You can get a great deal on a property by buying at auction and we can represent you saving you time and money.
How auctions work
Property auctions take a lot of the to-ing and fro-ing out of the property buying process. Instead of submitting offers through an estate agent, buyers gather in a room and bid for the property in person (or over the phone).
Each property – or group of properties – for sale is referred to as a ‘lot’ and proceedings are led by an auctioneer. The auctioneer introduces each lot offered for sale, acknowledges bids, and announces whether lots are sold or unsold and their final bid prices.
The buyer is legally obliged to complete the sale within 28 days.
Before the auction
You should never just turn up to an auction and start bidding – you need to do a lot of preparation first.
The first thing you should do is to request a catalogue. This will include a list of properties up for sale, together with detailed information and guide prices for each lot. Properties will also have a ‘reserve price’ which is the minimum the seller will accept.
You can subscribe to catalogue mailing lists from the big auction groups such as Savills, Allsop and the Essential Information Group. Auctions are trickier than they look and the more knowledge you have will ensure you know exactly what you’re doing when it comes to bidding. This is where we can help you by representing you.
Types of property
At a typical auction there tends to be a pretty mixed bag of properties, ranging from repossessions and tenanted properties to run-down housing stock in need of complete refurbishment.
Other lots are estate or probate sales or quirky properties. Auctions also attract vendors who want to sell quickly. Some will be repossessions which are being sold by the mortgage lender – you’ll know a property is a repossession as it will say “for sale by order of the mortgagee”.
Other sellers might be moving abroad at short notice, relocating within the UK, or getting divorced.
Some auction properties will need extensive renovation work. It can be difficult to get a mortgage for uninhabitable properties so those that need a full makeover will generally be bought by cash buyers.
Some properties sold at auction will be quite niche investments, so make sure you know what you’re doing before you start bidding. Buy a property with a 10-year lease for example, and you’ll could end up handing it back to the freeholder in a decade’s time leaving you empty-handed.
In general you have a better chance of finding a bargain at auction than in an estate agent’s window. After all, there is no estate agent there to push up prices and the seller won’t leave you waiting by the phone while he or she mulls over your offer. And if no one else bids – you win!
If you find a property you’re interested in, instruct us to go and see it . Only by us viewing the property can you find the true meaning of ambiguous catalogue terms such as “in need of upgrading” and “in poor decorative order”.
Surveys and searches
With a sale through an estate agent you’d only get a survey, valuation and legal searches done after having an offer accepted. But with an auction you need to get all this sorted beforehand.
This means paying out hundreds of pounds up front. In effect, it’s a gamble. If your bid isn’t the winning one, your money will be gone. However it’s cash well spent and could save you thousands of pounds in the long run.
Mortgage lenders won’t lend until a valuation and some other checks have been completed, and with good reason, so cash buyers should exercise the same caution.
Many auction lots are properties that need a lot of work doing or have structural problems that will take money to fix. So get a survey done before you even think about buying them.
You’ll need to put a 10% deposit down on auction day, so make sure you have the money.
Then, if you’re not fortunate enough to be a cash buyer, you’ll need help from a mortgage lender.
This is when the 28-day completion deadline might be a problem. Can your mortgage lender move quickly enough? To speed things up you’ll need to get a decision in principle, mortgage valuation and certain legal checks done before auction day. This will mean losing money if you don’t win the auction but failure to get organised could mean you can’t complete in 28 days as required.
When choosing a mortgage lender make sure they can work to the 28-day deadline – a broker can advise you which lenders are worth applying to.
If you bid higher than expected, don’t expect too much leeway from your mortgage company.
Mortgage lenders will only lend you the amount the property has been valued at (minus whatever deposit you are expected to put down to get that particular deal). It doesn’t matter to them whether you have paid more than that figure.
And if you haven’t got the funds to make up the shortfall between the mortgage lender’s valuation and the price you paid, then you will lose the 10% deposit you put down on the day on the auction.
When working out your budget, take into account the cost of surveys and legal advice. As with a traditional purchase you will need a solicitor to do the conveyancing and have to pay Stamp Duty.
Check the small print
Before the day of the auction, your solicitor should request a legal pack from the auctioneer. This should contain all the legal documents for the property, including its entry on the Land Register together with other legal searches required by the mortgage lender (for example, the environmental and local authority searches). These are required because they can reveal problems which affect the value of the property.
The pack should also include any ‘special conditions’ relating to the sale. It is absolutely vital that you read these, as they list specific details which fall outside the general conditions of sale.
This can be anything from a shorter completion date to the seller requiring the reimbursement of part or in some cases all of their legal fees. The last thing you want in a no-nonsense auction is to suddenly be surprised with additional costs because you didn’t take the time to read them.
On the day make sure you arrive in plenty of time and get a good seat so the auctioneer can spot your bidding signal.
When you arrive, pick up an `addendum sheet’. This includes any amendments and additional information to the properties listed in the auction.
When the bidding on your chosen property begins, use your hand or catalogue to signal a definite intention to bid and catch the auctioneer’s eye. If he 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!”
Before entering the auction room decide on a budget and stick to it. Never get caught up in the emotion of the auction and never bid above your pre-set price. Keep a clear, cool head, and if you think you might be unable to do this, get a solicitor or auctioneer to do the bidding for you.
If you can’t make the auction in person, you can always make a proxy bid or bid over the phone. Details of how you can do this can be found in the auction catalogue.
If you win you will need two pieces of identification as well as a cheque to cover the 10% deposit – you cannot pay this by cash or credit card. You will be asked to sign and exchange contracts in the auction room.