This guide has been written as an introduction to purchasing property through auction for the newcomer covering all aspects from selecting appropriate properties, bidding at auction and structuring financing.
Auctions are becoming an increasingly popular channel through which to purchase property, with information available from various sources including TV, books and the Internet to assist you in what is thought to be a complicated process for professionals only.
Property auctions are often used by lenders, developers, investors and councils to sell property in a quick and efficient manner. If you are the successful bidder at auction you will usually have 28 days to complete the purchase or even less in some cases, therefore it is important you are well prepared at all stages of the auction process.
Active Securities are a specialist provider of non-status auction finance. Our business is focused on delivering both a flexible and efficient service for our clients and is particularly suited to the time constraints of auction purchases.
Before the Auction
Firstly, it is important to decide what type of property you are looking to purchase, the location and how much you are prepared to spend. With this in mind, you can now look to the various auction houses for details of their forthcoming auctions.
Auction Houses
Within the UK there are numerous auction houses. Broadly speaking there are two categories, regional and national auction houses. The national auction houses tend to be London based and auction property throughout the country. The regional auction houses focus specifically on certain areas of the country.
Finding a Property at Auction
To assist you in searching for properties, Active Securities has made it a little easier. We provide a calendar of forthcoming auctions and additionally a portal allowing you to search many UK auction houses for auction properties available matching your criteria. Additionally the auction houses often provide catalogues available online and / or by post. Catalogues are typically available 3-4 weeks before the auction date.
Catalogues provide basic information for each of the lots to be auctioned – typically including pictures, floor plans, description and a guide price. The guide price provides an indication as to the price the vendor hopes to achieve and will be updated throughout the auction process.
Once you have short listed properties that are of interest, you should contact the auctioneers to register your interest. This will enable the auctioneer to keep you informed of any changes, i.e. if the lot has been withdrawn or sold prior to the auction.
Viewing Properties
It is essential to view the properties of interest to you before the auction day. Viewing arrangements for each lot are contained in the auction catalogue and typically take place on a pre-determined date and time and often in groups. It is useful to note that when buying tenanted properties, viewings are not always possible.
Finance
Prior to bidding at auction, it is important for you to obtain approval in principle from your financing provider before the property auction. Active Securities provide quick and simple financing solutions allowing you to complete within short time periods. Many people chose to use short term lenders such as Active Securities in order to complete on property purchases from auction with the view of obtaining long term financing thereafter.
You should be aware that with tenanted properties access is not always readily available, even after the auction. This should be taken into consideration as most long term finance lenders will require an internal inspection of the property.
Legals
Legal packs are generally available and should contain the Special Conditions, Title Deeds, Office Copy Entries, Leases (where applicable), Planning Permissions (where applicable) and Searches. Copies can be obtained from the vendor’s solicitors or the auctioneers prior to the auction and are usually available for inspection at the auction itself. Auctioneers typically charge £10-20 to supply the legal pack.
General and Special Conditions of Sale
Each lot is sold subject to the Notices and General Conditions of Sale printed in the property auction catalogue and the Special Conditions which apply to specific lots. The Special Conditions are usually available from the vendor’s solicitors or the auctioneers.
These conditions are legally binding and purchasers are deemed to have read and understood these prior to bidding. It is therefore important that you and your legal advisors satisfy all of your legal enquiries and are aware of all conditions prior to bidding at auction.
Inspections and Surveys
It is recommended to obtain a surveyor's report prior to bidding at auction and if possible and where appropriate a full structural survey.
This can be costly especially if you are interested in more than one property and you may not be the winning bidder at auction. However, a professional may identify issues with the property and will provide a firm indication of value.
Bidding Prior To Auction
You can submit an offer before the auction which, if suitable, is forwarded to the vendor. If this is accepted, your purchase will proceed and when contracts have been exchanged the property will be withdrawn from the auction. Offers should be unconditional and you should ensure that you are in a position to exchange contracts.
Unable to Attend the Auction
If you are unable to attend the auction, there are four means by which you can bid:
1) Arrange for someone to submit bids on your behalf. They will require your written consent and you should agree limits before bids are submitted. It is always advisable to inform the auctioneer of your intentions prior to the auction.
2) Submit telephone bids to a member of the auction team who will be present in the auction room. This requires prior arrangement with the auctioneer and usually requires a 10% deposit (subject to a minimum) to be transferred to the auctioneer prior to the auction day.
3) Bid by Proxy. This requires you to register your highest bid in writing with the auctioneer along with a deposit for 10% of the figure quoted (subject to a minimum). A member of the auction staff will bid on your behalf up to your set limit.
4) Auctioneers are starting to introduce Internet bidding facilities. If available, further details can be found through the auctioneers website or in the auction catalogues.
At Auction
Bidding at Auction
It is advisable to arrive at the auction house early in order to check if there have been any last minute alterations to the details of the lots. The lots will be sold subject to these amendments and it is important that you check these before bidding.
The auctioneer will announce the lot by number and address and will invite bids at a suggested level, you can bid by raising your hand or catalogue. Make sure that you clearly bid as it is often difficult for the auctioneer to track individuals in a busy auction room. When the bidding reaches the highest level the auctioneer will indicate that it is to be sold (as long as the price is greater than the reserve price). If you are the highest bidder the auctioneer will strike the gavel and you will have purchased the lot. At this time a legal and binding contract is formed.
Should the reserve not be exceeded, the property will not be sold. If the final bid is close to the reserve the auctioneer will often state that you are close to the reserve price and you should 'come and speak to us'.
Winning Bidder
If you are the successful bidder you will be asked to complete a purchase slip and attend the contract desk where the written formalities will be completed. You will need means of paying the deposit, the name and address of the solicitors who will be acting for you and proof of your identity and address. An administration fee is sometimes charged by the auction house.
Following the auction you should ensure the written contract is provided to your solicitors. The balance of the purchase monies is generally payable within 28 days or sooner if varied by the Special Conditions of Sale.
Property Auction Deposit
It is important that you have all finances ready for the day of the auction. Should you be the successful bidder, a 10% deposit will be required to be paid (subject to a minimum which can often be as much as £2,000)
The deposit should be payable by way of a bankers draft or building society cheque. It is highly unlikely that the auctioneers will accept personal or company cheques unless prior arrangements have been made. Cash or credit cards are not accepted as a deposit.
Insurance
The property is your responsibility from the date of exchange and it is therefore very important that you make arrangements to insure it immediately after the sale.
Unsold Lots
If the lot you are interested in is unsold you should register you interest with the auctioneers before leaving the room as there is the opportunity of furthering negotiations with the vendor.
This document is only intended as a brief and general overview of the property auction process. If you have specific enquiries you should contact the auctioneers directly. Please refer to our terms and conditions.
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