Auctions are a great way to avoid lengthy and uncertain buying procedures and bag yourself a bargain. We have put together our essential points to consider when buying a home under the hammer.
PREPERATION BEFORE THE AUCTION
Decide on the area you’re interested in and contact local auctioneers. They will be able to advise you on any upcoming auctions and add you to a mailing list so that you receive the latest auction catalogues.
Once you have spotted a property (or two) that you like, contact the auction house to arrange a viewing. Make sure to thoroughly inspect it and its surrounding neighbourhood. Consider taking a builder or handyman with you to find out what may need to do to the property, and how much it is likely to cost. If you have any queries, don't be afraid to ask the auctioneer.
The particulars will contain key information but you may need to request a separate legal pack to get the full picture. Searches are often included in the legal documents, but if not, ask your solicitor to do them before the auction.
Legal documents can vary from one property to another, consider asking a solicitor to look over the legal pack for any hidden covenants or loopholes that could end up costing you more than you bargained for.
Don't forget to check the terms and conditions of the auction house you choose to use, by entering a bid you are agreeing to them. Make sure to familiarise yourself with the conditions of sale, what needs to be paid and when—you don’t want any surprises on the day.
Whilst it's important to take your time considering any property, there are usually only four weeks between publication of the auction catalogue and the auction itself—you will have to act fast.
You can always ask the auctioneers to keep you informed of any alterations or amendments to the sale conditions, otherwise known as an Addendum. If you're really keen, ask them to inform you if there's any possibility of the property being sold before the auction date, this has been known to happen on occasion.
Think about the maximum price you are willing to pay for the property, whilst auction properties may be cheaper than market value, renovations are usually needed. Unless you're lucky enough to be a cash buyer, you will need finance in place before bidding. Make sure you know how much the deposit will be and check which method of payment is required so you can arrange for sufficient funds to be available.
It is advisable to arrive at the auction well before the advertised starting time. Any additional information or changes to a property will be available in an Addendum or will be announced by the auctioneer before the auction starts. Make sure you are aware of any alterations as they could have a bearing on your decision to buy.
Be aware that each auction property is initially offered at a guide price and is also subject to a reserve price. The guide price is the starting price at which bidding will commence, whereas the reserve price is the minimum amount the seller will accept. The reserve price is not disclosed to bidders but can be up to ten per cent higher than the guide price so bear that in mind when bidding.
When the time comes, make sure your bids are clear; some auction houses will give you a paddle (or something similar) so that the auctioneer may easily identify you when you bid. It's easy to get carried away but try to remain calm and within your set budget. The auctioneer should make it quite apparent where and what the current bid is in the room.
If you are unable to attend the auction, someone such as an agent or a solicitor can bid on your behalf. Some auctioneers will also accept phone or proxy bids, in which case the auctioneer will require written authorisation from you and a cheque for the deposit. This is calculated on the amount of your maximum bid.
If your bid is successful, you will be required to sign the contract and pay the deposit there and then. At the fall of the auctioneer's gavel, you will be bound by the terms and conditions of the sale and liable for the insurance of the property from that moment. Pulling out of the sale after this could result in huge after costs.
Most auctions require a ten per cent deposit on the day and between 14 days to six weeks to complete and pay the remaining balance of the purchase price. Any outstanding costs and completion details will be clearly stated in the conditions of sale.
In the instance that the property remains unsold, the auctioneer may have the authority to sell it privately in the room immediately after the sale. Make sure to register your interest with the auctioneer prior to the sale and stick around at the end of the auction.
Although there are many things to consider, it’s a chance to have fun and it really doesn’t need to be complicated. If you do your homework, familiarise yourself with the lot you want, the terms and conditions and are clear with your bids and do not exceed your maximum budget, you’re in with a great chance of success and finding a bargain.
Now is a great time with many properties receiving multiple viewings and multiple offers, and in many cases, sales are agreed for significantly more than the asking prices.
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