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Auctions


Image of a sold sign.

Many people who are considering buying or selling a property may be unaware that sale by auction may be as good or even better method than more conventional means. Auction is becoming an increasingly attractive means of buying and selling property. For the buyer it is a transparent process, the sale is binding at the fall of the gavel and the completion date is fixed in advance. For sellers the amount of competition at sales often means that auctions achieve higher prices than private treaty sales. In general you should not seek to buy a property at auction if your purchase is dependent on the sale of another property on which the contracts have not been exchanged.

Before the Auction

1. You should obtain a copy of the auction catalogue from the auctioneers. This may have information relating to the property as part of a "home buyers package".
 
2. After looking round the property yourself, consult a chartered surveyor and if you wish to proceed, instruct them to carry out an RICS Homebuyers report. This report will advise on the condition and value of the property and may also suggest certain enquiries you should make, other specialist reports you should obtain or indicate expenditure you may face over repairs. Ask for the Report to be in your hands at least week before the sale.

3. Instruct your solicitor to inspect Local and National searches and the title deeds for any onerous covenants, restrictions etc. Again, this Report should be with you at least one week before the sale.

4. Ask the auctioneer at the outset if they have information relating to the property since this could reduce your costs considerably. Otherwise you should instruct your solicitor or chartered surveyor to make enquiries at relevant local authorities regarding planning, building regulations, highways and any other factors which might affect the property directly or indirectly, such as new roads or redevelopment.
 
5. Discuss with your chartered surveyor the upper limit of the price you should pay for the property.

6. Remember to take into account the cost of advice from the source lending you money to buy the property as well as the fees for obtaining the professional advice outlined above, stamp duty if applicable and the cost of work which may be needed immediately after purchase.
 
7. Check what methods of payment the auctioneer will accept for the property. If you are the successful purchaser, you will usually be required to pay a 10% deposit. Subject to a minimum specified in the catalogue immediately after the sale and should therefore have sufficient funds to cover this. It may be necessary, for example, to make arrangements for a banker's draft prior to the sale.

How does the auction sale work?
1. If you have any queries on the day of the sale ask the auctioneer or his staff. They are more approachable than most imagine and are knowledgeable about the properties they sell. Ask for a copy of the addendum for any changes to the original details.

2. Your surveyor or solicitor can attend the sale and bid on your behalf. This may be advisable if you are likely to be carried away by the proceedings and bid over your upper limit.

3. If you do attend the sale, listen carefully to the opening remarks of the auctioneer. Amendments may be announced which directly affect the property in which you are interested.

4. Most properties are subject to a reserve price below which the auctioneer cannot sell the property at the auction. It will be made clear whether the property is being sold subject to a reserve in the catalogue or conditions of the sale although the reserve price will not usually be disclosed.

5. Attend the sale and bid for the property up to but not beyond the price you have previously decided is your maximum bid.

6. It is a popular myth that auctioneers mistake any casual movement for a bid. Do not worry, auctioneers are able to distinguish between someone scratching their head and bidding but, if for some reason a mistake is made, tell the auctioneer straight away; do not wait until the end of the sale.
 
7. If you are the last and highest bidder at the fall of the auctioneer's hammer, you are the successful purchaser and are legally committed to pay the price you bid and complete the purchase.

8. No one can outbid you after the sale and the vendor is equally legally bound to complete the sale on the day and under he terms stipulated in the contract.

9. You will usually be required to pay your 10% deposit or a minimum specified in the catalogue immediately after the sale and will sign the contract in the saleroom. The date on which you will be required to pay the remaining 90% of the price to complete the purchase will be stipulated in the contract document and is usually within twenty-eight days of the sale.

10. Upon signing the contract you will be responsible for insuring the property. If the property remains unsold after the auction i.e. your bid was below the reserve price, speak to the auctioneer to register your interest before leaving the saleroom. It may be possible to buy the proper by private treaty at a price agreed with the vendor.  

Selling a property at auction
If you are considering the sale of your property by auction, you must be able to give vacant possession at a fixed date, unless the sale is subject to tenancies, this is usually four weeks after the date of the auction. You will therefore need to have access to alternative accommodation and/or storage of your furniture and other belongings.

1. Consult a qualified property auctioneer (MRICS/FRICS) who will advise you if your property is suitable to sell at auction.

2. If the auctioneer considers the property suitable, discuss the procedure, possible sale date, whether it will be included in the sale of other properties and viewing arrangements.

3. Always obtain a copy of the auctioneers terms of business and read them carefully.

4. The auctioneer will discuss with you the likely sale price and reserve; the price below which you do not wish the auctioneer to sell your property at auction.

5. At this stage you should also discuss the cost of the sale and the rate of commission charged by the auctioneer. You may be required to pay for special advertising or the printing of a brochure. For example, a budget estimate should be obtained from the auctioneer detailing expenditure and confirming the limit of your commitment in writing. You should be aware that, if your property fails to sell, you may be required to pay certain costs incurred and this should be clarified before the sale.

