Purchasing at auction can be a risky business but it is also a really good way of securing a competitive property investment. But there’s more to it than just waving your hand.
Auction houses will often specialise in properties in their local area. Once you’ve identified the area you are interested in, contact the auction house to be put on their online or paper mailing list. Auction catalogues and viewing schedules are usually published several weeks before the auction and should also indicate a guide price and conditions of sale.
Download all the legal documents for the lots you are interested in and make sure you and your solicitor read them carefully. How much you bid can depend on what you know about a property, and searches are often included in the legal documents.
To prevent expensive mistakes, make sure your purchase is worth the money you are prepared to invest in it by taking advice from a Chartered Surveyor. Ask them to view the property before the auction to give advice on the local property market. A RICS-regulated valuer can help you decide how much you should be prepared to bid.
If you are concerned about getting carried away and bidding beyond your limit, appoint someone to bid on your behalf – or bid by proxy, where you authorise the auction house to bid on your behalf up to a set maximum.
Immediately following your successful bid, you will need to show identification documents, insure the property and exchange contracts. You will be required to pay a deposit of at least 10% of the agreed price, and an auction fee.
Check the accepted payment methods before the auction and make sure you have a payment plan in place. If you are buying with assistance from a mortgage lender, make sure they can release the funds within the timescale. If you fail to complete on the sale (usually set for four weeks after the auction) you are likely to lose your deposit and could even be sued by the seller.
Be aware that the guide price isn’t always realistic – selling prices are often much higher (and sometimes much lower) than the auction house’s guide price. The auction house will be aware of the reserve price set by the seller, and if the reserve isn’t met a sale won’t be agreed.
If the reserve isn’t met, it may be possible to contact the seller through the auction house after the auction, when they may be inclined to ‘do a deal’. Similarly, in some cases sellers may be willing to sell before the auction, although it is likely they will want to see what interest there is before they agree a direct sale, and it will usually have to be the ‘full’ price.