Guide To Buying Property At Auction
1: Buying property at auction - source future auction property
Buying property at auction starts with identifying all the property lots that interest you then contacting the auction house for further information. Do this as early as possible, as there is normally only 2-3 weeks between the catalogue being released, and the auction date.
Call the auction house to find out about viewing arrangements. The auctioneer will either take a deposit for the keys and allow you to view the property unaccompanied or they will organise for a local agent to show you around.
Work out how much you can afford i.e. your maximum bid. Estimate your total costs including repairs, decorations, solicitor’s fees, surveys, mortgage, removal charges, furnishings and add this to the amount that you will need to borrow.
Remember that if your bid is successful, you will need to put down a 10% deposit immediately. Usually you will also be expected to complete the payment within 28 days, and for this reason you will need to have a solid offer for a mortgage. Arrange this now and inform lenders that you intend to buy at auction.
ALWAYS ALWAYS carefully check the Legal Pack and General/Special Conditions of Sale, in case a Buyer's Premium and any other fees apply to the lot you're interested in. If in doubt, phone the auctioneer and ask your solicitor for clarification.
PRICE INFORMATION: A GUIDE PRICE is an indication of the seller’s current minimum acceptable price at auction. The guide price or range of guide prices is given to assist consumers in deciding whether or not to pursue a purchase. It is usual, but not always the case, that a provisional reserve range is agreed between the seller and the auctioneer at the start of marketing. As the reserve is not fixed at this stage and can be adjusted by the seller at any time up to the day of the auction in the light of interest shown during the marketing period, a guide price is issued. This guide price can be shown in the form of a minimum and maximum price range within which an acceptable sale price (reserve) would fall, or as a single price figure within 10% of which the minimum acceptable price (reserve) would fall. A guide price is different to a reserve price (see separate definition). Both the guide price and the reserve price can be subject to change up to and including the day of the auction.
Arrange legal assistance from a solicitor or licensed conveyancer. Legal enquiries from Local Authorities and Land Registries need to be carried out before you bid. Auction houses should normally provide a 'legal pack'. This contains legal documents outlining special conditions of sale and title deeds' details. You may now let the auction house know you are interested in the property and they will keep you informed of any changes relating to the property or the sale.
Remember to check how much the auctioneer’s administration fee is. Any additional costs excluding the administration fee will normally be listed in the Special Conditions within the legal pack and these costs will be payable on completion. Any stamp duty and/or government taxes are not included within the Special Conditions within the legal pack and all potential buyers must make their own investigations.
Lenders will require a valuation survey to be carried out, and if you are worried about the condition of the property you should commission a full survey.
6: Buy prior to auction
If you want to eliminate the risk of being outbid, you can always submit an offer in advance of the auction. If the vendor likes your offer they may accept it and withdraw the property from the auction.
7: Visit an auction sale
Before going to an auction to buy, you can visit an auction sale to see what happens, experience the atmosphere and get an understanding of proceedings.
8: Payment terms and Buyer's I.D.
If you are the successful bidder when an auction sale has finished, you will need to put down a 10% deposit immediately, and so you’ll need to know what types of payment the auction house accepts. Some accept personal cheques but most prefer bankers’ drafts and building society cheques. Get the amount made out to 10% of your maximum price - if you secure the property for less than this amount the auctioneer will refund you the difference.
Under the Money Laundering Regulations 2017, auctioneers are now required to take identification for all buyers. It is necessary to take the identification of those bidding on the basis that one of these parties may go on to become the buyer. Identification should be in the form of the photo page of your passport or photo driving licence. In addition, a utility bill with your name and address on it is required. For those bidding by proxy, you will be asked to email your identification when submitting your completed form.
9: Call ahead
Before you set off for the auction, call the auctioneer to double check that your lot is still going to be offered.
10: Arrive early
This way you will get a seat, hear the auctioneer's announcements and you’ll have time to speak to a member of staff if you have any last minute queries. It will also give you time to register your interest to buy.
When your lot number comes up the auctioneer will announce the address. Double check it’s the lot that you have come to buy before you start bidding. When you registered your initial interest to buy you may have been given a card to wave at the auctioneer but you can also use your hand to catch the auctioneer's eye as well.
If the auctioneer receives a bid higher than your own he will return to you in case you wish to better it. He will also warn you when the bid is about to be closed, usually three times "for the first time, for the second time, for the third time and final time – sold!" Remember to stick to your maximum price and do not get carried away.
Usually a property will have a reserve and if you meet it the vendor is legally bound to sell to you. You have won if your bid is the highest and the reserve has been met. The next step is to fill in a purchase slip requiring some personal details and the details of your solicitor. After this you will be asked to sign the memorandum of sale, which you will exchange for the vendor's part as soon as it's ready. This is your contract and should be sent straight to your solicitor. You will also be asked for proof of ID and your 10% deposit.
Once the gavel comes down the property becomes your responsibility. The auction house or your solicitor should be able to advise you.
14: Balance of payments
The balance of payment usually needs to be transferred within 28 days of the auction or the timescale set by the vendor. Remember, if this is not achieved you will forfeit your 10% deposit.