A Simple Guide to Buying and Selling at Auction
Why Sell At Auction?
Selling at auction can provide an uncomplicated solution for those wanting a quick resolution. If your property does sell, you will achieve instant exchange of contracts on the fall of the hammer. All legal paperwork for your sale must be prepared prior to the auction date to allow for immediate exchange. However, it is not always the best solution and, whilst the success rate is running at a national average of approximately 70%, it does not always offer a guaranteed sale.
What Type of Property Is Suitable for Auction?
The type of properties that are most often auctioned are those in need of refurbishment or renovation, conversion opportunities, farm buildings, land or property resulting from the death of the owner. As well as people looking for a home for themselves, this type of property is also likely to generate interest from investors and developers.
In Preparation
Once you have had your property valued, you will need to instruct your chosen auctioneer. This needs to be done at least 6 weeks, preferably 2 months, prior to the auction date to allow adequate time to market your property. You will also need to instruct a solicitor who will draw up all the legal paperwork in anticipation of a sale.
You will also have the opportunity to set a reserve price, which is the minimum price you wish your property to be sold for. It is confidential and will not be disclosed to bidders. If bidding does not reach the reserve price, your property will remain unsold.
Very often, offers can be submitted prior to the auction date. You can arrange with your auctioneer to not accept any such offers or to pass on only ones over a certain level. You may choose not to accept any of these offers unless exchange of contract can be guaranteed before the date of the auction.
Why Buy At Auction?
Buying at auction can give a purchaser the opportunity to secure a purchase immediately with no possibility of gazumping. It may also offer an unusual or challenging opportunity. However, you must ensure that you know exactly what you are prepared to take on and what you are prepared to pay. It is very easy to get carried away when bidding against others. All bidders must be in a position to proceed with a sale and the 10% deposit must be available at the point of the hammer fall.
In Preparation
View the property as many times as you need to ensure it is right for you.
Have a survey and ask a trusted builders opinion of likely costs before setting your budget. You cannot withdraw from the sale at a later date if problems subsequently come to light.
Make sure you are fully aware of the legal implications and likely costs involved in buying at auction. The auctioneers will have all the documents relating to the property. Ensure you read these in detail or ask your solicitor to do so.
You must have the full amount you will need to buy the property available. If you are financing the purchase through a mortgage, you must have your mortgage offer and a deposit, typically 10% of purchase price, in place prior to the auction.
Have buildings insurance prepared in anticipation of a successful bid.
The auctioneer will advise whether you have the opportunity to submit an offer prior to the auction date. However, you will still need to be in a position to exchange contracts almost immediately in order for the property to be withdrawn from the auction.
If you cannot be there on the day of the auction inform the auctioneer in advance, they can either bid on your behalf or convey your telephone bids. It is also possible to send a trusted 3rd party to bid on your behalf but they will need your written consent.
On Auction Day
It is always advisable to check that the property is still available before you go to the auction.
Ensure you are aware of any last minute amendments to the catalogue details.
You will need to bring two forms of identification, your solicitor's details and your deposit, which can be in the form of a bankers draft, building society cheque or a personal cheque. You cannot pay by cash or credit card. You may also be liable for additional auction costs so this will also need to be allowed for.
Don't bid more than you can afford or have agreed with your mortgage lender.
When the Bidding Ends
This will mean the property has either been withdrawn because it failed to reach the reserve price or it has sold to the highest bidder.
If the property was withdrawn, it is possible for any interested parties to open negotiations directly with the seller of the property. Your auctioneer will advise you in this instance.
If the hammer falls and the property sells to the highest bidder, the contracts are automatically exchanged and the buyer is liable for the deposit. The balance will be paid upon completion, the date for which will be specified in the legal documentation.
If a buyer or seller subsequently defaults on the sale, they will lose the deposit and may also be subject to legal proceedings to recover other costs.
For any further advice on buying or selling at auction, please call Tim Trembath on 01371 877352.
