Once a seller has decided to sell their property at auction, the estate agent or auction company will prepare the details as with a conventional sale. The seller’s solicitor will also obtain the Title Deeds and carry out the usual Local Authority and Land Registry Searches and prepare any special conditions of sale required by the auctioneer. These will be included in the auction pack, which you can obtain before the auction or, at the very least, read on the day.
The Auctioneer will then feature the property in their catalogue for the next auction and distribute this to his mailing list.
Prior to the Auction
Once you have identified property that you would like to bid on by looking through the auction catalogue or viewing lots on-line, you should check it out legally. The vendor’s solicitors will have prepared legal packs containing (where applicable) special conditions of sale, title deeds, leases and searches. These will help you make an informed decision about the lot. If you need further legal information you should contact the vendor’s solicitor – the details of which are usually provided in the catalogue or on the auctioneer’s website.
Check what methods of payment the auctioneer will accept for the deposit on 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 you 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.
The auctioneer acts as an agent for each seller. They prepare the catalogue from information supplied by or on behalf of each seller. This will usually include a photograph of the property, a brief description and a guide price. You should not assume that the catalogue details are accurate or that the picture is a realistic representation of the property.
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. What will be listed is a ‘guide price’ – this may be set deliberately low in order to attract interest amongst potential buyers. It is likely that the guide price will be exceeded quite substantially on auction day with the guide prices being exceeded by 100% or more in some cases.
If you want to put in an offer prior to the auction, you can usually do this in writing, (by letter, fax or by email) at any time up to the date of the auction, but if your offer is accepted you will have to be in a position to exchange contracts and pay your deposit immediately – as if you had bought at the auction. It can be a risky strategy, as I have met many people who have bought a property at the auction for considerably less that the price offered prior to the auction.
If you are intending to bid by telephone or proxy, you will need to make arrangements for this with the auction house prior to the event. Usually the auction catalogue will contain instructions on what to do if you want to bid but can’t actually attend the event in person. You will need to complete a registration form and a cheque to cover your deposit relevant to your maximum bid will need to be provided to the auctioneer in the event that you are successful. This does rather ‘show your hand’ somewhat, as you have revealed your maximum bid, and in my experience there is no substitute for attending the auction in person.
On the day itself
o If possible, arrive early and familiarise yourself with the empty auction room. On arrival, you will need to register with the auction house. In order to bid you will be given a unique bidder number prior to the start of the auction.
o On arrival, get a copy of any addendum sheet. These are distributed around the auction room and contain late information or alterations. Don't assume that all the properties included in the catalogue will be offered on the day of the auction. Some may be withdrawn or sold prior to the auction.
o If you haven’t already done so prior to the auction, check out the legal pack in respect of any properties that you intend to bid on. This is another good reason to arrive early – sometimes the legal pack can take quite a bit of time to read through and depending on the level of interest in the property, could be in great demand on the day. Some people deliberately hold onto the legal pack at the auction to prevent other interested parties who may be ‘competition’ reviewing it. This might sound uncharitable, but this is business, and clearly the fewer people interested in the property, the less the property is going to fetch.
o If you have any queries on the day of the sale ask the auctioneer or his staff. They are approachable and knowledgeable about the properties they sell.
o Take a seat or stand somewhere in the room where the auctioneer will able to see you bidding clearly. More of the reasons for this later.
o Listen carefully to the opening remarks of the auctioneer. Amendments may be announced which directly affect the property in which you are interested.
o It is a popular myth that auctioneers mistake any casual movement such as a nose scratch for a bid. Don’t worry - auctioneers are able to distinguish between someone scratching their head and bidding but, make sure you gesture clearly at the auctioneer. Subtle twitches and winks will not be picked up. Either raise your hand or nod/shake your head clearly. The auctioneer will warn the room when he is concluding a sale and invite anyone still wanting to bid to make themselves known. If for some reason a mistake is made, tell the auctioneer straight away; do not wait until the end of the sale.
o The Auctioneer may give an indication when the property has reached its reserve price. Phrases like ‘It’s in the room to sell...’ or ‘this ones selling today’ are clues that the reserve price has been reached and the property will be sold to the highest bidder from that point.
o Once the bidding slows down, the auctioneer will say ‘Going once…going twice…’ This is the point at which some people choose to join the bidding - which is why it’s important that the auctioneer can see you as decisions happen very quickly – so the bidding will recommence. Eventually, the auctioneer will say ‘Going for a third and final time…’ and if there are no more bids they will either bring down the gavel and say ‘sold’ or say ‘I’m sorry, that property didn’t reach its reserve price’.
o If a property fails to reach its reserve price, don't give up! The vendor may decide to accept your bid immediately following the auction. So if the property you were interested in wasn’t sold, leave your details with the auctioneer since you may be able to come to a private arrangement with the vendor. This could be immediately or some days after the sale.
o You will need to take two forms of identification with you, such as a Driving License or passport and a bank statement or utility bill as proof of address. You will also need your cheque book or debit card, details of your solicitor and all your banking details. If your bid is successful you are legally bound to buy the property and will need to put a down payment deposit there and then of 10% of the property's price. You will also be required to sign the purchase contract in the sale room. The seller is legally bound to complete on the specified day (usually within the next 28 days). You would then pay them the rest of the purchase price (i.e. 90%).
o Don't forget that the property becomes the buyer's insurable risk as soon as the hammer falls. If any damage is done to the property between exchange and completion it is your responsibility and loss.
o The auction terms and conditions assume that the buyer has acted like a prudent buyer. If you choose to buy a lot without taking these normal precautions you do so at your own risk. The expression ‘Buyer Beware’ cannot be overemphasised.
I have seen people make huge mistakes because they didn’t do their research, bought ‘blind’ or sometimes on a whim because a property ‘seemed cheap’.
Did You Know?
Until the bidding reaches the reserve price, the Auctioneer may take bids ‘off the wall’. This is the crafty (but entirely legal) practise of the Auctioneer pretending that someone has bid when they haven’t. This is used to entice would-be bidders to join in the bidding and can help kick start the bidding on a property if it is slow to begin.
What kind of properties are sold at auction
Every and all types of property are for sale through auction houses, but generally speaking the type of properties that are sold at auction are just the type that you should be looking for if you want to buy at Below Market Value. They are sometimes unusual or quirky properties that will not normally sell through estate agents and really need to attract property investors, cash buyers or people looking for special deals. However, there are also perfectly standard properties that are being sold via this route – and you’ll find a large proportion of mid terrace and first time buyer development projects in the pages of the auction catalogues.
What makes auctions so interesting is that there is a great breadth of property and land deals ranging from:
• Properties that are requiring renovation. Derelict properties and properties that are in poor decorative state.
• Properties needing complete modernisation.
• Properties with structural problems.
• Properties that have tenants already in-situ.
• Leasehold properties on very short leases.
• Properties which are subject to restrictions or covenants.
• Properties which are unmortgage-able (or at least it will require specialist financing to get a mortgage secured on them).
• Properties owned by local authorities, mortgage companies and other public bodies such as water boards.
• Properties which are going to require Change of Use Planning Permission to be turned into housing such as Ambulance stations, public lavatories and railway buildings.
• Lock up garages and other ‘storage’ dwellings.
• Smaller plots of land suitable for individuals to buy (some of which may have outline planning permission for development, others may have full planning in place).
However, the certainty and convenience of auction is attracting more and more vendors to use this route to sell – and standard bungalows, flats, houses and land development opportunities are all regularly available.
