The process of buying property at auction in Scotland differs slightly from that in England and Wales.
What sort of properties are sold at auction?
Any property, whether residential or commercial, may be sold at auction. This article focuses on residential property auction sales.
Why are properties sold at auction?
There is a perception that properties sold at auction are those that are less attractive to potential buyers. While this may sometimes be true, the reverse can also be the case: some properties are put up for auction precisely because the seller anticipates they will generate considerable interest - and an auction can often be the best way of maximising sold property prices, as would-be purchasers compete against each other. At the other end of the spectrum, properties that need a great deal of renovation work frequently come up for auction. Although these are properties that are sometimes perceived as less desirable, such a property may sometimes prove very popular if, for example, it offers the potential for a healthy profit for a developer. Other common reasons for properties being sold at auction include as a consequence of repossession or bankruptcy, where the property is difficult to value and the seller is unsure where to pitch the sale price, and where the original owner has died and the property has lain empty for some time.
How do you find out about auction properties?
The best way, according to Shelter Scotland, is to ensure you are on the mailing list for local auctioneers - and you should be able to find auctioneers listed online and in the Yellow Pages. Local newspapers sometimes also carry details of both auctioneers and forthcoming property auctions.
How should you prepare for an auction?
The first tip is to research. This means researching both the area in which you want to buy (trends in sold property prices, anything that might affect future sale prices, schools, availability of public transport etc.) and any specific properties that catch your eye in the auction listing. It is vital that you arrive at the auction having read the Home Report in detail and knowing exactly what is included in the sale. Secondly, with this information in mind, it is essential that you work out what the property is worth (and what it is worth to you - which may not be the same as the first figure) and set a budget. In order to do this, you may also decide to have a survey carried out and get quotes for any renovation work. Next, if you need a mortgage to help fund the purchase, you must contact your mortgage lender. They may also require a survey or valuation of the property before agreeing to lend you the money. Finally, you should also have a solicitor lined up to check the property's registration in the Land Register, investigate whether there are any local council plans that might affect the property, and verify that there are no other impediments to ownership.
Can you view an auction property before bidding?
Yes - and you should ensure you do. You can make an external, or "drive by" viewing at any time - and you may want to do this several times at different times of the day, particularly if, for example, the property is on a road that may get busy during rush hour or is near a pub or nightclub. Viewings inside the property are generally prearranged and published on the property schedule. They are open viewings, which means that anyone can attend without having pre-registered. It may also be possible to book an individual viewing at a separate time, but you will have to arrange that with the auction house.
Can you submit an offer before the auction?
Usually - yes. However, of course, the vendor is under no obligation to consider your offer and may choose to allow the property to proceed to auction. If your offer is accepted, you will have to pay the deposit immediately. The vendor will then withdraw the property from the auction.
How do you bid at auction?
You have three choices: attend in person, attend via phone, or use a proxy. If you choose to use a proxy, you must decide your maximum bid beforehand and the auctioneer will then bid up to that amount on your behalf. Proxy bidding is useful for those who are unable to attend an auction, but also for those who fear they may be tempted to exceed their maximum bid.
What to remember at auction?
Do not be tempted to exceed your budget even in the face of fierce bidding from other potential buyers. Getting carried away and drawn into a bidding war may result in you paying more than you can afford or more than the property is really worth.
What happens if your bid is successful at auction?
If yours is the winning bid, it is legally binding and you will have to pay a deposit immediately. This is usually 10 per cent of the purchase price or a minimum of £3,000. At the same time, you will also be required to pay the buyer's administration fee, which amounts to 1 per cent plus VAT of the sale price, subject to a minimum fee of £2,000. You will then have to pay the balance within 28 days. This means that is essential to have the money ready.
When should you not buy at auction?
Although the decision on whether or not to buy at auction is very much a personal one, it is not sensible to do so if you do not have immediately accessible money to fund the purchase and, in particular, if:
- a purchase relies on the sale of your old home and that sale has not yet gone through
- a purchase depends on obtaining a mortgage and you don't yet have a firm offer.
What else to remember?
Residential properties sold at auction represent only a very small fraction of the total number of properties on the market. It is a mistake to concentrate on auction properties to the exclusion of those for sale via estate agents. Apart from anything else, researching properties up for sale with estate agents can help the would-be auction purchaser to gauge the state of the market in a particular place.
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