
Lengthy chains of buyers and sellers are one of the main problems in today’s property market, according to Phil. ‘If you’ve got a chain of five or six people buying and selling one another’s houses, the longer it takes to put the chain together, the greater the chance that someone in that chain is going to change their mind,’ says Phil. ‘Thirty percent of deals collapse between the time of a price agreed and exchange of contracts. Auctions offer certainty—the deal is done, there and then, in the auction room. No ifs, no buts, no changes of minds—that can be very attractive,’ he continues.
While property auctions were once the domain of cash buyers and property developers, they are now much more accessible to everyone. According to Phil, a much greater range of properties are now available at auction, so they offer an attractive potential option for buyers that want to steer clear of the open market. Auction catalogues cover a broad range of property types, including quirky conversion projects, quaint cottages for restoration and old military facilities. Disused water towers have even been known to go under the hammer at UK auction houses. Auctions may also include commercial sites for conversion to residential property, including agricultural land or woodland and old farm buildings. Understanding the legal restrictions placed on non-conventional sites is important, and will often in require the services of a solicitor or land management specialist.
Proceed with Caution
Whether you are a buy-to let landlord, searching for a new family home, or seeking out a property to invest in, it is important to do your research before forging ahead with purchasing any property at auction. Begin by requesting a brochure from the auction house in question, and study the particulars that relate to the property you are interested in—this includes the small print! The catalogue covers a wealth of important information, including the details of the property for sale, how to view lots and the general conditions of sale. Before making any decisions, try to view the property at least once, as you would if you were buying on the open market. It is also prudent to notify an independent solicitor in advance of the auction so you can obtain any legal information relevant to the sale. It is also wise to get a house survey done before you go ahead with your bidding. If possible, take a builder or surveyor with you when you are viewing the property. That way you will be able to get quotes on any work that is needed.
Get Your Finances in Order
When you buy a property at auction, you should prepare to hand over a 10 percent deposit as soon as the hammer falls. The remaining 90 percent of the purchase price is expected within 28 days.‘Because you are exchanging your contracts there and then, you need to have your finances really ship shape,’ says Phil. ‘You have to be 100 percent confident.’ If you are not a cash buyer, you will need to secure your mortgage in advance of the auction. Most lenders will issue mortgages on homes bought at auction, however, it can be a more complicated process as you don’t know how much the property will be sold for, and the lender will need to issue a valuation of the property. Make sure you have the mortgage agreement tied down in advance of the big day, or you risk losing your 10 percent deposit.
The Big Day
When auction day finally arrives, you will usually need to bring two forms of identification and your 10 percent deposit, which is usually made in the form of a cheque or cash. Get a copy of the Late Announcements of Addendum sheet, which contains any modifications to the auction catalogue. For example, it may include EPC ratings or confirmation of tenancy agreements that were not available when the catalogue was printed. ‘If you’re going to bid for yourself, go and sit through an hour’s auctions to see the rhythm of the auction and how people are doing it. Don’t just turn up, go in, and get your hand in the air—that’s madness,’ warns Phil. Buying at auction can be an exhilarating experience. However, it is important not to get swept away by the immediate excitement of the experience. Set a ceiling price limit before you bid so that you don’t get too carried away during bidding and exceed your limit. ‘If you’re the type of person that might put their hand in the air a couple of extra times when you shouldn’t, then you shouldn’t be sitting in that room you should get someone else to do it,’ advises Phil. If the bidding ends and the property doesn’t meet its reserve, you can still register your interest with the seller through the auction house. Many sellers are open to negotiation, and can be receptive to sensible offers.
SEE ALSO:
BUY TO LET: Should You Get Involved