Buying at auction: A ‘how to’ guide
Buying your first property at auction may seem like a frightening prospect but by following some simple steps you can reap the rewards of this tried and tested method of sale.
Whether you are looking at residential or commercial, a piece of land or something unusual, the auction process is simple but the key to making it successful is in the preparation.
The first step is to look through the available lots. You can do this by contacting auctioneers directly or by searching property portals such as OnTheMarket.com. Once you find a lot or lots that take your interest you will be able to read through the property listings to get a brief but useful insight into the key features. These should include a guide price, property description, location, photographs and viewing instructions.
Guide and reserve prices
Guide prices are used to indicate the seller’s minimum expectation and can be shown as a price range or a single figure. As guide prices are normally agreed before any marketing takes place, they are not necessarily the figure at which a lot will sell for. This will depend on the level of interest and on who bids on the day of the auction.
The guide price may also be changed at any time prior to the auction so it is important to stay in touch with the auctioneer for all the up to date information. Unless stated otherwise, each lot will be offered subject to a reserve which is a figure the auctioneer cannot sell below. The reserve should be set within the guide range.
The next step will be to view the lot. Viewing instructions can be found in the property listing or on the auctioneer’s website. Most auctioneers will arrange block viewings at specific times during the auction campaign by prior confirmed appointment. As negotiator or viewing assistants are often on tight schedules you run the risk of a wasted trip if you do not confirm your booking or are running late.
When viewing, it is advised to wear suitable clothing and come prepared with a torch. Not all properties are in a habitable state and may present you with a multitude of hazards. It is common practice for auctioneers or joint agents to advise prospective buyers that they view all lots entirely at their own risk. So be safe!
Measurements and plans
Measurements and plans are often supplied as copies by the seller and may not be provided in their original scale. When viewing a property it is always a good idea to double check measurements before relying on them to make a decision.
Once you have viewed the property it is time to look a little deeper. The auctioneer will have been provided with a full legal pack from the seller’s solicitor. This information will include documents such as Special Conditions of Sale, title details, leases, searches, planning permissions and plans. Remember not all documentation is received at the same time so keep an eye on the auctioneer’s website for any additions, alterations or addendums. In most cases the legal documents will be made available online after completing registration. Otherwise they can be viewed in the auctioneer’s office or be sent by post.
Common Auction Conditions and Special Conditions of Sale
Part of the legal pack will include a group of documents called the Common Auction Conditions and Special Conditions of Sale, which outline how the auction will be conducted. It will also include important information relating to the lot you are interested in.
As we have not all had the training of a solicitor or licensed conveyancer, it is recommended that you seek expert advice if you are intending to bid. Advisors will be able to inspect the legal documentation and report back to you with their findings. While this may involve a small initial outlay, it could well save you a lot of time and money if you have missed anything.
If you are seeking to finance your purchase, you would be strongly advised to arrange this before the date of the auction so that any valuation or survey your lender may require is carried out before you bid. As the successful buyer, it will be your responsibility to insure the property on exchange and you should make arrangements immediately after the sale.
Remember it is your responsibility as a prospective purchaser to satisfy yourself as to the condition of the property and to make all necessary pre-contract enquiries. Once the gavel falls, you are the purchaser and have entered into a legally binding contract with the seller.
If you have followed all the steps above, you are now nearly ready to bid. On the fall of the gavel you will be required to pay a deposit of 10% which is normally subject to a minimum amount on lower value lots. The deposit will be required in a cleared fund, so make sure you either bring a banker’s draft/counter cheque, building society draft or debit card to the auction room. In some cases a personal or company cheque will be accepted by prior arrangement. Deposits cannot be taken in cash.
Most auctioneers will also charge an administration fee that is payable at the same time as the deposit. This fee will be made clear to you by the auctioneer and is for the processing of the contract.
You’re now ready to bid! In some instances, sellers may wish to consider pre-auction offers and may even sell a lot early. By registering your interest in a lot, you should be notified if an offer is likely to be accepted giving you time to also submit a bid.
Pre-auction sales are treated in the same way as bids made in the room and will require immediate exchange of contract with 10% deposit if accepted. By registering your interest you should be notified if a lot is sold or withdrawn before auction.
Sadly, some lots will be withdrawn prior to auction, this can be for legal reasons or other unforeseen circumstances. It is always worth double checking that the lot you are interested in is still available before making a long journey.
Remote bidding services
For those who cannot attend the auction in person, most auctioneers will offer remote bidding services by prior arrangement. The most common methods are telephone bidding, where a member of staff will call you as the lot is being offered and will bid on your instructions.
Internet bidding is where you can make live bids via your computer or by Proxy. You can give the auctioneer authority to bid up to a certain level on your behalf. Always remember to give the auctioneer at least 48 hours notice to arrange your remote bid in order to avoid disappointment.
The auction day
Arrive in plenty of time for bidders’ registration. Registration will allow the auctioneer to conduct any necessary checks and to provide you with a bidding number or paddle. You will also be handed an auction addendum outlining any amendments made to the lots. You will also have a chance to view any last minute legal documentation at the clerk’s desk.
Before the auction begins the auctioneer will give important opening remarks about how the auction will be conducted, so listen carefully!
When bidding, be clear! Leave winking and nodding to the professionals. If the auctioneer misses your bid and the hammer falls you’ve missed it, even if your bid would have been higher. It is important to remember that the gavel will fall once the highest bid above the reserve price is reached. At the fall of the gavel, a legally binding contract is formed.
Proof of identity
The Money Laundering Act requires all successful bidders to provide photographic identification and proof of address for all and any named buyers before registering or when signing the Memorandum of Sale. Currently this will include a passport or a driving licence and proof of address which is no more than three months old. If you are bidding on behalf of somebody else, a group of people or a company then ID will be required for all parties. This will also include written authority from the company and a copy of the Certificate of Incorporation.
Once the gavel falls to the highest bidder above the reserve price, you as the buyer are contracted to buy. You will be asked to make your way to the clerk’s desk (unless bidding on another lot) to sign the Memorandum of Sale and pay your deposit.
After signing this, it will be sent to both the buyer’s and the seller’s solicitor in order to facilitate completion within the required period of time. The standard completion period at auction is 20 business day from the date of exchange.
After the auction
If you have been unsuccessful on the day you may find that you are interested in a lot that might not have sold. The auctioneer can provide you with a list of unsold lots which you will be able to view or submit offers for.
Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.
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