S
Shaun Kearsey
New Member
A GUIDE TO BUYING AT A PROPERTY AUCTION
A property auction is merely a collective sale held in a room where the auctioneer will offer property (Lot) to the prospective purchasers which will either be sold to the highest bidder or withdrawn if there served price set by the vendor has not been met.
*Why people buy at auction?
*Buying property at auction has become extremely popular in the past10 years or so and the two main reasons for this, is the potential for purchasers to save thousands of pounds on the value of the property and secondly, the speed in which they can complete on their purchase. There are usually a few reason that properties are sold at auction, they are: The property could have been repossessed by the lender The vendor is in financial trouble and need to liquidate his/her asset quickly The property is in need of renovation or great deal of refurbishment The vendor is finding it difficult to sell his/her property on the open market due to economy and other circumstances.
*Different purchasing methods: Auctions V Estate agents
*If you have ever bought a property through an estate agent, you would know that: Having your offer accepted does not secure you the property Your purchase is always subject to contract Surveys and all legal enquiries are carried out after the offer has been accepted Date of exchange of contracts is always determined when all parties are in agreement However when purchasing a property through an auction, the process is almost reversed: Once your offer (bid) has been accepted, you are legally bound to purchase the property Your purchase is unconditional Surveys and all other legal enquiries must be carried out before bidding at auction Date of exchange and completion is usually within 28 days of successful biding at auction You can clearly see from above the advantages of buying property at auction.
*What is guide price?
*Guide price is merely an indication as to what the auctioneer feels the property will sell for and by no means it’s reserved price, however it could well be close to it. It is advisable to keep in contact with the auctioneer as the guide price is subject to change until the day of the auction.
CHOOSING YOUR PROPERTY AND OBTAINING PROPERTY INFORMATION!
*How to obtain property information?
*Now that you know the advantages of buying your next property at auction, you must obtain information on properties that suits your budget as well as the area and other personal criteria. There are two methods that are available to you-:
1) Search through hundreds of properties each month via individual auction houses to find your desired property in you chosen location with you specific criteria which takes huge amount of time and effort.
2) For majority of purchasers who are time strapped, they can simply subscribe to auction information service and set their specific criteria including region/post code and receive up to date information on auction properties as well as properties with great deals in terms of price and yield from bank receivers, asset managers and motivated sellers, which could save you thousands of pounds in both time and money.
*Property details and brochures
*Needles to say, with both methods, you can obtain property details and brochures which include: Photograph of the outside of the property (In some instances, internal photo’s are also included)Brief description of the property together with room dimensions and other relevant information The relevant agent who can be contacted for internal viewings Solicitor handling the transaction Date, time and place where the auction is to take place Full address of property together with the guide price In some instances legal information is also included Viewing the property before the auction day When viewing the property, it is important to pay particular attention to-:
1) Electrical wiring
2) Central heating
3) Dampness
4) Any internal or external cracks appearing on the structural walls paying special attention to the above items could save you thousands of pounds in un-necessary expense further down the line.
*What should you do next now that you have identified your desired property?
*Once you have identified your desired property, you have two options:-
1) You may be able to purchase the property prior to auction. Auction houses are happy to put forward your offer prior to the auction date. The advantage for you is that there are no other bidders trying to outbid you and force the price higher. However, you will be required to sign the memorandum of sale which constitutes an exchange of contracts. It is imperative that all your legal searches, surveys and other enquiries have been carried out prior to signing the memorandum of sale.
2) Register with the auctioneer prior to the auction which will ensure the property is not sold to someone else without your knowledge. However before bidding on your chosen property, you must take care of the followings:- Survey Booking/Arranging your mortgage (If you are not a cash purchaser)
*Legal searches - Please be aware that although you may have spent money on the above activities, there are no guarantee that your bid will be successful.
*Survey – It is essential that you carry out a survey prior to purchasing your property at auction. If you purchase a property at auction and subsequently find faults with the property, you will have no recourse against the auction house or the vendor. In a nutshell “It is purchased as seen”.
