by Mark Johnston
While the auction room has typically been considered bargain hunting territory developer territory, it can also provide rich pickings for the residential buyer.
Before going to an auction, buyers should have a firm idea of exactly how much they can afford to spend and therefore they should stick to it. They should never leave themselves overstretched and should also remember that property prices can still fall further.
Buyers need to make sure that they make their financial arrangements prior to the auction as once the bid is accepted and the hammer has fallen, a contract has formed and the buyer is then legally bound by it.
Sales at auction go through very quickly, buyers can usually move in 28 days after the sale.
If the bid is successful the buyer needs to pay a 10% deposit on the day and then they are required to pay the remaining balance within 28 days.
Unless a property is bought very cheaply, buyers may need to get a mortgage. When approaching different mortgage lenders buyers must let them know they intend to buy at auction, as some lenders are reluctant to offer mortgages for auction properties.
It is worth also noting that there may be a buyers fee to pay at the auction house and also stamp duty is payable on all properties of £125,000 and above.
It is worth noting that buyers can contact the auctioneer before the sale and put in an offer on a property, especially if the property is listed in the catalogue as ‘up for auction unless previously sold’.
Before buying property at an auction, buyers are advised to go to a couple of sales first just to see how they work as they can be very daunting.
Arrive early as buyers need to register with the auction house prior to bidding. The bidding system is transparent so you always know what others are offering.
When making a bid, buyers should gesture clearly to the auctioneer.
The bidding will generally start lower than the guide price printed in the catalogue, it will then probably go up in multiples of £5,000 or £1,000 once bidding slows down.
This is the point that buyers should make sure they do not get carried away!
If a buyer is bidding on a property and it fails to meet its reserve price it will not be sold, in which case it may be worth then trying to contact the seller in order to attempt to negotiate a sale.
Remember that a property becomes the buyer’s insurable risk as soon as the hammer falls. The conditions assume that the buyer has acted like a prudent buyer.
Lastly if a buyer did want to back out of a sale not only would they loose all their deposit, but the seller would also be able to take them to court. The court could then order the buyer to pay the sellers expenses and pay the seller the difference if they eventually sell the property for less than the price originally offered.
Story link - Buying a Property at Auction Part 2
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