Properties are usually to be found at auction because circumstances have necessitated a sale, rather than because the vendor has chosen this route. Therefore, speed of sale often takes priority over reaching a high price. Buying at auction offers a transparency of pricing unavailable in the usual house buying process. This means you will know exactly how much your fellow bidders are offering for the property and can decide yourself whether to participate in the bidding process.
A second way of conducting an auction is to invite bidders to make an offer, and enclose it in a sealed envelope, along with a 10% deposit, prior to your specified closing date. On that date the offers are compared and the highest offer wins.
Before attending the auction, you should review the properties of interest in the usual way.
Although there is the possibility of securing a bargain at auction, there are also certain disadvantages. First of all, there is no guarantee that you will actually get the property you are interested in – there may be other interested parties with deeper pockets or a greater incentive to buy.
Another disadvantage is that you will have to perform all the preparatory steps, including finance, conveyance and surveys, before attending the auction. This means that if you are outbid, you lose all the expenses of the preparation.
You should also bear in mind that the winning bid is legally binding and the contracts have to be exchanged there and then.
If yours is the winning bid, remember that the sale is legally binding. Contracts will be exchanged right after the auction, and you will have to pay 10 percent of the sales price before you leave the auction house. Typically, the outstanding amount is paid within 28 days of the auction date.
In the same way that buyers are not guaranteed to ‘win’ the property they bid for, sellers are not always guaranteed to sell their property either. Auctions often take place where more unusual properties are concerned and there is a more specialised market for them. If you choose to sell your home via auction, it is still commonplace to appoint an estate agent to deal with the sale.
Before you decide that you want to auction your property, it is wise to discuss your options with your estate agent, and use their experience to try to establish whether auctioning the property will ensure the highest price, as well as the easiest and quickest sale.
Viewings will take place prior to the auction, but also, you or your agent will then need to prepare a document for interested buyers, typically in the form of a brochure This document is likely to include: the full specification of the property itself, details about the tenure, possession, fixtures and fittings, Council Tax Band, special conditions of sale, and perhaps photographs. These details are fixed with no opportunity for negotiation with your buyer.
You will also need to set a reserve price, i.e. the lowest price you will accept for the property. If the bids do not reach the reserve, the property will not be sold.
If your reserve price is reached, the highest bidder is legally bound to buy the property as soon as the hammer drops. Your buyer must then immediately transfer the 10% deposit to you, and pay the balance within 28 days.