*Booking/Arranging your mortgage – Before bidding on a particular property, you must ensure that not only you have 10% deposit available on the day of the purchase, but the balance to be paid within 28 days in order to complete the transaction. If you are paying the balance via mortgage finance, then you would need a valuation report which your lender will advise you as to whom their preferred and acceptable valuers are. Legal searches – By appointing a solicitor at an early stage, he/she will inspect the contract and any special conditions contained there in. Upon your instructions, your solicitor will make the usual pre-contract enquiries, searches, etc and will report back to you.
*Different types of survey and why you should need one!
*By obtaining a survey, you can be sure that the property you are purchasing is in a fit state. There are usually three types of surveys:-
1) Valuation report – This gives the most basic of all surveys and only gives you a report on the value of the property.
2) Homebuyer’s report – This report gives more detailed information on the general condition of the property including the valuation.
3) Building survey – The most detailed and comprehensive report. This survey gives comprehensive detailed information about the property including structural report at valuation. You must decide which survey fits your requirement before instructing a surveyor. (Discounted RICS surveys are available through Invest Connect)
*Are you a cash purchaser or will you need a mortgage?
*Financing your purchase at auction with mortgage needs careful planning. You must contact your financial advisor the moment you have viewed the property and let him/her know of your intentions of buying the property through an auction. You would need a firm offer from a mortgage lender before you can bid on your chosen lot/property and that can take weeks to process. Please be aware that failing to complete on your purchase within 28 days of bidding, not only you could lose your deposit, there could also be penalties and other legal obligations on your part. I would therefore suggest that before you attend the property auction, you should ensure that all your finances are watertight and have a firm offer from a lender. However if you are a cash purchaser, the process is much simpler as you only need a 10% deposit on the day of the auction with the balance to be paid within 28 days for completion.
*How much deposit do I need?
*As previously discussed, whether you are a cash purchaser or financing your purchase via a mortgage, you need a 10% deposit on the fall of the hammer with the balance due normally within 28 days.
*What are the legal requirements when buying property at auction?
*Once you have appointed a solicitor, he/she will need to go over the properties legal pack which includes:-The local search Land registry search Memorandum of sale Special condition of sale Title deeds Copy of lease (If applicable)A copy of the legal pack can be obtained from the solicitor handling the sale on behalf of the vendor or the auctioneer for a very small charge (where applicable) and upon inspection of the legal pack, your solicitor will advise you accordingly.
*Auction day and bidding process
*The day has arrived and you must be prepared. You should arrive at the venue with plenty of time as important announcements are made at the start which could be related to the property you wish to purchase. Any alterations to the property being sold will be included in the copy mark “Addendum”, so be sure to pick a copy up on your way in. The following steps must be completed upon arrival at the auction venue:-
1) Registration form – You must fill out a registration form in which you will be given a bidding number.
2) Identification – You must produce an item of personal identification (passport/driving license). Please be aware that if you are bidding on behalf of a third party, you must ask the auction house as to what document are required prior to attending the auction.
3) Solicitor details – You must provide the details of the solicitor acting on your behalf so that once your bid is successful, the process can start immediately. The auctioneer will open the bidding process by announcing the address of the property/lot and then suggests an opening bid from the floor. When the auctioneer feels the highest bid has been reached, he will then warn the other bidders in the room three times before dropping his hammer and the property is legally sold. If you wish to increase your bid, you must make sure that you catch the auctioneer’s attention or you may lose the property. However on the other hand, do not get drawn into a bidding war and bid more than you can afford to pay. Remember, once the hammer drops, you are legally bound to meet the price.
Should you be the highest bidder, you will need to:-
1) Pay a deposit of 10% of the sale price plus any administration charge in the form of bankers draft, building society cheque or debit card.
2) Sign the memorandum of sale
3) Obtain the legal pack which should include the contract and all other legal document and present it to your solicitor
4) Arrange building insurance immediately as the property is now legally yours. N.B. If a property/lot does not reach its reserve price and you are still interested in purchasing it, you must contact the auctioneer who maybe able to negotiate and forward your offer to the vendor. If your offer is acceptable, auction terms and conditions still apply.
*Conclusion
*Now that you have decided to purchase your next property through an auction, it is imperative that you inspect every property that you wish to bid on and take legal advice. You must always make sure that your finances are in place whether you are buying cash or through a lender and have a survey carried out prior to bidding. Lastly, I would suggest that you attend a couple of auctions just to get the feel of the bidding process before embarking on buying your next property.
