Buying and Selling a property at an Auction
Buying or selling a property at an auction is often seen as risky, daunting and not for the faint hearted. However it is one of the quickest and cleanest ways to acquire and sell a home, find a perfect DIY project or even a valuable property investment.
The guide intends to give the buyer and seller an overview of the property auction process and aims to highlight the key stages that could see you achieving the results you desire.
Buying Property at an Auction
Before the Auction
An auction could be a quick and easy way to buy a property. The transparent nature of the sale process enables all parties who are interested to submit their highest offers, once the gavel falls, it’s yours.
It is essential that you understand the buying process. The key to success is to view the property, do your research and ensure your finances are in order. To be successful you need to be fully prepared before you even think about bidding on a property.
Finding a Property
The first step is obviously finding suitable properties that you could be interested in. The website (developaproperty.co.uk) aims to ease the search process by bringing many auction properties all under one roof. Other places to search are the individual property, auction house catalogues and websites.
Once you have singled out your potential property it’s time for you to do the research. The first step would be to go and view the property. Most auctions will allocate a set time for viewing so simply turn up and have a look. Meanwhile, other auctions will request you call and book at a suitable time.
At the viewing, have a good look around, take notes, pictures and plans. Assess the condition internally and externally and note down any factors that require attention. At the end of the day you might be the one buying the property so do not be shy in having a good nose around. If you need to consult a surveyor then it is the right time to do so.
You will now have a good idea of the condition of the property and be in the best position to calculate the quoting prices. Be detailed in your approach by covering all the costs associated to get the property up to the scratch.
Next, have a browse to find out the current market price of properties within the area. Search the main portals, speak to agents and even have a look at sold prices. This gives you an idea of the market price. Now take away your costs associated and you will have a ball park figure of the maximum amount you should be paying for the property.
This is a simple and basic approach; however you must remember that all interested bidders have different motives and calculations. You should work out your costing, and have a maximum price that you are prepared to bid otherwise you could get carried away with the momentum of the fast paced auction room.
A legal pack is available for most properties going to an auction. It is essential that you digest this in-depth and if you are not sure about anything then have your solicitor check it out. Occasionally, a property deeds and titles may contain covenants or legalities which could impact the value of the property. To cover yourself, give this work to your solicitor just in case you uncover a nasty surprise at a later date.
Having the finance arranged and in place prior to the auction is a must. Firstly, you will be required to make a ten percent deposit in cleared funds on the day of the auction. The remaining balance should be completed within twenty eight (28) days. Some lots may be earlier or later but the general rule is twenty eight (28) days for completion.
If you need to raise finance for the balance it is prudent to have discussed and arranged this with your finance company. An agreement in principle from your financier will usually suffice. There have been instances where the purchasers could not raise the finance resulting in them losing their ten percent deposit.
Auction house can get very crowded on the day, so get there early in order to secure a seat. In case registration is required, getting there early will give you enough time to do all the formalities. Auction house will require you to bring two forms of ID.
When the time comes to bid make sure you are visible to the auctioneers and that they are aware that you are bidding on the property.
As the bidding starts you may feel your heart beat pounding and the adrenaline starts to rush, this is where you have to stick to your guns and make sure you do not get carried away. It can be very easy to go with the momentum and keep on bidding. Your mind may say ‘just one more bid’ or the ego fools you into challenging your opponent, however you must stick to the maximum price you were prepared to buy and walk away if the price exceeds this. The rule is never get emotional in the bidding process, know your price, bid up to or around it and always be prepared to walk away.
Winning a property is at the fall of the hammer. You will need to pay a 10% deposit and then the rest is left to the solicitors. Completion will need to take place within twenty eight (28) days unless stated otherwise.
If for instance the reserve price has not been met, there is still an opportunity to strike a deal. The auction house will aim to broker a deal with the vendor to end the lot for an agreed price. It is also not uncommon for a vendor to accept an offer prior to an auction.
Selling a property at an Auction
Selling a property at an auction has become more and more popular and could be a quick and efficient way to secure the sale of your property and avoid a last minute pull out.
The benefit of a legally binding contract upon the fall of the hammer usually means that the sale will be completed within twenty eight (28) days after the purchaser has paid a ten percent deposit on the day of the auction.
There are some properties more suited for auction than others. If the property is unique, particularly run down, have legal covenants or even repossessed, an auction sale may be the best option. Basically, anything that a conventional estate agent finds difficult to shift will be ideal for an auction sale.
The finance company may seize a mortgaged property if the other party (mortgagee) defaults in paying back as a result of failed project or otherwise. The seized property will later be placed on auction to get the best possible price at the quickest time frame. The property will be sold to the highest bidder as bidders will offer the price they feel it’s worth.
If you have decided to sell a property through an auction you will need to decide on which auctioneer to use. There are many of them around and shopping to get the best deal like you would do for a conventional estate agent is recommended.
Auction houses charge about 2.5% of the hammer price. They may also ask for entry or advertising fees to place your property in their catalogue. Check out the different auction houses and their catalogues to see their qualities and ask about their potential reach.
The guide and reserve price need to be set and agreed. The guide price should not be too high so as not to scare potential buyers away and in turn the reserve must be set at a reasonable amount. The reserve is the minimum you would accept on the property and if this is reached at the auction, there is no going back.
Your solicitor will need to prepare the legal pack and other paperwork associated with the sale. Their details are usually displayed on the auction catalogue in the event of any queries relating to the sale of the property.
On the day of the auction when your lot comes up for bidding, you are bound to feel your heart pounding in anticipating what price would be achieved in the buzz of the auction day.
Hopefully, you reach and exceed your reserve price. However, if the reserve is not met, do not be disheartened there is a big possibility that a buyer may negotiate a price that you are happy with after the auction is finished. If you accept an offer, the standard auction terms and conditions apply such as the buyer needs to pay a 10% deposit and is expected to complete the payment within twenty eight (28) days.
In summary, if a quick and easy sale is required or you have a property that cannot be sold by a conventional estate agent then selling through an auction provides a viable alternative as buyers will pay a price that they think it’s worth and many could get carried away in the buzz of an auction room