Before Buying Property At Auction
A property auction can be a thrilling way to buy property, and snap up a bargain. Property auctions aren’t just good for buying repossessed homes, it’s now possible to buy all kinds of properties at auction. However it is essential that you do your homework before trying to buy a property at auction, and you need to put a number of important things in place before you go. Here’s our step-by-step guide:
1. Get an auction catalogue
For every property auction, there is a catalogue that displays all the properties that will be auctioned off. These are available approximately two to three weeks before auction day. The catalogue is usually available online earlier, normally a few days before it comes out in print.
It is likely that there will be more than one property auctioneer in your region, so do your homework before you get involved. For instance, different auctioneers may well specialise in different types of properties, or properties in certain price bands - if you don't do your research to find out which is most appropriate for your needs, you could end up making a wasted trip.
Occasionally, there will be changes to the property information published in the auctioneer's catalogue and the auctioneer will advise you of these changes prior to auction or on the auction day itself. It’s worth keeping in regular contact with the auctioneer so you know about any additions or amendments to the catalogue that have come up and might affect the sale of the property.
2. Peruse the lots
Identify those lots that may be of interest (in our UK Auction List database or in the auctioneers' own catalogue). Note that some properties are offered with vacant possession, some are tenanted and some may be part vacant. Also properties may be leasehold or freehold. Full tenure details are usually available from the auction house.
3. Note the guide price - PLEASE READ CAREFULLY
Most properties have guide prices published in the auction catalogue. Generally speaking Guide Prices are provided as an indication of each seller's minimum expectation. They are not necessarily figures which a property will sell for and may change at any time prior to the auction. Virtually every property will be offered subject to a Reserve (a figure below which the Auctioneer cannot sell the property during the auction) which we expect will be set within the Guide Range or no more than 10% above a single figure Guide. ALWAY CLARIFY AND CONFIRM THIS WITH THE AUCTIONEER PRIOR TO BIDDING ON A PROPERTY. The guide prices of the properties that are listed in our database may be subject to change, so we advise that you contact the auctioneer directly to confirm the guide price prior to the auction day.
4. View the property
As with any property purchase, you should arrange viewings before you bid and take steps to eliminate any nasty surprises. Viewings are arranged directly with the auctioneers or their joint agents. Where properties are tenanted, viewings are normally not arranged so interested parties are advised to contact the tenants directly to arrange a convenient time for viewing. When buying any property you should try and view it twice: once during the day and another time at night. This may not be possible with restricted viewing times, but do what you can to make sure you know as much as possible about the property, especially if you are planning to live there.
Before you decide whether or not you should bid, make sure the information you’ve been given about the property is correct. Research the property thoroughly and ask local estate agents and neighbours for their opinions. Take a copy of our property viewing checklist to check the description of the lot in the catalogue is accurate. Treat the viewing in the same way as you would if you were buying from an estate agent - and make sure the property is 'as described' in the catalogue, then ask local estate agents and residents for their opinions.
It’s important for you to register your interest as early as possible. If you find a property that you are interested in, please contact the auctioneer directly so that they can let you know if the property is withdrawn or sold prior to the auction.
5. Obtain legal documentation
The vendor's solicitors will prepare legal packs containing special conditions of sale, title deeds, leases, office copy entries, and replies to pre-contract enquiries. For a small charge, these documents can be posted to you and may be available online as well. Legal packs will usually be available for inspection in the auction room or again online. Don't forget that you buy subject to all documentation and terms of contract whether you have read them or not. You must use this information to determine a) if you wish to bid for the property, b) how high you are prepared to bid and c) if you will have the finances in place. We suggest that you ask your solicitor to look through the special conditions of sale, title deeds, leases, office copy entries etc. to ensure everything is in place - remember the sale of a property is binding, so make sure you know what you are buying in advance.
6. Obtain a survey
Now is the time to also ask your solicitor to a property survey. The extent of the survey is up to you, but if the property is older than 75 years and/ or it has recently been modified, it would be best to arrange for a full survey, even though this will be costly. So make sure that you carry out the usual property and land searches to make sure there are no problems lurking beneath the surface. This will involve a cost but it's an important and necessary step to protecting your potential investment. You should instruct a chartered surveyor and your solicitor to carry out the required checks on the property and draw up paperwork. Please ask your surveyor to call the auctioneer directly to make arrangements for access to the building.
We also strongly advise potential buyers to call the auctioneer the day before the auction to make sure the lots you're interested in are still available.
7. Arrange your finance
If you need to arrange a mortgage it is important that you obtain an offer in principle from your lender before the auction day. Most building societies and banks will ask a surveyor to prepare a valuation report before making a mortgage offer, so it's wise to make your mortgage application as early as possible.
Remember that if you do buy a property at auction, your winning bid will constitute an immediate and legally binding contract.You will be required to pay a deposit of around 10% there and then, whilst the remaining balance will be due quickly - usually within 28 days. For this reason, you cannot just turn up and see what happens - you must have finance arrangements in place first. This should be discussed with your lenders to make sure that it won't be a problem.
Before you go to auction, find out what the payment terms will be, should you be successful in bidding for a property.
Also look at all the finance options that might be available to you. Bridging loans may be preferable if the property is to be sold soon after purchase, or refinanced with a long-term loan. Long-term finance may be more appropriate if the property is to be held on to for a number of years.
8. Understand all terms & conditions
Buying property at auction is different to buying property privately and we strongly advise potential purchasers to check that they have read and understood all the various legal documents and terms & conditions.
9. Making an offer prior to the auction
You can make an offer for a property at any time up to the date of the auction, but in this case it is essential to have your finances in place as you must move quickly. You should put your offer in writing to the auctioneer, who will liaise with the vendor. If the vendor accepts your offer, contracts will be exchanged immediately and you will have to pay a 10% deposit, paying the remaining 90% within 20 working days. If you haven’t paid in full by the day of the auction, the vendor may not withdraw the property and you could lose your deposit (and the property) to the highest bidder.
10. Telephone and proxy bidding
If you’re unable to attend the auction sale, you can bid by telephone in real time while the auction is taking place, or by proxy, where you specify your maximum bid in writing and the auctioneer bids on your behalf. In each case the auctioneer will need a completed registration form, a cheque to cover your 10% deposit and a buyer's fee payable prior to auction day. A bidder's registration form can normally be found in the auctioneer’s printed catalogue or can be downloaded directly from their website.
11. Before the auction
Make sure you have the following information to hand:
• Lot number
• Property description
• Guide price
• Important notice to bidders
• Memorandum of sale
• General conditions of sale
Other procedures you need to be aware of:
• ID requirements
• Paying the deposit and payment method
• Signing the memorandum of sale
• The responsibility of insurance for the property
The guide price is simply the auctioneer's indication of what property might reach and it will usually sell above this mark. The guide price is not to be confused with the reserve price that is the lowest price the vendor will accept. And, remember, the guide price can change at any point, so keep in touch with the auctioneer right up until the auction day itself. On the morning of the auction (or last thing on the day prior to the auction) it is worth calling the auctioneers and checking that the property your wish to bid for has not been withdrawn or already sold.