Buying a property at auction wouldn’t appeal to every house-hunter and indeed, still only accounts for just over 2 per cent of total home sales in the UK.
But that said, this still amounts to around 20,000 residential property sales per year and, in the wake of the pandemic, buying a property at auction has grown in popularity, possibly because of delays in getting sales completed when going down the conventional route.
So, if you are tempted to buy a property at auction, you need to be aware of some basic dos and don’ts both before the auction itself and at the auction, if you’re to succeed.
Once you have picked an area you are interested in, make contact with property auction houses and ask to be added to their mailing list, so you receive the new auction catalogues.
2. View the property
Just as would with any other property you are thinking of buying, go and see it. Make a thorough inspection of the building and also check out the local area. You might even want to take a builder with you, for a second opinion on work you might like to do and the potential cost.
3. Scrutinise the catalogue
Details of the property will be in the auction catalogue and you need to read this carefully. You should ask for a copy of any separate legal pack that has been prepared, which should – but may not always – include results of searches. It’s strongly advisable to ask you conveyancing lawyer to look over this information, to spot any loopholes, covenants or other details that you need to know about, before you decide to go ahead. If no searches have been made, your lawyer will also be able to carry these out for you.
Also, make sure you carefully read the small print and observe any conditions of sale. This way, you avoid any nasty surprises on the day.
4. Don’t delay
Auction catalogues usually come out only a month before an auction, so you need to make a decision quickly, and – even more speedily – ask your lawyer for help with the legal side.
5. Express your interest
Let the auctioneers know you may be interested in a property, and then they will keep you up-to-date with any developments. For example, it’s not unheard of for a property to sell before the auction even takes place. If this is likely to happen, you’ll want to know.
6. Get your finances in place
You should set and stick to your budget. This will, in general, be the amount you have saved, plus any mortgage offer you have in place, but minus other costs (such as moving costs and legal fees). You need to know in advance the method of payment that will be required if you succeed in the auction, and how much deposit is needed.
7. Guide price and reserve price
There is a difference, and it’s important to understand what each means. The guide price is the price that bidding will start at; the reserve price is the minimum amount the seller will accept. You won’t know what the reserve price is, but it can be quite a bit higher than the guide price, so bear this in mind when you are bidding.
8. Stay calm!
It’s easy to get carried away when bidding, but remember this is a major purchase, so stick to your budget. Make your bids clear (so the auctioneer is aware of your interest) but keep a cool head. If you’re not sure that you’ll be able to do so, you can always ask someone else – perhaps your lawyer – to bid on your behalf.
9. Be very sure
Remember, if you are successful, and you place the winning bid, then you will have entered into an agreement and will be asked to sign the sales contract, and pay the deposit, there and then. Pulling out afterwards could result in costs that you will be liable for.
In general, the deposit you will be asked to pay is 10 per cent of the sale price, and you will have between two and six weeks to pay the balance. Remember to take along some ID to the auction, as well as your bank card.
10. What if the property doesn’t sell?
Not all property will sell at the auction (for example, it may not meet the reserve price). If this happens, and if you are interested in buying, you should approach the auctioneer, who may have the authority to sell it privately, after the sale.
If you are considering buying a property at auction, and are looking for legal advice, get in touch with Optimum conveyancing lawyers. We help people with property law matters relating to buying and selling properties in Swindon, Wiltshire, Cheltenham and Gloucestershire.