Good Luck……….
A property auction is merely a collective sale held in a room where the auctioneer will offer property (Lot) to the prospective purchasers which will either be sold to the highest bidder or withdrawn if there served price set by the vendor has not been met.
*Why people buy at auction?
*Buying property at auction has become extremely popular in the past10 years or so and the two main reasons for this, is the potential for purchasers to save thousands of pounds on the value of the property and secondly, the speed in which they can complete on their purchase. There are usually a few reason that properties are sold at auction, they are: The property could have been repossessed by the lender The vendor is in financial trouble and need to liquidate his/her asset quickly The property is in need of renovation or great deal of refurbishment The vendor is finding it difficult to sell his/her property on the open market due to economy and other circumstances.
*Different purchasing methods: Auctions V Estate agents
*If you have ever bought a property through an estate agent, you would know that: Having your offer accepted does not secure you the property Your purchase is always subject to contract Surveys and all legal enquiries are carried out after the offer has been accepted Date of exchange of contracts is always determined when all parties are in agreement However when purchasing a property through an auction, the process is almost reversed: Once your offer (bid) has been accepted, you are legally bound to purchase the property Your purchase is unconditional Surveys and all other legal enquiries must be carried out before bidding at auction Date of exchange and completion is usually within 28 days of successful biding at auction You can clearly see from above the advantages of buying property at auction.
*What is guide price?
*Guide price is merely an indication as to what the auctioneer feels the property will sell for and by no means it’s reserved price, however it could well be close to it. It is advisable to keep in contact with the auctioneer as the guide price is subject to change until the day of the auction.
CHOOSING YOUR PROPERTY AND OBTAINING PROPERTY INFORMATION!
*How to obtain property information?
*Now that you know the advantages of buying your next property at auction, you must obtain information on properties that suits your budget as well as the area and other personal criteria. There are two methods that are available to you-:
1) Search through hundreds of properties each month via individual auction houses to find your desired property in you chosen location with you specific criteria which takes huge amount of time and effort.
2) For majority of purchasers who are time strapped, they can simply subscribe to auction information service and set their specific criteria including region/post code and receive up to date information on auction properties as well as properties with great deals in terms of price and yield from bank receivers, asset managers and motivated sellers, which could save you thousands of pounds in both time and money.
*Property details and brochures
*Needles to say, with both methods, you can obtain property details and brochures which include: Photograph of the outside of the property (In some instances, internal photo’s are also included)Brief description of the property together with room dimensions and other relevant information The relevant agent who can be contacted for internal viewings Solicitor handling the transaction Date, time and place where the auction is to take place Full address of property together with the guide price In some instances legal information is also included Viewing the property before the auction day When viewing the property, it is important to pay particular attention to-:
1) Electrical wiring
2) Central heating
3) Dampness
4) Any internal or external cracks appearing on the structural walls paying special attention to the above items could save you thousands of pounds in un-necessary expense further down the line.
*What should you do next now that you have identified your desired property?
*Once you have identified your desired property, you have two options:-
1) You may be able to purchase the property prior to auction. Auction houses are happy to put forward your offer prior to the auction date. The advantage for you is that there are no other bidders trying to outbid you and force the price higher. However, you will be required to sign the memorandum of sale which constitutes an exchange of contracts. It is imperative that all your legal searches, surveys and other enquiries have been carried out prior to signing the memorandum of sale.
2) Register with the auctioneer prior to the auction which will ensure the property is not sold to someone else without your knowledge. However before bidding on your chosen property, you must take care of the followings:- Survey Booking/Arranging your mortgage (If you are not a cash purchaser)
*Legal searches - Please be aware that although you may have spent money on the above activities, there are no guarantee that your bid will be successful.
*Survey – It is essential that you carry out a survey prior to purchasing your property at auction. If you purchase a property at auction and subsequently find faults with the property, you will have no recourse against the auction house or the vendor. In a nutshell “It is purchased as seen”.
*Booking/Arranging your mortgage – Before bidding on a particular property, you must ensure that not only you have 10% deposit available on the day of the purchase, but the balance to be paid within 28 days in order to complete the transaction. If you are paying the balance via mortgage finance, then you would need a valuation report which your lender will advise you as to whom their preferred and acceptable valuers are. Legal searches – By appointing a solicitor at an early stage, he/she will inspect the contract and any special conditions contained there in. Upon your instructions, your solicitor will make the usual pre-contract enquiries, searches, etc and will report back to you.
