More and more private buyers are turning to property auctions to find the home of their dreams …. but how do they avoid the pitfalls?
Whereas property auctions were once the preserve of professional landlords and builders, now they attract a far wider variety of buyers.
People are drawn in by the prospect of buying at a good price, completing a sale quickly and being sure that the sale will go ahead.
“Once the hammer goes down the property is yours – there’s no danger of a property chain collapsing or someone putting in a higher offer,” explained Sally Smith, Director and Auctioneer at Loveitts, the sole property auctioneer in Coventry and Warwickshire.
“That is very appealing and quite often now we are seeing people coming to auctions to look for a home they will live in themselves. However, they do need to be prepared.”
So what do you need to know before venturing into the auction room? Sally shares a few insights.
- Do your homework. All lots will have a buyers’ legal pack with information about the property such as the Official Copy of Register of Title, Land Registry and Local Searches, leases, tenancy arrangements, planning permission documents, fixtures and fittings and any special conditions of sale. Read it carefully.
- If there is a chance to visit the property, take it. Some sellers hold open days in advance of auction. Buying property without inspecting it is risky. If you need a mortgage you will need access to allow a professional surveyor to advise you and the lender about the condition of the property.
- Decide on your top price and stick to it. Take account of all the costs of buying at auction. There will be an Administration Fee and sometimes a Buyer’s Premium, which will be shown in the property details. There may also be some additional cost within the legal pcak so another reason to ensure you have read it.
- Get your finances in order. Successful bidders need to pay a 10% deposit, Administration Fee, Buyer’s Premium immediately after the hammer falls. You should have proof of ID such as a passport and any documents about your right to live in the UK. Completion is usually within 28 days, so you must ensure you have the necessary funds.
- Traditionally auctions were seen as places for cash buyers such as builders and developers, but this is no longer the case. You can buy a property at auction with a mortgage, but you must have the finance firmly in place before bidding. Some properties are not suitable for mortgages so take independent, professional advice.
- Line up a solicitor beforehand ready to complete the sale. Completion is usually within 28 days of an auction, so ensure funds for the full price will be available by then. Double-check the completion date – some timeframes are shorter, others longer.
- Consult an insurer beforehand. Some sellers will insure up until completion, others won’t.
- If you can’t get to the auction room, you can arrange to bid by telephone. If you are nervous about bidding in person, a proxy can bid on your behalf.
- When the hammer goes down, the sale is agreed. It represents a binding contract between buyer and seller and you cannot back out. In the rare event that you do, you will lose your deposit and open yourself up to significant penalties.
- Above all, don’t get carried away. Stick to your top price and walk away if bidding goes above it. That property wasn’t meant for you.
If successful, you will be asked to prove your identity and complete paperwork for anti-money laundering purposes, then to pay the deposit, Administration Fee and, where applicable, the Buyer’s Premium, and to sign two copies of the memorandum of sale. You will be given paperwork to hand over to your solicitor so the sale can be completed.
Sally Smith said: “Buying at auction is exciting and can be nerve-wracking for beginners, so it is always worthwhile to visit one in advance just to see how it all works.
“Familiarising yourself with the process and the atmosphere in the sale room will prepare you for bidding yourself in future. Preparation is the key.”
Loveitts hold bi-monthly auctions at the Village Hotel, Dolomite Way, Coventry. The next auction ‘in the room’ takes place on Thursday 21st November at 6.30 p.m. A full list of lots available can be viewed on: www.loveitts.co.uk/auctions.