Property auction tips – part 2 of A Series
Residential Property Auctions Tips
This is part 2 (of our two part “Property Auctions Tips”).
A good place to find information about upcoming auctions is the Essential Information Group’s website – they run a very comprehensive database of auctions all around the UK.
Before the auction, do go and see the property. In my view it is essential. Often these will be at open days, where you can also see possible fellow bidders. Don’t be put off if they seem more professional than you – everyone has to start somewhere. And the chances are they will probably not actually be bidding for this property anyway.
Take a torch, as there may well be no electricity – which is nearly always the case in repossessions. Also, take a step ladder, spirit level, tape measure (if you plan a refurbishment or structural alterations) and binoculars (to see roofs, gutters and chimney stacks). A screwdriver to unscrew a loft hatch can be useful too.
Though open viewings are restricted by the agents, mainly because in the case of repossessions, they get very little in the way of commission, let’s be honest, money does talk. So, if you can suss out the agent and offer a little gift, he may well let you have a longer look around on your own at another time.
In some properties there will no official access for viewings because the current occupants are not amenable. But you may find that a knock at the door, a polite manner and a box of chocolates, may get results and persuade the current occupants to let you look around. (See also, part one about what sort of tenants are OK, if buying with “tenants in situ” and what checks you should do).
Budgeting for the Auction and the Bidding Process
Most auctions charge about one to one and a half percent of the auction price, always with a fixed minimum amount, plus an admin fee of about £150 to £200, so budget for this.
Carefully allow for any works you need to do. Get firm quotes from a builder. (see also, Part 1). Also, plan for any financing you need – possibly bridging loans and then remortgages after a year.
When you go to the auction, ensure you have the deposit in the right form too – they will not accept cash due to money laundering regulations. And you will need ID with you too. Check to see any new documents have been added to the legal pack.
Make sure the property has not been withdrawn too! Frustrating, but it can happen, even on the day of the auction.
If you go with your partner, make sure you sit together – as it has not been unknown for a husband and wife to bid against each other when they have sat in different parts of the room.
Some people advise to join the bidding late. That’s not a bad idea.
For the really confident – and only once the bidding slows down you could ask to change the bid increment. However, you will have to see if that is allowed at that particular auction, once you have seen other lots. Generally, in busy auctions, the auctioneer will wish to “crack on” at a fast pace – and will not like a punter trying to change the bid increments, but a few will be OK with this in the quieter auctions.
Auctioneers can play some clever games. Apart from “imaginary bidding” where their own staff (or an imaginary punter) can bid the price up to the reserve price, they will often try to increase demand, especially early on in an auctions by saying things like “Well bid” and “You’ve got a bargain there” when a lot has completed. It is all part of the cut and thrust, designed to get the punters waiting for “their lot” to come up, to bid that little bit more.
Never forget, like an estate agent, the auctioneer wants to get most, (ideally all), of the lots sold at a good price for his clients who have put their property on with him. He is not working for you!
Some experts think the best bargains can be had early in the catalogue before the room “heats up” when everyone has arrived – or later when many people will have drifted off. I’m not so sure.
Phrases the auctioneer may use are a signal about the reserve price. “It’s in the room” or “this will sell today”, means the auction price has gone past the reserve price and will sell today. The auctioneer may well also say. “We are not there yet” or “I need a bit more”, meaning the reserve price has not been met.
Pre and Post Auction Bids
You may be able to make a bid in advance of an auction if the auction house (and the vendor) allows this. You will still need to move fast – and may get a little longer than the usual 28 days as a result.
If a property has not met its reserve price, he may have vendor’s authority to see after the auction at the reserve price for up to a day after the auction. Many professional investors pursue such a strategy, often known as “hawking”.
Be aware though that both pre-and post-auction offers will not be accepted if the seller is a government body. Post-auction offers will not be accepted for repossessions. (These vendors legally have to ensure transparency).
Not all estate agents handle repossessions. Many don’t like the low commission the lender’s pay, so choose to opt out. But you can easily find out which agents do. Just ask them.
Agents are supposed to keep marketing repos, even after you have put an offer in and have had it accepted, but due to the low commission, many won’t do much more marketing, if they are convinced you are a sound buyer. Look out for the formal notices they have to put in local newspapers and you may be able to out-bid the offered price.
For repossessions, exchange and completion date are often required to be the same. This is OK, as it cuts the chance of a squatter entering an empty property (though this is rarer these days in non-commercial real estate).
Make sure you check the property over before you actually exchange, just to sure it is in the same condition as when you first viewed it, especially if a few weeks have gone by.
Have lots of “Gone Away, Return to Sender” stickers ready to put on the mountain of post for strangers that will be waiting for you when you get access and which will keep coming for a few months. And of course, ALWAYS change the locks immediately you get in.
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