*Different types of survey and why you should need one!
*By obtaining a survey, you can be sure that the property you are purchasing is in a fit state. There are usually three types of surveys:-
1) Valuation report – This gives the most basic of all surveys and only gives you a report on the value of the property.
2) Homebuyer’s report – This report gives more detailed information on the general condition of the property including the valuation.
3) Building survey – The most detailed and comprehensive report. This survey gives comprehensive detailed information about the property including structural report at valuation. You must decide which survey fits your requirement before instructing a surveyor. (Discounted RICS surveys are available through Invest Connect)
*Are you a cash purchaser or will you need a mortgage?
*Financing your purchase at auction with mortgage needs careful planning. You must contact your financial advisor the moment you have viewed the property and let him/her know of your intentions of buying the property through an auction. You would need a firm offer from a mortgage lender before you can bid on your chosen lot/property and that can take weeks to process. Please be aware that failing to complete on your purchase within 28 days of bidding, not only you could lose your deposit, there could also be penalties and other legal obligations on your part. I would therefore suggest that before you attend the property auction, you should ensure that all your finances are watertight and have a firm offer from a lender. However if you are a cash purchaser, the process is much simpler as you only need a 10% deposit on the day of the auction with the balance to be paid within 28 days for completion.
*How much deposit do I need?
*As previously discussed, whether you are a cash purchaser or financing your purchase via a mortgage, you need a 10% deposit on the fall of the hammer with the balance due normally within 28 days.
*What are the legal requirements when buying property at auction?
*Once you have appointed a solicitor, he/she will need to go over the properties legal pack which includes:-The local search Land registry search Memorandum of sale Special condition of sale Title deeds Copy of lease (If applicable)A copy of the legal pack can be obtained from the solicitor handling the sale on behalf of the vendor or the auctioneer for a very small charge (where applicable) and upon inspection of the legal pack, your solicitor will advise you accordingly.
*Auction day and bidding process
*The day has arrived and you must be prepared. You should arrive at the venue with plenty of time as important announcements are made at the start which could be related to the property you wish to purchase. Any alterations to the property being sold will be included in the copy mark “Addendum”, so be sure to pick a copy up on your way in. The following steps must be completed upon arrival at the auction venue:-
1) Registration form – You must fill out a registration form in which you will be given a bidding number.
2) Identification – You must produce an item of personal identification (passport/driving license). Please be aware that if you are bidding on behalf of a third party, you must ask the auction house as to what document are required prior to attending the auction.
3) Solicitor details – You must provide the details of the solicitor acting on your behalf so that once your bid is successful, the process can start immediately. The auctioneer will open the bidding process by announcing the address of the property/lot and then suggests an opening bid from the floor. When the auctioneer feels the highest bid has been reached, he will then warn the other bidders in the room three times before dropping his hammer and the property is legally sold. If you wish to increase your bid, you must make sure that you catch the auctioneer’s attention or you may lose the property. However on the other hand, do not get drawn into a bidding war and bid more than you can afford to pay. Remember, once the hammer drops, you are legally bound to meet the price.
Should you be the highest bidder, you will need to:-
1) Pay a deposit of 10% of the sale price plus any administration charge in the form of bankers draft, building society cheque or debit card.
2) Sign the memorandum of sale
3) Obtain the legal pack which should include the contract and all other legal document and present it to your solicitor
4) Arrange building insurance immediately as the property is now legally yours. N.B. If a property/lot does not reach its reserve price and you are still interested in purchasing it, you must contact the auctioneer who maybe able to negotiate and forward your offer to the vendor. If your offer is acceptable, auction terms and conditions still apply.
*Conclusion
*Now that you have decided to purchase your next property through an auction, it is imperative that you inspect every property that you wish to bid on and take legal advice. You must always make sure that your finances are in place whether you are buying cash or through a lender and have a survey carried out prior to bidding. Lastly, I would suggest that you attend a couple of auctions just to get the feel of the bidding process before embarking on buying your next property.
Good Luck……….
