Under the Hammer - A Novice's Guide to Buying and Selling Property at Auction

If you are trying to sell your home in this difficult property market, you may be struggling.  Have you considered selling at auction? 

• Which properties are best suited to an auction sale?
• Properties in need of renovation.
• Barns with planning permission for conversion.
• Investment properties.
• Repossessed properties or those likely to be repossessed.
• Unique properties where it is difficult to set a market value.
• Properties with problems e.g. structural problems or title problems.
• Vacant properties.

Even if your property does not fall into one of these categories it may still be suited to a sale by auction.

What are the advantages for the seller?

• The main advantage is that selling at auction, if successful, results in a quick sale with a set timescale. Completion of the sale will usually take place 28 days after the auction.  On the fall of the gavel, you have a binding legal contract with the buyer with no possibility of the buyer trying to renegotiate the price.
• Your buyer will have his finance already in place so there will be no nasty surprise when a mortgage offer fails to materialise.
• Your buyer will pay a 10% deposit which means if the worst happens and the buyer fails to complete you will at least have 10% of the agreed price as compensation.
• Auctions can drive the price up if there is more than one interested buyer.

What are the disadvantages for the seller?

• The property may not sell and you will have incurred costs including the entry fee for the auction and the legal fees for the preparation of the auction pack.
• You may not achieve the price you had hoped for, but remember you can set a reserve price, i.e. a minimum price at which you are prepared to sell.

Planning to buy at auction?

Firstly, find a good solicitor who will be on hand as soon as you find a property in which you are interested. 

You must ensure the finance is in place as you will need to have 10% of the price available on the day of the auction to put down as a deposit, plus the auctioneers’ administration fee.  The balance of the purchase price plus any stamp duty, Land Registry fee and legal fees will need to be paid on completion which is usually four weeks after the auction.

Once you have found a property, ask your solicitor to look through the auction pack prior to the auction and raise any enquiries and resolve any problems.  Some properties are put into auctions because there are problems with the title which is why you need a good solicitor to spot those problems before it is too late and you have agreed to buy, problems and all!

If you plan to have the property surveyed, which is usually advisable, ensure this is done prior to the auction. Remember it is easy to get carried away in the excitement of the auction room so decide on your highest bid beforehand and stick to it.

If you are unsuccessful the money you have spent on the survey and your solicitor’s fees will have been wasted.  On the other hand, if you are successful, you could well walk away with a bargain, with a large proportion of the legal work done, and in 4 weeks’ time you will be the owner of the property.

Joanne Coupe is a solicitor at Raworths LLP specialising in freehold and leasehold conveyancing.
To contact Raworths, telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate HG1 1HF. Alternatively you can email joanne.coupe@raworths.co.uk