Auction Guide: How the auction process works for buying property at auction
The basic principles behind buying a property at auction are reasonably straightforward; a property is put up for sale, bids are taken from potential buyers with the lot eventually being sold to the highest bidder. However, there is more to an auction than the bidding process itself, and for those unfamiliar with how it works, it can all seem a little overwhelming.
Having a sound understanding about how the auction process works will ensure you get the very most out of your auction experience. When buying property at auction, the process can be broken down into three main phases; before, during, and after the sale. In this article auctioneer Rob Limbert explains the key stages and how the process works when buying property at auction.
Before auction day
Around a month prior to the auction the catalogue will be released. This gives you details of the upcoming lots including the guide prices. Sign-up to receive the latest Pugh alerts here, so you are made aware when the auction listing goes live and when new properties are received to market.
If you are looking to purchase a property at auction, you should treat this information as the basis from which to conduct your own research and due diligence rather than viewing it as your main source of information.
Contact the auction house and arrange viewings for any properties you are interested in. Feel free to take along a surveyor or a builder for advice, and also seek the advice of a local estate agent to find out its true value on the open market.
If you are interested in bidding for the property you should also request the legal pack from the auctioneer and have a solicitor read through this. You may also want to arrange for a chartered surveyor to carry out a buildings survey or structural survey on the property.
Before the auction you should ensure your finances are arranged. One of the major benefits of buying property at auction is that the process is much quicker than other traditional purchasing methods; once the gavel falls the sale is agreed and the highest bidder agrees to complete on the purchase (effectively the exchange of contracts takes place). You will need to provide a 10% deposit for the property on the day of the auction, and if successful to pay the remainder within 28 days of the auction finishing. Therefore it is important to make sure your finances are in place.
In the run up to the auction, you should keep checking the auction listing to see the status of the lot/s you are interested in. Offers are made before the auction day as savvy property buyers try to gauge the vendor’s appetite for selling, so they may have been sold prior to the auction. In some circumstances a lot may be withdrawn - for example if the legal pack isn’t complete. You should also check to see if there have been any addendums (changes to the property listing).
Remember, once the hammer comes down, the sale is agreed and the property is yours. Therefore it is absolutely crucial to do your preparation in order to get the most from your auction property buying experience.
The day of auction
So you have viewed the property you are interested in, you have done your due diligence, you have your funds in place and you are ready for auction day. The first thing you’ll need to do when you get to the auction venue is register to bid – while anyone can attend an auction, you need to verify your identification before you will be handed a bidding paddle. Make sure you have the correct forms of identification and deposit available.
If you are interested in a property but unable to attend, you can register for one of the out of room bidding options i.e. as a remote bidder over the telephone.
Once you get to the auction house you should check the addendum sheet. This will contain details of any amends or alterations to the catalogue listing; read this carefully as some properties may have been removed from the auction completely.
When you want to make a bid ensure your intention is clear to the auctioneer by giving a clear sign (raising your paddle is always a safe indication) so this is picked up on. Some people think it is strategic to wait before making an offer, only to find they were too slow or too discrete and the property has been sold. Our advice is if you want to bid, make sure you do so clearly and in good time.
If you are the highest bidder when the gavel falls and you have met the reserve price, then congratulations, the property is yours!
After the auction
If you have been successful at buying a property at auction, the Auctioneer will ask for your paddle number and one of the Pugh team will bring you a sales slip to sign. They will also guide you to where you can complete the process as you will also be required to pay a deposit.
There is typically a 28 day completion period following this. It is during this time that legal and financial matters must be sorted out before the keys are exchanged and the sale completes.
If the property you were interested in did not achieve the vendor's Reserve Price, all is not lost and you may still be able to secure the property. If you are a buyer then make sure you speak to the auctioneer afterwards; it may be possible for you to increase your bid, or come to an arrangement with the vendor.
As a buyer you need to ensure the property is adequately insured once the auction concludes as anything that happens to it from this point is the buyer’s responsibility.