Checklist when buying property via online Auction

Things to consider while buying property at Auction

Although there are many things to consider like doing your homework, familiarising yourself with the lot you want, the terms and conditions, and being clear with your bids. There are a number of important factors to consider. Especially nowadays, you have a modern method of auction where there is no cost to the vendors. Here are some key things to keep in mind:

1. Research the property & area: Decide on the area you are interested in. Before the auction, research the property thoroughly. Know the property's market value, any pros or cons of the property, and any other relevant details. Check the legal pack thoroughly.

2. Arrange Viewings: Once you have spotted a property (or two) that you like, contact the auction house to arrange a viewing. Make sure to thoroughly inspect it and its surrounding neighbourhood. Consider taking a builder or handyman with you to find out what may need to do to the property, and how much it is likely to cost. If you have any queries, do not be afraid to ask the auctioneer.

3. Set a budget: Think about the maximum price you are willing to pay for the property, whilst auction properties may be cheaper than market value, renovations are usually needed. Unless you are a cash buyer, you will need finance in place before bidding. Make sure you know how much the deposit will be and check which method of payment is required so you can arrange for sufficient funds to be available. Determine your maximum budget for the property, including all associated costs such as taxes, insurance, conveyancing, and buyers' fee. Stick to your budget and do not get caught up in bidding wars that may push the price beyond your limit and overpay for the property. Have a plan for how much you are willing to bid and stick to it. 

4. Attend a few auctions: Attend a few auctions to get a feel for the process and understand the bidding system. This can help you feel more comfortable when it comes time to bid on a property.

5. Obtain a copy of the auction particulars: The particulars will contain key information but you may need to request a separate legal pack to get the full picture. Searches are often included in legal documents, but if not, ask your solicitor to do them before the auction. Legal documents can vary from one property to another, consider asking a solicitor to look over the legal pack for any hidden covenants or loopholes the property might have. 

6. Understand the auction terms: Each auction may have its own set of terms and conditions, so make sure you read and understand them thoroughly before placing any offers/bids.

7. Get pre-approval for financing: If you are planning to use financing to purchase the property, get pre-approval before the auction. This will give you a better idea of how much you can afford to bid.

8. Have the property inspected: It is essential to have the property inspected before the auction to identify any potential issues that could affect the property's value or your ability to use it. You will need a solicitor when buying at an auction. In fact, your solicitor plays an even more vital role when buying through an auction than when buying through an estate agent. This is because legal due diligence takes place before you bid. This means you will rely on your solicitor both before and after the auction.

9. Attend the auction with a clear mind: Make sure you are well-rested and focused when attending the auction. Do not let emotions or impulse bidding cloud your judgement.

10. Have a backup plan: In case you are outbid or the property doesn't meet your expectations, have a backup plan in place for your next steps.

11. Be prepared to act quickly: If you are the winning bidder, you will need to act quickly to secure financing and complete the purchase. Ensure you have all the necessary paperwork and financing to move forward. There are usually only four weeks between the publication of the auction catalogue and the auction itself.

12. Check the small print: Do not forget to check the terms and conditions of the auction house you choose to use, by entering a bid you are agreeing to them. Make sure to familiarise yourself with the conditions of the sale, what needs to be paid, and when, you do not want any surprises on the day.

13. Be informed: You can always ask the auctioneers to keep you informed of any alterations or amendments to the sale conditions, otherwise known as an Addendum. If you are really keen on a particular property, ask them to inform you if there is any possibility of the property being sold before the auction date, this has been known to happen on occasion.

14. Difference between Guide and Reserve price: Be aware that each auction property is initially offered at a guide price and is also subject to a reserve price. The guide price is an indication of where the reserve price is, whereas the reserve price is the minimum amount the seller will accept. The guide price can be a lot lower than the final sale price. The reserve price is not disclosed to bidders but can be up to ten percent higher than the guide price so bear that in mind when bidding. 

15. Make sure bids are clear and concise: It is easy to get carried away but try to remain calm and within your set budget. If you do not want to bid personally, someone such as an agent or a solicitor can bid on your behalf. Some auctioneers will also accept phone or proxy bids, in which case the auctioneer will require written authorisation from you and a cheque for the deposit. This is calculated on the amount of your maximum bid.

16. If your bid is successful, you will be required to sign the contract and pay the deposit there and then. At the fall of the auctioneer's gavel, you will be bound by the terms and conditions of the sale and liable for the insurance of the property from that moment. Pulling out of the auction after this could result in huge after-costs.

17. The most modern method of auctions requires a 10% percent deposit on the day and will require two forms of ID. You usually have between 14 days to six weeks to complete and pay the remaining balance of the purchase price as mentioned in the legal pack. Any outstanding costs and completion details will be clearly stated in the conditions of the sale.

18. In the instance that the property remains unsold, the auctioneer may have the authority to sell it privately in the room immediately after the sale. Make sure to register your interest with the auctioneer prior to the sale and stick around at the end of the auction.

PM

- Puja Mehra