Estate Agent or Property Auction?
Whilst many still regard the idea of purchasing property at auction, something only to be attempted by the Professional Investor, a growing number of owner/occupiers are becoming attracted to the dazzle of buying at a Property Auction, which can offer a viable alternative to the already saturated private treaty market. Though not for the faint-hearted, buying at auction offers a transparent and speedy mode of avoiding the numerous stumbling blocks and delays involved in buying your home on the open market – with a bit of research, an efficient Conveyancer and a little luck, you could also end up bagging yourself a bargain. Though the property market in general continues to struggle in its recovery from the economic downturn, savvy buyers are increasingly looking at alternative ways to acquire either their dream home, or a great business investment at the best price – no longer it seems are we blinkered by the traditional concept that the only way to safely purchase a property is by using a reputable Estate Agent. Indeed the flourishing array of Property Auction houses throughout the UK, claim that business is thriving, insisting that the benefits of buying property at auction far outweighs the traditional method of buying, which is regarded as time-consuming, impractical and expensive.
Property Auctions are becoming a more favourable way of acquiring property because the process is uncomplicated, fast and can offer the opportunity to snap up bargain properties. Media is an excellent tool for giving buyers the confidence to break away from the more traditional route, and programs such as Homes Under The Hammer, demonstrate that although it may not be for everyone, Property Auctions are fast beaming a feasible option in the turnover of property. With their popularity growing at considerable speed, more and more people, including first time buyers, are opting for this unconventional way of securing property in a market which might otherwise, be closed to them. Even online sites such as eBAY have seen a rise in the number of people joining their watch/bid lists.
If you think that Property Auctions are all about buying run down relics in need of renovation or extensive work, you’d be very much mistaken. The scope of property is extensive, with houses, flats, buildings and land being sold at auction for a variety of reasons. Banks regularly use Property Auctions as a cost effective method of disposing of repossessed property. Beneficiaries of someone who has died may see an auction as a fast way of freeing up capital for the Estate – if an Estate of a deceased person goes to the Crown, the property may well be auctioned off. Property at auction is vast and varied, from project properties to family homes, apartments to listed buildings, and of course, land for developing. Do your research; make sure the legalities are carried out by a sound Conveyancer and it really is possible to pick up a fantastic bargain; so long as you are aware of the consequences of bidding.
Of course, this option is not without its susceptibility, and, like every other major purchase, should not be entered into blindly. That said, if you do your homework, can access the funds necessary for the purchase within 28 days, make time to either inspect the building, (or risk surveyor fees upfront), have a good Conveyancer to undertake the legal requirements promptly, there are very real advantages to the option of using an Property Auction instead of a high street Estate Agent.
Property Auctions are becoming increasingly more popular according to statistics from Essential Information Group, who’s January 2015 newsletter includes statistics showing that “the auction market was largely unchanged in December 2014, with only marginal differences in the number of lots offered and sold compared with December 2013”. There was a nominal decline for the figures in the West Midlands area, however the amount raised from National Auction Sales, saw substantial increases throughout 2014, totalling in excess of £491m for December 2014; a 3.6% gain on December 2013 and the largest amount achieved in December since 2007.
Overall Statistics December 2014
Auctions Held in the UK134
Total Lots Offered 3,473
Total Lots Sold 2,605
Percent Sold 75%
Total Realised £491,153,403
Balancng the risks
So, why should you consider using a Property Auction?
The 2 major benefits of buying property at Auction are speed and price. Often the traditional route can take weeks or even months from the initial viewing and offer, to completion and actually getting your keys. Using the Auction option ensures there are no drawn out negotiations, no delays, No waiting for the Estate agent (or other parties), and no lengthy wait for documents to be processed. Properties sold at Auction offer the piece-of-mind that comes from knowing your contract is binding on the same day as your winning bid and that in most cases, the fixed completion date will be within 28 days from the date of the auction taking place. Providing you have the funds for deposit at the time of bidding (usually 10%), can obtain the remaining money before the completion date, and can have the legalities taken care of swiftly, the whole process can be completed in less than a month.
If it really is that simple, why isn’t everyone doing it?
Okay; It’s not all plain sailing. Buying a property at Auction can be a practicable alternative to using an Estate Agent but it isn’t foolproof and of course, there are potential opportunities for calamities, unless you know what you’re doing.
If you are considering this route you really DO need to do your homework. There is no cooling off period at an auction. If yours is the winning bid, it constitutes a legally binding contract and the paperwork will be signed and exchanged immediately. You will also be required to pay a deposit of around 10% on the day of auction, which will be lost if you decide to pull out for any reason. If you find out later that the house you bought has hidden problems, you have no choice but to pay for the repairs. If the damage is extensive, you may end up spending more than what you originally planned.
The best way to avoid this type of situation is to thoroughly inspect the house before participating in the property auction. Remember, the 10% down payment you make after the bidding will not be refunded if you, by any chance, fail to pay the balance, so if you aren’t a cash buyer, make sure you have the loan or mortgage agreed in principle before you arrive and start bidding.
Check with your local paper or search for local Auctioneers online, choose the one that seems to fit your requirements. Contact them and ask for viewing catalogues for up and coming auctions (You could also ask to be added to their mailing list). This will allow you to see what types of property are on offer and give you a guide to the sort of price they are expecting. These are usually available several weeks in advance and will give you plenty of time to choose one or two properties, view them and if necessary, have them inspected by a surveyor. Contacting a Conveyancer at this stage to carry out what is known as due diligence (the necessary checks) on the not only the legal pack, but also the Title Deeds to the property could prove invaluable. Properties are sometimes sold at auction with defective or “problem’ titles and a worthy Conveyancer will investigate as much as possible, before you make your bid.Don’t forget that, just as with any other purchase of property, there is likely to be Stamp Duty, along with associated purchasing costs.
Property Auctions can be a bit daunting the first time you attend one, so don’t be afraid to ask questions. Sit at the back, watch, listen and learn, paying particular attention to the signals bidders use, when placing their bids. You need to have confidence when bidding, and watching others should ensure that you don’t place ‘accidental bids.’
Here are a few pointers that will help you familiarise yourself with a Property Auction.
- The auctioneer’s role is merely to act as an agent for each seller. The Auctioneer prepares the catalogues using only information provided by the seller. He/she has no connection to the seller and is completely independent.
- Properties are sold in the order set out in the catalogue and are sold in ‘lots’ one at a time. It is important to remember though, that because the catalogues are printed well in advance of the auction, things can change – lots can be withdrawn, and auctions can occasionally be cancelled at late notice.
- Bidding may start slowly, but can become fast and furious if there is lots of interest. Possibly the most important thing to remember though, is that once the auctioneer’s gavel (hammer) falls, the successful bidder is immediately under a binding, legal contract to complete the purchase in line with the auction house’s terms and conditions.
- The auctioneer can refuse any bid without explanation and will settle any disputes over bids. His decision is final and there is no way to challenge it.
- A seller will usually give the Auctioneer a minimum price he/she will except for the property. This is called a ‘reserve price.’ If this figure is not met, the auctioneer will usually withdraw the property from auction. There is sometimes an opportunity to bid for unsold properties after the auction is finished – but the seller can still refuse to accept your bid.
So how can I avoid making a mistake and ensure I get a great property and a good deal?
I cannot stress enough, the importance of doing your homework. If you are intending to buy at auction, go to a Property Auction and see for yourself what happens.
If you decide this is the route for you, involve a Conveyancer at the outset. Always view the property before the auction and wherever possible, have it inspected by a qualified Surveyor. “for warned is for armed’ is particularly relevant when it comes to purchasing at a Property Auction.
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