Buying At Auction

Property Auctions have become increasingly popular, with both buyers and sellers, whether they are owners, occupiers, developers or investors.

An auction is an excellent place to buy perhaps that bargain property, but make sure you do your homework first, to avoid any nasty surprises.

There are many advantages in buying at auction, the main benefits are:

  • Certainty, control and transparency – as a buyer, you are in control, deciding when to bid and how high or low you wish to go. A purchaser is able to buy the property at a price that was achieved, competitively, against other bidders in a transparent process and if your bid is successful, then the property is yours on completion. The vendor cannot withdraw.
  • It is possible to buy properties quickly. If you are well organised, properly advised and have the requisite financial resources, you can exchange contracts in a matter of days.
  • You may find properties are on offer, with attractive low guide prices, although the eventual sale price may be determined by the level of competition in the room.

As a potential buyer, your first step is to obtain a copy of the catalogue from the auctioneer. This contains the ‘lots’ (properties) to be auctioned. Look through the following general information:

  • The important Notice to Bidders
  • The Memorandum of Sale
  • The General Conditions of Sale (many auctioneers already use RICS Common Auction Conditions, which you can download free at www.rics.org/cac
  • Try to obtain the specification information, relating to the lot (or lots) you’re thinking of buying. From the seller’s solicitor you need:
  • The legal pack, which contains documents such as title information, searches and leasehold documents.
  • Any special conditions of sale.

From the auctioneer you need:

  • The Guide Price, which can change throughout the marketing period. It’s worth checking what the auctioneer defines as the guide price too - for instance, they may call it ‘the seller’s minimum price expectation’.
  • Any addendum, which you can get before or at the auction – this tells you about any additions or amendments to the catalogue, that have come up and might affect the sale of the property.

Before you decide whether or not you should bid, make sure the information you have been given about the property is correct – it’s worth getting professional advice and both a valuation and an appropriate survey, before you buy, see RICS guide ‘Property Surveys’, available at www.rics.org/propertysurveys.

Finally, you need to arrange finance – both for the exchange (normally a 10% deposit) and completion. If the auctioneer is following the RICS Common Auction Conditions, completion will be 20 working days after the auction.

Once you’ve decided to bid, advise the auctioneer that you are interested in the property and keep in regular contact. Next, you need to find out what the auctioneer’s procedures are, for the following:

  • Proxy, internet or telephone bidding (if you or your solicitor or agent, cannot attend the auction).
  • Signing the Memorandum of Sale and responsibility for insurance of the property from and including the auction day. Generally, insurance of the property is up to the buyer, as soon as the hammer falls.
  • Paying the deposit.
  • VAT - the auctioneer will ask the seller whether or not the sale is subject to VAT. If so, you need to know the impact of VAT on the deposit and completion amounts.
  • Checking your ID.
  • Pre-registration.

Before the hammer goes down, the auctioneer points to the highest bidder in the room and states the final bid. Once the hammer falls, there is a binding contract, which is subject to the conditions of sale.

If a lot doesn’t reach its reserve price, the auctioneer will say it hasn’t been sold and doesn’t bring down the hammer. If this happens with your prospective lot, make sure you leave your contact details with the auction team, so you can find out about any post-auction sale.

Remember, once the auctioneer’s hammer is knocked down, you are contracted to buy and the vendor is contracted to sell, so prepare well in advance before attending the auction room and bid with confidence to bag that bargain property. For more information visit www.rics.org/propertyauctions.

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