Should I buy at Auction?

Auctions can be a great way of bagging yourself a bargain! You can also avoid lengthy transactions and the often uncertain buying procedures – but, what are the risks and what do you need to consider?

There are currently 2 types of property auction in the UK.

• The traditional auction – where all interested buyers place bids in front of each other. If you are the highest bidder, you exchange contracts as soon as the auction is over and pay your deposit (usually 10% of the purchase price). You then have 28 days to complete the purchase. If you then withdraw, you will lose your deposit and the property. You may also be liable for any further losses that the seller incurs as a result of the sale not proceeding – so be sure before you bid.

• The modern auction – usually run online, rather like an ebay auction, and can last for up to 30 days. If you ‘win’, you pay a fee to the auction house, usually around 5% of the purchase price. Be warned – this fee is non refundable and is on top of whatever purchase price you have agreed. You then have 28 days to exchange contracts and a further 28 days to complete. This method is often favoured if you are having a mortgage to finance the property as you have longer to arrange this.

Before the Auction

• Contact the local auction houses in the area that you are interested in buying. The auction houses can then keep you updated as to what’s coming up and where.
• Do your research – once you’ve found somewhere, arrange a viewing. Inspect the property and the surrounding area thoroughly. Take a builder with you in order to get a general idea of work to be done, or to give you a ‘heads up’ on any possible structural problems.
• Obtain a copy of the Auction Pack. This will have important information about the property that you need to know before placing your bid. Searches are often included within the Auction Pack. It is really important that you instruct your solicitor to review the pack, ahead of the Auction.  Once contracts have exchanged, you are legally bound to purchase the property regardless of what ‘issues’ might be uncovered afterwards.
• Act Fast – if you’ve done all of the above, you often won’t have long between viewing the property for the first time, to the night of the auction. Don’t leave things until the last minute – be a confident bidder.
• Set a budget – it’s easy to get carried away with the thrill of the Auction. Know how much you can afford, consider all costs / renovation quotes and don’t go over budget.

At the Traditional Auction

• Guide Price and Reserve Price – the “guide price” is the starting price at which the bidding will commence. The “reserve price” is the minimum that the seller will accept.
• Pick a good seat – make sure the auctioneer can see your bids clearly.
• If you win, you will be required to sign the contract and pay your deposit there and then. You will then be bound by the terms and conditions of the contract and be liable for insuring the property.
• If the property does not sell, speak to the auctioneer as they may have authority to sell the property privately, for the right price.

Things to consider

Auctions often attract two types of property – a perfectly normal property, whose owner just wants a quick and efficient sale; and a property which may have structural or legal defects, whose owner wants to sell the property and may have had issues selling the same on the open market. Buying a property at Auction does come with risks – our advice would be to make sure you have thoroughly investigated the property as far as you can structurally, and ask your solicitor to review the Auction Pack for you well ahead of the auction date.  If you do both of these things, then you will be able to confidently bid on – and hopefully win – your chosen property.

Poole Alcock would love to help you secure your auction purchase – call us on 0800 470 0336.