The advantages of buying at auction
Buying at auction has become a more popular method of purchase in recent years.
The main advantages are:
- Certainty, control and transparency – as a buyer, you are in control, deciding when to bid and how high you wish to go. A purchaser is able to buy the property at a price that was achieved competitively against other bidders in a transparent process, and if your bid is successful, then the property is yours on completion. The seller cannot withdraw.
- It is possible to buy properties quickly. If you are well organised, properly advised and have the requisite financial resources, you can exchange contracts in a matter of days. If the auctioneer is following RICS Common Auction Conditions, completion will be 20 working days after the auction.
- You may find properties are on offer with attractive low guide prices, although the eventual sale price will be determined by the level of competition in the room.
Before the auction
As a potential buyer, your first step is to get a copy of the catalogue from the auctioneer. This contains the ‘lots’ (properties) to be auctioned. You may want to view the property you plan to bid on before auction.
Always deal with the auctioneer direct – this way you can be sure you have the most accurate and up-to-date information. If you’re viewing online, make sure you’re looking at the auctioneer’s official website, not one of the many listing sites that have no connection with them.
Look through the following general information:
- The Important Notice to Bidders.
- The Memorandum of Sale.
- The General Conditions of Sale (many auctioneers already use RICS Common Auction Conditions, which you can download free from the RICS website at www.rics.org/cac).
Try to get hold of the specific information relating to the lot (or lots) you’re thinking of buying.
From the seller’s solicitor you need:
- The legal pack, which contains documents such as the title information, searches and leasehold documents
- Any special conditions of sale.
From the auctioneer you need:
- The guide price, which can change throughout the marketing period. It’s worth checking what the auctioneer defines as the guide price too – for instance, they may call it ‘the seller’s minimum price expectation’.
- Any addendum, which you can get before or at the auction – this tells you about any additions or amendments to the catalogue that have come up and might affect the sale of the property.
- Confirmation of all of the auctioneer’s fees ahead of the auction. It’s worth keeping in regular contact with the auctioneer so you know about any additions or amendments to the catalogue that have come up and might affect the sale of the property. Before you decide whether or not you should bid, make sure the information you’ve been given about the property is correct – it’s worth getting professional advice and both a valuation and an appropriate survey before you buy (see the free RICS guide Home surveys for further information, available at www.rics.org/homesurveys).
Finally, you need to arrange finance – both for the exchange (normally a 10% deposit) and completion. If the auctioneer is following RICS Common Auction Conditions, completion will be 20 working days after the auction. Once you’ve decided to bid, tell the auctioneer you’re interested in the property and keep in regular contact.
Next, you need to find out what the auctioneer’s procedures are for the following:
- Proxy, Internet or Telephone Bidding (if you or your solicitor or agent can’t attend the auction).
- Signing the Memorandum of Sale, and responsibility for insurance on the property from and including the auction day. Generally, insurance on the property is up to the buyer as soon as the hammer falls.
- Paying the Deposit.
- VAT – the auctioneer will ask the seller whether or not the sale is subject to VAT. If so, you need to know the impact of VAT on the deposit and completion amounts.
- Checking your ID.
The immediate run-up to the auction
On the morning of the auction (or last thing on the day prior to the auction) it is worth calling the auctioneers and checking that the property your wish to bid for has not been withdrawn or already sold. This may save an unnecessary journey and related travel cost.
Make sure you arrive at the auction in time to check the addendum for any changes relating to the lot you want. Also, listen out for any announcements about the lot in the auctioneer’s opening remarks.
When the lot is sold
Before the hammer goes down, the auctioneer points to the highest bidder and states the final amount bid. Once the hammer falls, there is a binding contract, which is subject to the conditions of sale. If you’re the buyer, a member of the auction team will then approach you to get the information they need to complete the Memorandum of Sale and other relevant documentation. They’ll also ask you to pay the deposit and supply your ID.
When the lot is unsold
If a lot doesn’t reach its reserve price, the auctioneer says it hasn’t been sold and doesn’t bring down the hammer. If this happens with your prospective lot, make sure you leave your contact details with the auction team so you can find out about any post-auction sale. If you are still unclear about anything then contact the auctioneers who should be able to provide you with further information.