The intention for properties that are being put up for auction is that they are sold on the day of the auction. That’s one of the great things about buying (or selling) a property at auction – there’s no long, drawn out sales process – instead the property is sold to the person offering the highest bid on the day.
However, not all properties are sold in this way – and it is very common that during an auction where any number of properties may be up for grabs that a percentage of them do not get sold. There are a number of different reasons for this:
1. The property is withdrawn from the auction after the catalogue has been printed (there could be any number of reasons for this including the vendor accepting a pre-auction offer – see below)
2. The bidding on a property doesn’t reach its reserve price. This is a limit set by the vendor to say what is the absolute minimum amount that he would sell the property for. The auctioneer is unable to sell the property for less than the Reserve Price, irrespective of the level of interest and number of bids.
If you have set your sights on a property that is destined for the auction, then the most obvious thing to do is to go along to the auction itself and bid on it. However, you may also want to consider other ways to buy.
On the basis that you do want to buy the property, you may want to see if the vendor will accept a pre-auction offer from you. This would mean you putting in an offer on the property, just like you would if the property were advertised for sale through an Estate Agent in the conventional way. The vendor will be able to consider your offer and if he decides to accept it, you would proceed with the purchase and sale just as if you had placed the highest bid at the auction i.e. you will still need to complete within the normal 28 days. The result would be that the property would be withdrawn from the Auction itself.
Be aware, however, that many vendors will not want to go down this route – and the closer you are to the auction day, the greater the chances of them preferring to wait and see what happens at auction – and who can blame them? If there is more than one person interested in the property, they stand the chance of the property being subject to a bidding war and achieving a far higher price than the guide price. Of course, it could go the other way and you could end up paying more than you would if you attended the auction. It’s a gamble.
Whether or not a vendor will accept a pre-auction offer depend very much on their situation and circumstances. Local authorities, housing associations, mortgage lenders and other government bodies won’t accept pre-auction offers. Neither will certain individuals or businesses by receivers or trustees. They are usually bound to demonstrate that they are aiming to achieve the highest possible price in a fair and open way – and taking the property to auction allows them to do this.
You are more likely to have a pre-auction offer accepted if the vendor is a private individual, a small to medium sized landlord or a small developer.
If a property does not sell at the auction, it is worth approaching the auctioneer directly afterwards to make an offer. If the seller is an individual in the room and the property failed to reach the reserve price, the vendor will have had their expectations of the property’s value re-adjusted. They may now be more open to accept a lower offer. Alternatively, if there are properties that do not sell that you haven’t particularly researched, you could ask for a list of unsold lots from the auctioneer and then carry out the necessary checks and put in an offer a few days later. Once again, the vendor will be in weaker position following the auction and may be more receptive to your approach.
Be aware that like Pre-Auction offers, if your offer is accepted you would be expected to proceed with the sale as if you had placed the winning bid i.e. you would need to pay the deposit immediately and complete within the normal 28 days.
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