Property auctions could be a great place to pick up a bargain, whether you are looking for a home or an investment.
Essentially, there are three steps to buying property at an auction. They are:
- Preparation: get your finances straight, shop around, and view before you bid
- Know-how: making sure you understand how auctions work
- Auction day: what to do when you get there
- Get your finances straight
It is important to know that, if you do buy a property at an auction, your successful bid will constitute an immediate and legally binding contract.
You will be required to pay a deposit of around 10% there and then, whilst the remaining balance will be due quickly, usually within 90 days.
Therefore, do get copy of an auction agreement called ‘Proclamation of Sale’ and arrange an ‘in principle’ agreement with a mortgage lender before you bid at an auction.
- Shop around
There many local property auctioneers who specialise in different types of properties, and there used to be a need to contact them to request catalogues for up-and-coming auctions.
Nowadays you can usually subscribe to a catalogue mailing list online
- View before you bid
As with any property purchase, you should arrange viewings before you bid and take steps to eliminate any nasty surprises:
a) treat the viewing in the same way as you would if you were buying from an estate agent, do not forget to protect yourself just because you are likely to get a bit of a bargain.
b) carry out the usual property and land searches to make sure that there are no problems lurking beneath the surface. This would usually involve a cost but it is an important and necessary step to protect your potential investment. If you are unsure, consult a property solicitor or a chartered surveyor.
c) based on the results of viewings and searches, try to shortlist one or two properties in which you are interested in bidding.
1. Auction Process
Next, it is also important that you know the auction process in gist. Auctions can be quite intimidating if you have never attended one before, and here are some pointers:
a) the auctioneer’s role is to act as an agent for each seller. He or she may have prepared brochures or catalogues using information provided by the seller
b) when the auctioneer’s 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
c) the auctioneer can refuse any bid without giving an explanation
d) the auctioneer will settle any disputes over bids and their decision is final
e) if the reserve price, meaning the minimum bid acceptable to the seller, is not met, the auctioneer will usually withdraw the property from auction
2. Auction Day
Set a budget. Make sure you have made a decision on what your maximum bid will be. Do bear in mind that you have now form a view of the property’s value (having carried out viewings and local searches).
3. Be Prepared
Arrive early, be it physically or virtually (for example, at an online auction), to register yourself in order to bid accordingly.
4. Finding a Solicitor
Once you have found the right home and started making plans for a mortgage, you would still have a lot of legal requirements to meet.
Choosing a good property solicitor, also known as a conveyancer, would give you peace of mind that everything would be done correctly, such as dealings with Land Registry and transferring the cash to buy your home.
Consider using a local solicitor – they should have a good knowledge of any laws or issues related to the area.
Although most of the process would be handled via phone or email, being able to drop into an office to hand over paperwork or check on things could speed things up.
Estate agents may recommend a solicitor, but do shop around for yourself to see if you can find a better deal on price or service elsewhere.
About the Author:
This article is written by Chia Swee Yik, Partner of this Firm (+6016 2148 218, firstname.lastname@example.org) (assisted by paralegal, Ooi Zhuang Hong) who has provided practical advice on property transaction.
Feel free to contact him if you have any queries.