Professional Property Purchaser Rachel Johnston of Stacks Property Search advises new auction bidders…
“Whilst most property is sold by private treaty, estate agents and vendors tend to opt for an auction when they are confident that there will be huge interest, where the property is a restoration or rebuilding project, or where the property is so unusual no one can establish a certain value. It can be a good way of selling a property that is likely to throw up lots of difficult hurdles in the course of a sale giving a purchaser reasons not to progress. An auction focuses the mind and doesn’t allow the purchaser time for the initial enthusiasm to wear off.
“A property for sale by auction will generally show a low guide price in order to attract a large audience. There will usually be a ‘reserve’, and the auctioneer may indicate when the reserve has been passed by saying, ‘I’m selling’, or ‘the property is in the market’.
“The first thing to remember when considering buying at auction is that when the hammer falls, you have entered into a binding contract to buy the property. You will be expected to produce 10% of the price immediately (cheque or cash), and there will be a fixed completion date, stated on the auction particulars and confirmed by the auctioneer, generally in a month’s time. If your purchase relies on the sale of another property, buying at auction is clearly not an option. Prior to the auction, all purchasers must do their legal and survey homework, although sometimes the vendor will produce documentation.
“You now can bid online for property, even from the comfort of your sun lounger, but is this a good idea? Being away from the saleroom might allow you some space for dispassionate evaluation, or you might subconsciously treat it as playing with Monopoly money. Whilst it’s much easier to click away virtual money than it is to write a cheque, a click will have the same binding effect as waving your auction paddle. The same diligence and pre-auction work needs to have happened whether you are in the room or not. Make sure you have followed all the rules & guidelines from the auction house on proving your identity, funds, etc – knowing that the rules may differ significantly if you are bidding online.”
1. Make sure you and your solicitor are entirely satisfied with all the legal aspects of the purchase before bidding. Legal packs will be made available prior to the auction and you should make sure your solicitor has time to study this document in detail.
2. Arrange a survey of the property you are considering prior to the auction. It may be a fee that turns out to be lost if you don’t buy the property, but it’s really vital that you are made aware of any structural issues that could have a big impact on the price you’re prepared to pay.
3. Decide in advance the maximum price you are prepared to pay, and don’t be caught up in the moment and go above this figure.
4. Work out your finances in advance of the auction so you are absolutely sure you will be able to fund your upper limit if you are successful.
If you are in the room:
5. Sit where you can see what’s going on and who you are bidding against.
6. If the bidding is fairly slow, don’t show your interest too early.
7. Make sure that the bids work out so that it is you who is bidding when the price reaches your upper limit; this requires a certain amount of mental agility during the bidding process itself.
If you are online:
8. Check your connection & its reliability.
9. Allow for timezone changes
And finally it is worth saying it again:
10. DON’T get carried away and exceed the limit you have set yourself.
It’s highly unlikely that *only* you have spotted the potential of a property, so be prepared for reality to strike when you’re the one who has agreed to pay the most for the lot
Do not be bamboozled by the madhatters on Homes Under the Hammer who just turn up for a laugh and buy a property! Many people who buy at auction find that, after the initial euphoria, there is a period of post-purchase depression, a result of things happening so quickly. ‘Buyers’ Remorse’ is a risk, especially if you are under-prepared, and there is no opportunity for the clarification of thought that often happens between offer and exchange. Without this window, you need to trust that you can make a good decision and stick by it. Be prepared for a portion of post-purchase worry, and – if you’ve followed out advice above – you need not panic that you’ve done the wrong thing.
Buying at auction is a good way of assessing the level of competition
If you hate the feeling you may have paid over the odds, knowing that you have paid only one bid more than the competition can be comforting. The most hardened bargain hunter can prefer to lose at the auction itself, as if the property fails to sell, a deal can often be secured immediately afterwards and the necessary paperwork signed there and then. If you are able to resist being swept up in thrill of the chase, then bargains may be available.
Assessing the value of a one-off property with no comparables is not easy
In the country house market, it is never easy to be sure that you have secured the purchase of your chosen property at the right price. At auction it is even harder. The help of a relocation agent who is familiar with values, and who will bid on behalf of a purchaser at auction can be invaluable.
An interesting side effect of buying at auction is that purchasers often get to meet their neighbours at an early stage
They will generally turn up to the auction and introduce themselves to the new owner, and good relations will be important to you in your renovation work, whether you are going to flip it, or live in it. Make sure you start things off on the right foot!
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