Property Auction tips, Part One of a Series
Property Auction Tips
This is part 1 (of our two part “Property Auctions Tips”).
It’s possible to get a good deal at an auction but you need to know what you are doing. The best way to understand how auctions work is to go to a few first before actually getting involved yourself. It’s also worth watching TV programmes like “Homes under the Hammer.”
Of course, with the Wuhan flu, physical auctions have been suspended for now.
My sincere hope is that people will start resisting this awful technocratic-digital takeover, (the brainchild of World Economic Forum CEO, Klaus Schwab and others), and that physical real-world face to face activity will resume and we will stop living our lives like locked up drones at home.
Certainly, with auctions, you can learn a lot more by actually “being in the room” and you can certainly get a better deal, as I will explain later and in part 2.
Buying at auction means you can get the property you want quickly without lots of negotiation. Once the gavel goes down, that’s it! As long as you are the highest bidder and the property has met the vendor’s minimum – the “reserve price” – then it’s yours. No chance of a vendor changing their mind selling to you, (as can happen in “private treaty” – where you have bought through an agent or direct), because they decided to patch it up with their partner!
Some auctions quote a “Guide Price.” It’s not the same as the “reserve price” but is a good indication – so if the Guide Price is £105-115,000, the reserve price is probably around the £110,000 mark.
For the uninitiated, prices at auctions seem low, but there is usually a good reason. Many properties will be in poor condition, have subsidence, are blighted by proposed road developments, have been occupied by squatters, have sitting tenants or have defects in the legal title. Or they could just be unique and therefore hard to value.
But there will be a few properties that may have nothing wrong with them at all. This is usually the case with those being sold by executors after the death of the owner, repossessions and “distressed sales” – where the property is being sold by people who have overstretched themselves financially.
We tell our clients to look out for properties where the vendor is in a different part of the country to the solicitor – as this may indicate a probate sale. These can be good as often the vendors will accept a low price in order to “move on” quickly after the death of a family member.
Repossessions often have the words “for sale by mortgagee in possession” in the details. These may be in a mess but if structurally sound can be bargains too.
If you buy with existing tenants in place, check whether they are Assured Tenants or Assured Shorthold Tenants. These should be OK, but “Rent Act” tenants will have rents fixed at a low level and it will be virtually impossible to get them out.
Before the Auction – Things To Do
To be on the safe side, you may want to get a “quick and dirty” survey done and it will be essential to get insurance ready and all the legal checks done before the auction. This costs money, of course, but means if something really nasty turns up and the property wasn’t worth what it sold for, then at least you will have avoided buying something that may have ended up being a nightmare.
To prepare for an auction, ask for the package compiled by the auctioneer which should be available about 4 weeks before the auction. This will have details on each property and the memorandum of agreement which is equivalent to the contract, the title documentation, the searches, whether there is any outstanding planning or environment issues and replies to general enquiries. Have this checked over and look out also for any special conditions, for example, it may say the buyer has to pay the vendor’s legal fees!
Then go and view it. More on this in part 2.
If the property needs work, carefully budget for it with a good builder and get a DETAILED quote showing a proper specification of the works to be done and what materials will be used (and ensure these are included in the cost.)
Get quotes for buildings insurance cover before the auction but remember many insurers will charge more (and some won’t insure at all where there is subsidence or may not cover this aspect of risk) or if it’s unoccupied.
Work out the maximum price you’re prepared to bid before the auction starts. If you’re the highest bidder and the reserve has been met, you must sign the contract in the auction room and pay a 10% deposit. You have to complete 28 days later, so your solicitor will need to move quickly and get all legal documents ready. If you don’t complete, you lose not only your deposit, but if the property has to be re-auctioned and it ends up fetching less than you have paid, you’ll be liable for the difference!
So make sure you use a conveyancer who understands the auction process and who can work fast.
Ensure you have your deposit with you at the auction. Auctions won’t take cash due to money laundering regulations so check beforehand what form of payment is acceptable.
If the property hasn’t met its reserve, the auctioneer will normally tell you the reserve and advise if he has the vendor’s authority to sell at the reserve price for up to 24 hours after the auction.
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