Basic Info About House Selling Auctions

[penbat1]

Can someone tell me what usually happens in practice. It doesnt seem feasible for each bidder to do a survey and personal inspection of every property they may get involved in bidding so i wonder if many bidders just take at face value the auctioneers guide price. How is this guide price arrived at ? Also can you be sure that the successful bidder will always cought up all the money within 4 weeks of the sale ?

Also very roughly how much is a property usually sold for at an auction as a percentage of a sale price obtained if selling on the open market via an estate agent ?

Thanks

Edited May 24, 2009 by penbat1

[Spark]

Survey - you get one if you have any doubts about the building. Are there any cracks, smell of damp, loose floorboards or non-level door frames etc? You don't HAVE to get a survey (some people even buy at auctions without even viewing the property!

Guide price is usually at least 25-30% below what an EA would advertise the place at. Don't know exactly how they arrive at the price. Sometimes the guide price is put deliberately low to get loads of people interested in viewing. Some places just go for guide prices and some go for significantly more. I saw a derelict 4 bed detached with 2 acres of land in Essex with a £100K guide. Final price at fall of hammer was over £190K! Most properties (but not all) at auction have a reserve price (which is usually around the guide price).

If buying at auction you must:

Have 10% of auction hammer price as cleared funds as a deposit. You must also bring 2 or 3 forms of ID - including passport/driving licence and a utility bill to prove who you are/where you live. You exchange contracts on the day so have entered into a legal contract to buy the place and complete within 14/21* or whatever days (* varies from lot to lot). If you don't complete within the deadline the sellers solicitors will send you a letter (and charge you £50-100 for it). Normally charge you interest on the full standard amount at BoE +10%. They will normally give you another 14 days to complete. If you don't, they keep your 10% AND they can sell the place to somebody else!

Final selling price is very variable - could get a place at 40% below the price of a place in an EA window. Might pay within 10% of what the place is worth. You could pay more than the place is worth if you don't do your research and buy a house with non-standard construction or one with serious structural problems!

Auctions are good if you have the money ready and you know what you are buying. You know once the hammer falls the place will be yours within 1 month - no gazumping, no gazundering and no vendor/buyer changing their mind.

[Tim Miller]

Can someone tell me what usually happens in practice. It doesnt seem feasible for each bidder to do a survey and personal inspection of every property they may get involved in bidding so i wonder if many bidders just take at face value the auctioneers guide price. How is this guide price arrived at ? Also can you be sure that the successful bidder will always cought up all the money within 4 weeks of the sale ?

Also very roughly how much is a property usually sold for at an auction as a percentage of a sale price obtained if selling on the open market via an estate agent ?

Thanks

Professionals may but usually do not have a survey done, they should have enough experience to get away without a survey for a lot of properties. The general public will have a survey if buying with a mortgage. It is extremely bad practice to purchase any property without a personal inspection. The same goes for buying without going through the legals from the vendors solicitor, that would be utter madness.

Guide prices tend to be about 10% or so lower than the reserve price. The auctioneers advise on the guide price. They are experienced enough to get the guide right. They could seek local estate agents advice. They can easily get sold prices on line as well. Occationaly a buyer will be late completing, there are penalties for being late which can include loss of the deposit.

An average saving when buying at auction over an estate agent depends so much on the market condition, now bigger savings are normal and may well be 20% to 30%. You must remember an auction repossession might be 40% to 50% off 2007 peak prices but even an estate agent will get you 20% to 30% off. In good times the saving could be as little as 10% to 15%. So much depends on the property and location. BTL flats in city centres can and have been bought at 50% off, a detached riverside grade 2 rose covered cottage will never go for 50% off.

A few tips if buying at auction, stay within your preset valuation. Talk to local agents about similar and the particular property. Always stand at the back of the auction, that way you can hopefully tell if bid are coming off the wall. Stick your hand up right at the end, and slow the bidding down by taking your time increasing your bid. That way you hopefully will give the opposition time to think they don't want to get caught up in bidding higher. If the reserve is not met, the auction staff will normally approach the last bidder to see if they will go up a little more to reach the reserve. If it was not you, don't be shy in finding auction staff to talk to. Don't hang around at all if doing this. They probably will make a call to the vendor to tell him the property did not sell but have a potential buyer there with them, see if a deal can be done. The vendor might even be at the auction.

I hope this helps.

[penbat1]

Thanks very much guys for your useful responses, although I need info from the perspective of a seller. I have a property which I am interested in selling through an auction to get a quick sale and the final selling price isnt that important.

Is it a legal requirement to have a HIPS report to sell through an auction and if so at what point would it be viewed by bidders or purchasers ? The property has an energy inefficient, although fully working, boiler.

Would the auctioneer ever do a personal inspection to produce a guide price ?

The property is structurally sound. However the interior could do with redecorating and new carpets fitted as it is tired looking. The fitted kitchens and bathroom are adequate but also old and tired looking. Also many floorboards on the first floor creak. I am wondering if it is worth that much effort to spruce up the interior of a property for sale at auction if the property is basically structurally sound. Is sprucing up a property with a new lick of paint etc likely to increase the sale price much through an auction ?

Thanks

[Spark]

Yes, you will probably need a HIP. There are a few cases where you don't need one if you look here.

I don't have any experience of selling via an auction - only buying and watching "homes under the hammer" on BBC1.

They will probably send somebody out from the auction house to view the place and to take an external photo. The auction house will also arrange block viewings on the place. Probably 1 hour on 1 or 2 dys per week for the 3 weeks leading up to the auction.

I would probably leave the house "as is", as some builders etc sometimes buy places at auction without even looking inside! They assume it's likely to need totally stripped out, plastered, electrics etc and will bid accordingly. The auction houses will charge a fee up front to list the property and will take a cut of the sale price if it sells at auction (I think they will charge about the same as an EA).

I was getting my place ready for the market and I was looking at the following website:

Get an offer

I don't have anything to do with this site, but I was seriously considering advertising my house here. I got a builder in to fit a new kitchen/bathroom/heating system etc. The builder lives across the road from me and made me a verbal offer for my place which I have verbally accepted. So my house is sold STC, but if things go wrong I might give this website a go.

It depends on how much time you have - i.e. can you be there to show people around etc or do you just want the place sold? If you don't want the hassle of marketing the place then putting it to auction could be your best bet. You have the minimum of hassle with viewings and if it hits reserve at auction you will have the money within 1 month. You are unlikely, however, to achieve a brilliant price for the property.