Selling at auction

Selling at auction can have its advantages, it is a quick transaction with no opportunity for the buyer to negotiate or withdraw.  As soon as the auctioneers hammer falls, exchange of contracts takes place.

If you are considering selling at auction, you need to think about the costs to you.  You will have to pay the auctioneer’s fee even if the property does not sell and if it does sell, the auctioneer will charge a commission in addition.  What price will you achieve?  Unless a reserve price is stated within the contract, the auctioneer is bound to agree the sale to the highest bidder.   This is important to think about and seek legal advice on before the auction along with, other relevant contract conditions.

The auctioneer will have to carry out their required money laundering checks and confirmation of your right to sell.  It is likely they will need to contact your conveyancer with regards to this.

A seller’s auction pack will need to be created by your conveyancer, which can take some time to prepare.  The auction pack will consist of many documents, such as the contract, the title to the property, searches and other relevant documents.  There are many matters to consider when drafting the paperwork, therefore it is important to contact your conveyancer as soon as possible.  This pack is then available for potential buyers to review before the auction.

 

Buying at auction

Are you “bagging a bargain”?  You should approach an auction with caution.  Arrange for your conveyancer to review the seller’s auction pack prior to the auction.  This is so that your conveyancer can inspect the pack and make any necessary investigations before you proceed.  There might be another reason why the seller is putting the property in auction rather than the traditional open market and your conveyancer, can advise you on the provisions and any obligations which may have a financial impact on you.  It is recommended that you also have the property surveyed prior to the auction as in all conveyancing transactions, it is a buyer beware situation (“caveat emptor”).  Once the hammer falls, you are under contract and bound to pay a 10% deposit.   You will need to ensure that you have the financing available if you are successful, as completion is often 20 business days of the date of the auction and insure the property.  Terms of auction contracts are usually less favourable to a buyer, so always check with your conveyancer, in good time before the auction.

The above sets out the traditional method of an auction, but online auctions, often referred to as the “Modern Method of Auction”, are becoming more popular.  There are still risks as a buyer.

The modern method of auction allows the seller to set out their requirements for the auction, such as the reserve price, start date and duration, normally 30 days.  The seller will appoint an estate agent and as an interested buyer you will submit your offer on line, in the form of a “bid”.   You can usually make bids, 24 hours a day, 7 days a week.  The highest bid wins.

To be a part of the auction, you may have to pay a participation fee, usually refundable.  You may be asked to provide confirmation or evidence that you have the funds to purchase the property should you be successful.   Again, the sellers auction pack will be available to view, ask your conveyancer to check this before proceeding, in good time.   The auction pack can be inspected and again, any implications which you are obliged to comply with can be advised upon.  In most circumstances , you must pay in addition to the purchase price, a non-refundable reservation fee, usually a minimum of 2.5% + VAT of the price or a minimum of £6000 + VAT, which will be included in the stamp duty liable.

If your bid is successful, you usually have 56 days to exchange and complete with some other conditions.  The difference to the traditional method, is that you do have the choice not to proceed, but you would lose out on your reservation fee paid.

In conclusion, if you are thinking of selling or buying at auction, it’s best  to discuss it with your conveyancer before you proceed.  At Fisher Jones Greenwood, we understand the processes that are involved with selling and buying at auction and have the experience and expertise to guide you through the process.

 

If you are about to begin this process, please contact FJG’s conveyancing team by calling 01206 835333 or by emailing [email protected]