Auctions tend to conjure up the image of old furniture and trinkets, or expensive artwork, but you can find a property bargain if you’re willing to raise your hand.
It’s a quick way to purchase a property, but it does come with its pros and cons. You need to be brave and potentially enter a bidding war during the auction, have the deposit on hand, and pay up quickly.
Top Tips for Buying at Auction
Before the auction
• Research your local property auction houses and request their catalogue. Most auction houses produce their catalogue a few weeks before the auction and hold regular sales.
• Read the catalogue carefully – check the details and read any small print.
• View the properties you are interested in. This is vital. One of the worst things you can do is purchase a property at auction unseen. There may just be one picture in the catalogue which hides untold problems inside or structurally. Consider appointing a surveyor to commission a survey.
• When viewing, research the property thoroughly. Ask local estate agents and neighbours for their opinions if appropriate.
• Instruct a Property Solicitor to review the auction pack which contains contract documentation including property searches and title documents to the property. The property solicitor will check whether there are any awkward title restrictions which may affect your proposed use of the property. You do not want there to be a covenant on the title restricting any development without your neighbour’s consent when you want to convert the property into maisonettes with a basement conversion for a gym. They will also be able to advise on issues revealed in the property searches such as planning use.
• Read all the terms and conditions in the auction catalogue and any addendum (further information sheet) which may be issued on the day of the auction, as this reveals any mistakes or changes that have occurred since details of the auction particulars were published and obtain professional legal advice.
• Ensure you have the requisite finance in place. The auction contract will provide for a 10% deposit to be paid when the contract is signed with the remaining 90% balance payable within 28 days of signing. If you are buying multiple properties at the auction, make sure you do your calculations right. Arrange your mortgage before going to the auction. You only have 28 days after the hammer falls to pay the balance and most mortgage applications take longer. If you fail to complete by the agreed completion date, you could lose your deposit.
• Make sure you have insurance lined up as it is usually the case that liability for damage to the property passes as soon as the bid has been accepted.
• Buying at auction is a legally binding commitment and carries all the same legal implications as buying a property via an estate agent. The auction office should have copies of all of the relevant legal documents related to the property you have purchased.
On the day of the auction
• Don’t forget to take two forms of identification with you, your chequebook, and your banking details.
• Arrive early and make sure you’re happy with where you’re sitting. Make sure that the auctioneer will be able to see you so don’t sit behind anything.
• Some auction houses ask that you register when you arrive. They may give you a numbered paddle to hold up during bidding, or to acknowledge the auctioneer if you have won the property.
• There may be some changes to the auction since the catalogue was produced so the auction house will provide a sheet with any late information or alterations. Some properties may have been removed from the auction altogether. Ensure that you read this and raise any queries if you are not sure about anything.
• When bidding, gesture clearly. Raise your hand or make eye contact and nod your head. Don’t think a small twitch or wink will be seen. And also don’t worry; you won’t accidentally bid if you just shift in your seat. If the auctioneer isn’t sure, he will ask.
• Properties will have reserve prices, meaning they have to reach a certain amount or they won’t be sold. Don’t be disheartened if the property you were bidding on doesn’t reach the reserve price as sometimes the seller may accept your bid after the auction.
• Work out at the outset, the maximum amount you are prepared to pay, and stick to it however fevered the auction room becomes.
• As soon as the hammer falls, the property is yours and you have agreed to purchase it. If you choose to buy a lot of properties or buy an expensive one, you do so at your own risk.
Overall, buying at auction is a great way to find your next property, be it a doer-upper or a full re-development, and there can be some great bargains to be had.
It is really important to contact a property solicitor as soon as possible to ensure there is sufficient time to review the auction documentation and to protect your interest just as it is when buying through an estate agent. Slater and Gordon's expert property solicitors can guide you through the auction process, ensuring that you have read all the small print. They can also explain any legal jargon and guide you through any obstacles.
To speak with a property solicitor, call us on freephone 0800 916 9083 or contact us online and we will call you.