The Process of Buying a Property at Auction
The process of buying a property at auction can be an exciting way to secure your dream property, but it isn’t for the faint hearted. Things can happen very quickly in the auction room and you need to have done your homework beforehand in order to bid confidently and avoid paying too much. Good planning is key at this should start with an understanding of what will happen on the day.
Prior to the Auction
Find the property from the Auction catalogue or online. Once you have identified property that you would like to bid on, you should check it out legally. The vendor’s solicitors will have prepared legal packs containing (where applicable) special conditions of sale, title deeds, leases and searches to help you make an informed decision. If you need further legal information you should contact the vendor’s solicitor – the details of which are usually provided in the catalogue or on the auctioneer’s website.
Check what methods of payment the auctioneer will accept for the deposit. If you are the successful purchaser, you will usually be required to pay a 10% deposit subject to a minimum specified in the catalogue immediately after the sale and you should therefore have sufficient funds to cover this.
Don’t only rely on the information in the auction catalogue. The auctioneer acts as an agent for the seller. They prepare the catalogue from information supplied by or on behalf of the seller. This will usually include a photograph of the property, a brief description and a guide price. You should not assume that the catalogue details are accurate or that the picture is a realistic representation of the property. The only way to really know the property is to go and take a look at it – not just a drive by viewing, but a proper inspection. Buying ‘Blind’ i.e. not seeing the property before the auction is a very high risk approach.
The Guide Price and the Reserve Price. Most properties are subject to a reserve price, below which the auctioneer cannot sell the property at the auction. It will be made clear whether the property is being sold subject to a reserve in the catalogue or conditions of the sale – although the reserve price will not usually be disclosed. What will be listed is a ‘guide price’ – which may be set deliberately low in order to attract interest amongst potential buyers.
Pre-auction Offer. If you want to put in an offer prior to the auction, you can usually do this in writing, (by letter, fax or by email) at any time up to the date of the auction, but if your offer is accepted you will have to be in a position to exchange contracts and pay your deposit immediately – as if you had bought at the auction.
Telephone or Proxy bid Arrangements. If you are intending to bid by telephone or proxy, you will need to make arrangements for this with the auction house prior to the event. Usually the auction catalogue will contain instructions on what to do if you want to bid but can’t actually attend the event in person. You will need to complete a registration form and a cheque to cover your deposit relevant to your maximum bid will need to be provided to the auctioneer in the event that you are successful. This does rather ‘show your hand’ somewhat, and in my experience there is no substitute for attending the auction in person.
On the day itself
Arrival at the auction. If possible, arrive early and familiarise yourself with the empty auction room. On arrival, you will need to register with the auction house. In order to bid you will be given a unique bidder number prior to the start of the auction.
On arrival, get a copy of any addendum sheet. These are distributed around the auction room and contain late information or alterations.
The Legal Pack. If you haven’t already done so prior to the auction, check out the legal pack in respect of any properties that you intend to bid on. This is another good reason to arrive early – sometimes the legal pack can take quite a bit of time to read through and depending on the level of interest in the property, could be in great demand on the day. If you have any queries on the day of the sale ask the auctioneer or his staff. They are approachable and knowledgeable about the properties they sell.
Once the auction has started. Take a seat or stand somewhere in the room where the auctioneer will able to see you bidding clearly. Listen carefully to the opening remarks of the auctioneer. Amendments may be announced which directly affect the property in which you are interested.
It is a popular myth that auctioneers mistake any casual movement such as a nose scratch for a bid. Don’t worry – auctioneers are able to distinguish between someone scratching their head and bidding but, make sure you gesture clearly at the auctioneer. The auctioneer will warn the room when he is concluding a sale and invite anyone still wanting to bid to make themselves known. If for some reason a mistake is made, tell the auctioneer straight away; do not wait until the end of the sale.
Tell Tale Signs. The Auctioneer may give an indication when the property has reached its reserve price. Phrases like ‘It’s in the room to sell…’ or ‘this ones selling today’ are clues that the reserve price has been reached and the property will be sold to the highest bidder from that point.
Once the bidding slows down, the auctioneer will say ‘Going once…going twice…’ This is the point at which some people choose to join the bidding so the bidding will recommence. Eventually, the auctioneer will say ‘Going for a third and final time…’ and if there are no more bids they will either bring down the gavel and say ‘sold’ or say ‘I’m sorry, that property didn’t reach its reserve price’.
Post Auction Offers. If a property fails to reach its reserve price, don’t give up! The vendor may decide to accept your bid immediately following the auction. So if the property you were interested in wasn’t sold, leave your details with the auctioneer since you may be able to come to a private arrangement with the vendor.
If You Are Successful
Identification. You will need to take two forms of identification with you, such as a Driving License or passport and a bank statement or utility bill as proof of address. You will also need your cheque book or debit card, details of your solicitor and all your banking details.
Deposit. If your bid is successful you are legally bound to buy the property and will need to put a down payment deposit there and then of 10% of the property’s price. You will also be required to sign the purchase contract in the sale room. The seller is legally bound to complete on the specified day (usually within the next 28 days). You would then pay them the rest of the purchase price (i.e. 90%).
Other things to be aware of. Don’t forget that the property becomes the buyer’s insurable risk as soon as the hammer falls. If any damage is done to the property between exchange and completion it is your responsibility and loss.
The auction terms and conditions assume that the buyer has acted like a prudent buyer. If you choose to buy a lot without taking these normal precautions you do so at your own risk. The expression ‘Buyer Beware’ cannot be overemphasised.
Did You Know?
Until the bidding reaches the reserve price, the Auctioneer may take bids ‘off the wall’. This is the crafty (but entirely legal) practise of the Auctioneer pretending that someone has bid when they haven’t. This is used to entice would-be bidders to join in the bidding and can help kick start the bidding on a property if it is slow to begin.
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