What to consider when buying a property on Auction
It’s no secret that auctions represent an excellent opportunity to invest in quality properties at market related – or even forced sale rates. Provided, of course, that buyers have done their homework before raising their hands to bid. Roy Lazarus, director at Park Village Auctions, explains the intricacies of purchasing a house on auction.
According to Lazarus, preparation is crucial to success. Buyers should take time to research the property and familiarise themselves with the different types of property auctions which will influence the conditions of the sale.
Notes Lazarus: “Buyers should have a firm budget in place before the auction. Gather as much information about the available property to determine what it is worth and the price you are willing to pay.
“Examine average sales prices of similarly sized houses in the area to get an idea of the value of the house. A good auctioneer will be able to supply a valuation or prospectus.
“Then, consider what the house is worth to you as the purchaser. Research the area – remember location, location, location. Consider the accessibility of the area and nearby amenities.
“Finally, inspect the property closely on viewing day, noting any repairs or modifications that you would need to make. Don’t be afraid to ask the auctioneer questions either. Find out if any fixtures, fittings or plants have been excluded and if there is currently a lease in place (which you should have sight of) which will have to be honoured.”
Auction properties are sold voetstoots, meaning “as is”, advises Lazarus. The buyer will purchase the house in its current condition, and the seller is under no legal obligation to repair any damages or faults unless otherwise stated in the Conditions of Sale. Leading Lazarus to what he says is the next step in preparation, understanding the Conditions of Sale.
According to Lazarus, buyers should obtain a copy of the Conditions of Sale, which will cover issues such as the confirmation period, outstanding rates and taxes, applicable VAT or transfer costs and commission. He says that it is imperative that the conditions be understood and encourages buyers to engage with the auctioneer should they have any queries.
Lazarus clarifies: “There may be a reserve on the property, in which case there would be a confirmation period (usually 14 days) for the highest bidder’s offer to be accepted or rejected based on numerous factors.
“The nature of the sale will also dictate who is liable for paying outstanding rates and taxes (if any). If trustees or a liquidator are selling the property then generally the seller would bear these costs. While the buyer would be responsible for settling the arrears in the case of a sheriffs auction, otherwise known as a ‘sale in execution’.
“Commission differs from auctioneer to auctioneer. Again, the Conditions of Sale will outline what the commission rate is and who is liable to pay. The current trend in the market is that buyers pay the commission.”
Furthermore, Lazarus explains that the commission typically excludes VAT, which bidders will need to take into account before applying for finance.
Lazarus recommends that buyers secure their finance, with VAT, transfer duties, and commission fees in mind, well in advance.
“You must be able to follow through on the transaction if you make the highest bid. Once the hammer goes down, the deal is concluded. You are liable for the agreed price, failing which you will be required to pay damages.” cautions Lazarus.
That being said, Lazarus believes that informed buyers are poised to take advantage of the benefits offered by auction properties. He elaborates, “Between voluntary and distressed sales, there are a variety of different houses available to suit a buyer’s needs. From the ‘foot-in-the-door’ property to superlative estate homes, apartments and even mansions ready for the taking.
“Auction sales are swift and transparent. When buyers have done their homework, they can acquire quality homes at better value than a conventional sale through agents –because there are no lengthy negotiations and bidders can ‘name their price’.