Understanding Auctions

Introducing Auctions

By James Emson, Managing Director, Clive Emson Auctioneers

We live in a world where we expect everything to be done yesterday. Yet “good things come to those who wait”, or so the saying goes – and that is exactly what property is all about.

Bricks and mortar have traditionally been a medium to long term investment, not something bought today and sold tomorrow making thousands of pounds in the process, although, occasionally that’s exactly what happens.

High risk strategies will always give the promise of an overnight fortune but with interested rates remaining low investing in property needn’t be a risky business!

Many of the hundreds of lots that we, at Clive Emson Auctioneers, offer annually across southern England require renovation, improvement or have potential for extension, which to a prudent buyer will offer a fantastic opportunity to add value.

With the old saying Caveat Emptor (Let the buyer beware) resonating in our minds many people ask how safe is it to buy a property at auction?

“At the fall of the auctioneer’s gavel a legal contract is made, you don’t need to be a property professional to buy at auction but you do need to ensure you are prepared and have done all that a prudent buyer would do before entering into a contract.”

By following these five golden rules you could find yourself reaping the rewards of a successful and quick transaction.

Look through the auctioneer’s catalogue to identify any lots which are of interest. The lot information will provide you with viewing details allowing you to book an appointment. The catalogue will also provide photos, elevations, location plans and more importantly a guide price.
Obtain a copy of the legal documentation. This is the information the seller’s solicitor provides and can include special conditions of sale (which may contain extra fees and cost in addition to the bid price), local authority searches and in the majority of cases all the documentation required for making an informed decision on whether to bid or not. It is important to remember that if you are not fully au fait with property law you should seek independent legal advice from a solicitor or licensed conveyancer.
If you require a survey have this carried out before you commit yourself to a legally binding contract.
If you are successful you will be normally be required to pay a 10% deposit in cleared funds (or £3,000, whichever is the greater) to the auctioneers at the point of exchange, together with the auction administration fee bit you should check the documents and terms as this on rare occasions can vary. If you require finance, again, arrange this before committing yourself to the contract.
Arrive on the day of the auction in plenty of time. You will need to register and obtain a bidding number without this you may not be able to bid and may have your bid refused by the auctioneer. Don’t forget to pick up a copy of the addendum (a list of amendments to the catalogue or documentation which will form part of the contract) and finally…..relax!!

The Auction Legal Process

Provided by Richard Franco-Robinson, Auction Department Manager, The Foster Partnership

Whether you are buying or selling at auction, the legal process can be divided into two distinct stages:

Pre Auction – all the due diligence work up to and including the auction itself.
Post Auction – all work after the date of the auction, up to and including completion and registration of the transaction.

Auction Purchase

Pre Auction

Obtain the auction legal pack from the auctioneers
Consider the Special Conditions that apply and advise you in respect of the same
Undertake any necessary searches
Raise enquiries with the Seller’s Solicitors and receive replies
Fully investigate the title
Prepare a full report for you on the property, prior to the auction

Post Auction

Receive the auction sales memorandum from the auctioneers
Draft and submit the Transfer Deed and requisitions on title to the Seller’s Solicitors
Undertake the usual pre-completion searches
Report to you with the mortgage deed for signature (if you are taking a mortgage over the property)
Obtain the completion statement from the Seller’s solicitors
Obtain the completion monies from you
Deal with the completion of the transaction
Submit the Stamp Duty forms to HM Revenue & Customs on your behalf, paying any necessary Stamp Duty
Register the transaction at the Land Registry
Send out the Title Deeds, following registration, either to you or to your mortgage lender (as appropriate)
On a leasehold transaction, register notice of your interest with the freeholder or Managing Agents

Auction Sale

Pre Auction

Draft the Special Conditions that apply and advise you in respect of the same
Submit to you the usual information forms, for you to complete and return
Undertake any necessary searches
Prepare and submit the auction legal pack to the auctioneers
Deal with any enquiries raised by potential buyers

Post Auction

Receive the auction sales memorandum from the auctioneers
Receive and approve the Transfer Deed and requisitions on title from the Buyer’s Solicitors
Submit replies to requisitions
Send you the Transfer Deed for signature
Obtain the title deeds and a redemption statement from your mortgage lender (if you are have a mortgage over the property)
Prepare and submit the completion statement to the Buyer’s solicitors
Deal with the completion of the transaction
Repay any mortgages you have over the property
Send out the Title Deeds, following completion, to your Buyer’s Solicitors
Account to you for the balance of the sale monies

Remember at an auction, the process of buying or selling a property is condensed into a matter of minutes rather than months. For both buyer and seller this speed can prove to be extremely advantageous; however, it should not diminish the significance of the transaction – there are many considerations for both parties and time, good consideration and professional counsel are still critical.