Going, going, gone: Five things to think about before buying at auction
- Credit: Archant
Buying at auction may seem like an easier, speedier means of purchasing property, but this method is not without its pitfalls. Julia Gray found five things you should think about before you bid...
1. The first step is to find auction houses that sell properties in the area you’re looking in. London auctions have properties in London and the home counties, but often also much further afield. Outside London, auction houses are more likely to specialise in local properties. Once you’ve found an auction house, get on its mailing list for auction catalogues. The catalogue should be available a few weeks before the auction, and will have viewing times, guide prices and conditions of sale.
2. Legal documents for each lot should be available to download from the auction house’s website. Read them carefully and send them to your solicitor, as they could affect how high you bid and if you bid at all. Searches are often included in the legal documents, but if they’re not, ask your solicitor to do them before the auction, although this could, of course, be a waste of money. The same applies to a survey - if you don’t want to pay for one on a property you may not buy, ask a good builder to view the property with you. Houses and flats being sold at auction often require modernisation, and not being aware of the full extent of the work required could prove very costly.
3. Research the local housing market before the auction so you know how much the property is worth, and decide on your maximum bid accordingly. The temptation at auctions is to get carried away and bid higher than your maximum. If you’re worried about this, get someone to bid for you, or bid by proxy, where you authorise the auction house to bid on your behalf up to a specified limit.
4. Before the auction, check what ID you need to register to bid and what methods of payment are accepted for the deposit. If you’re the successful bidder, you’ll have to exchange contracts and pay a deposit (usually 10 per cent of the purchase price) and a fee to the auction house immediately. The completion date is often four weeks from the date of the auction, but it can vary. If you fail to complete on that date, you could lose your deposit and even be sued by the seller. For this reason, paying cash is a much safer way to buy property at auction than with a mortgage.
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5. The guide price is the price the auction house expects the property to sell for, but properties often fetch much more. Lots will usually have a reserve price and only the auction house knows what it is. If the bidding doesn’t reach the reserve, it may be possible to do a deal with the seller, via the auction house, on the day. You can check online after the auction to see which properties didn’t sell - it usually says the price they’re available for. You may also be able to buy a property before the auction, but many sellers will refuse because they know prices can leap up in the heat of the moment.
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