News What happens at a Property Auction?
Published by AgentPro on 11th July, 2018
Dylan Williams of Rees Richards, who manage regular property auctions in Swansea, explains how property auctions work and what potential bidders and sellers should do before turning up on the day.
Property auctions used to only attract hardcore developers looking for their next fixer-upper project or large scale development – but that’s all changing.
Recent years have seen property auctions soar in popularity, with increasing numbers attending to both buy and sell – including mainstream buyers and sellers. Our Swansea property auctions are extremely popular and property auctions are a large part of our business.
I’m often asked by potential buyers and sellers what happens at an auction, so here’s our guide:
How do property auctions work?
At the start, it isn’t terribly different for Sellers. We will perform a property valuation and advise on a Guide price we expect the property to fetch at auction. Sellers can then instruct us to sell the property via auction, or via a normal estate agency contract. The fee to enter a property in an auction can range from £300 -£500 and if the property is sold, you will be expected to pay in the region of 1% of the sale price in fees. It is often more expensive for Sellers to sell at auction, but properties are sold very quickly, buyers have to complete within 28 days and those fixer-uppers that don’t sell elsewhere are exactly what bargain-crazy auction buyers are often hunting for.
What happens ahead of an auction
Ahead of the auction, we publicly produce a catalogue of 'lots' (properties) so bidders can see the properties we have up for sale ahead of the auction. This helps market properties and normally auctions are full of keen bidders. However, as a keen bidder, especially one new to auctions, we strongly recommend that you arrange a viewing on any properties you plan to bid on. Once bought, like any other sale, there are no refunds!
In the catalogue, Buyers are normally given an indication of what we expect the property to fetch at auction, called the guide price. Sometimes a Seller will have no reserve, but usually they instruct us with a reserve price, which is the lowest price they will accept. We cannot accept any bids for lower than the reserve price and don’t normally disclose the reserve until the end of the auction.
What Buyers should do before the auction
If you have seen a property of interest in our catalogue, and plan to buy using a mortgage, you would need to have a property valuation and an agreement to lend in principle agreed before the day of the auction.
Even if you have cash and are buying a ‘fixer-upper’ it’s advisable to have a full property survey completed – sellers may be selling at auction because a property has major structural problems they don’t want to fix.
Study the property particulars carefully, reading all of the small print. If you're satisfied, send them to your conveyancer and ask them to carry out the usual searches, enquiries and title checks before you bid on the day, as a bid is a commitment to buy. You’ll also need to get your surveys done before the auction. Of course, the risk of doing all this work beforehand means if you don’t manage to successfully bid, you will be out of pocket for all these costs, however if you do win, properties are often cheaper than a normal purchase – and you will need to complete within 28 days, so it’s a great way to move fast.
In any event, we invite all bidders to view the properties at least once, and ideally several times ahead of the auction, because bids are final.
What happens on the day of the property auction?
On the day of the auction, potential buyers gather in our auction room. The auctioneer will meticulously go through the sales catalogue, inviting buyers to place bids on the properties of their choice. Needless to say, the highest bidder on each property wins.
Auctions are exciting and at times you could hear a pin drop in the bid room, then when bidding starts you can sense the adrenaline rush as bidders compete to win – our advice is to attend an auction to have a look the first time, rather than bid. It’ easy to get caught up in the heat of the moment and bid more than you intended, so don’t get carried away and bid more than you can afford.
What happens on completion of the property auction?
When the auction is complete, successful bidders are asked to sign legal paperwork and pay a non-returnable deposit on the property (usually 10% of the sale price). Buyers are then expected to complete within 28 days of the auction – so sellers should be prepared to move quickly and have everything in place when they place their bid – and wait to see if nobody else raises it!
Everyone should attend at least one property auction in their lifetime – it’s a fantastic experience, buy or no buy. Our next property auction will be in the autumn – we’ll hope to see you there!