6. Instruct a solicitor who will obtain the Title Deeds and prepare the special conditions of sale required by the auctioneer. Local Authority and Land Registry Searches may be put in hand for the use of prospective purchasers if requested by the auctioneers.

7. Close to the date of the sale the auctioneer will discuss with you whether the reserve price should be adjusted, either way, to reflect current market conditions for your property and the level of interest shown by viewings.

8. If the bidding exceeds this figure your decision to sell at auction has been justified. If the reserve is not reached the property may still be sold privately, sometimes immediately after the sale to someone who has expressed an interest at the auction.

9. If your property is sold at auction the auctioneer will sign the contract on your behalf in the saleroom and collect a deposit from the purchaser, this is usually 10%. Depending on the terms of the contract, the remaining 90% of the price required to complete the purchase will usually be paid within twenty-eight days of the sale.

10. The account from the auctioneer for commission and auction expenses will usually be received by your solicitor who will pay it subject to your approval. After paying off other outstanding charges such as your mortgage and solicitor's fees, your solicitor will send you the balance of the payment or transfer this into your personal account.   How to contact an auctioneer. 

Questions and answers
Q. What are the advantages of buying at auction?
A. There are several advantages to buying at auction; these include Properties are usually available at a competitive price It is an open and fair competition between bidders Once the hammer has come down neither the seller or the buyer can withdraw and the process will be complete within a set time.

Q. What is a reserve price?
A. A reserve price is the lowest price the seller will accept. The existence of a reserve price should be disclosed but the amount will not.

Q. What is a guide price?
A. Guide Prices are simply an idea of what price the property is expected to sell for on the day. These often change in the run up to an auction so you should contact the auctioneer to check these.

Q. Should I obtain a catalogue?
A. Yes. The catalogue contains details of the property and the General Conditions of Sale and you should take the time to read these carefully.

Q. Can I bid via telephone or the Internet?
A. If you cannot attend the auction it may be possible to bid by proxy. This can be done in one of three ways By telephone - the auctioneer will telephone you during the auction In writing - you specify your maximum bid and the auctioneer bids for you Over the internet - this is available from some auctioneers and you should contact them directly Whichever route you chose the auctioneer will ask you to complete a proxy bidding form and to deposit a cheque large enough to cover the sale deposit amount based upon the largest figure you intend to bid.

Q. Can I inspect the property before the auction?
A. It is usually possible to view the property before the auction. There are often group viewings for popular lots. You should contact the auctioneer to arrange this.

Q. What if I need a mortgage?
A. If you need a mortgage then you must obtain an offer in principal before the auction day. Most lenders are familiar with the auction process.

Q. Do I need a survey?
A. Whilst we would recommend that you ask a chartered surveyor to undertake a survey on your behalf before buying any property a survey is not mandatory. If you require a mortgage you will however need to have a mortgage valuation prior to the auction.

Q Should I contact a solicitor?
A Yes. Let your solicitor have a copy of the auction catalogue, he may wish to contact the auctioneer and the sellers solicitor on your behalf.

Q. Can the catalogue details change?
A. There are occasionally last minute amendments to auction catalogues. Amendments are available from the auctioneers website or from them directly. On the day alterations would be printed as an addendum. You should stay in contact with the auctioneer to be sure you are aware of any changes.

Q. Can properties be sold or withdrawn prior to auction?
A. Properties do sometimes sell prior to auction or occasionally are withdrawn. You should check with the auctioneer the day before the auction to confirm that the lot in which you are interested is still being offered.

Q. How do I bid at auction?
A. When your lot comes up the auctioneer will confirm the address, the lot number and any last minute details or amendments. Make sure you are bidding for the correct property. You can bid by raising your hand, catalogue or any appropriate means. If you are bidding an amount that is different from the one the auctioneer is offering you should shout this out. You should make it clear to the auctioneer that you are bidding, however it is not true that an auctioneer will mistake any casual movement for a bid.

Q. Do procedures differ between auction houses?
A. Yes. You should always contact the auctioneer prior to the auction to discuss his procedures. For example some auction houses have a paddle bidding system.

Q. If successful at the auction what do I have to pay?
A. You must have your finances available on the day. If you make a successful bid you will be asked for a 10% deposit (subject to a minimum amount indicated in the catalogue of Conditions of Sale). Pre-written bank drafts are usually made out for 10% of your maximum bid. You will also need to provide the auctioneer with proof of identification and your solicitor's details. In return you will be given a "purchaser slip" which you should take to the contracts desk where you will sign the contract. A copy of this should be passed to your solicitor without delay. The balance is payable on completion which is usually 28 days later.

Q. Who is responsible for insurance of the property?
A. You are responsible for insuring the property from exchange of contracts. You should make arrangements in advance.

Q. What if the lot does not sell?
A. The lot may not have reached its reserve price and is withdrawn from the auction. It is worth approaching the auctioneer to discuss this, as it may still be possible to buy the property privately.

Q. How can I find out what is coming up at auction?
A. You can contact individual auctioneers for their catalogues. Details of auction results and forthcoming auctions are available in the property press; both Estates Gazette and Property Week have auction pages every week.


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