Property & Land

Selling and buying property by public auction:

Introduction.

Property can be sold either by Private Treaty, Public Auction or by Tender. Private treaty sales are recognised as the usual traditional method. Sales by Tender, when offers are made usually in a sealed envelope prior to a deadline, perhaps given an impression of "mystery" and very often potential purchasers are deterred because of the nature of the process.

A public auction sale, especially in times of a buoyant market, is a popular method of sale in order to achieve the best "open market value".

Advantages

  • The whole process, from initial advertising to completion, can be undertaken within 8 to 10 weeks.

  • The fall of the hammer, provided the reserve price is reached, is the contract between the seller and buyer.

  • The buyer must sign the contract, available for inspection prior to the sale, immediately after the sale - and pay a deposit (usually 10%). The seller's contract is also signed, and the contracts are exchanged.

  • The contract will stipulate the completion date when the balance of the purchase money is paid by the buyer.

  • If the buyer fails to complete, the seller then retains the deposit - which would cover the sale expenses.

  • The seller must be in a position to buy and sign a contract. There is no chain.

  • All surveys should be undertaken prior to the sale.

  • Open market value is achieved with competitive bidding. With spirited bidding, the realisation price sometimes exceeds expectations.

  • If the property does not sell at the auction, it normally remains on the market by private treaty.

Auction Procedure

  1. The property generally requires 4-5 weeks' advertising with prominent, effective advertisements. The type of property dictates the publications in which to advertise. Normally, the local newspapers and websites are adequate.

  2. The Sale Contract and Conditions of Sale are made available for inspection by intending purchasers prior to the sale, at the Auctioneers and Solicitor's offices. Your solicitor prepares the Contract.

  3. Prospective buyers must have finance arranged prior to the sale and if necessary a survey on the property. 

  4. The buyer must sign the Contract immediately after the fall of the hammer - and pay a deposit (usually 10%). The deposit is non-refundable and becomes the property of the seller.

The signing of the Contract commits the purchaser to complete the sale on the date fixed for completion. The completion date is when the balance of the purchase money is paid.

Failure to complete can result in penalties. The minimum and usual completion date is 28 days from the date of sale.

Guidelines for Prospective Buyers

Prior to Auction

  1. View the Property Arrangement to be made via the Auctioneers, Michael C L Hodgson as detailed in the particulars of sale.

  2. Conditions of Sale The property is sold subject to Conditions of Sale. Different conditions may apply to separate Lots if there is more than one Lot. The Conditions of Sale are part of the Sale Contract.

    It is recommended you familiarise yourself with the Contract and obtain legal advice if you are uncertain on any matter or terminology within the Contract.

  3. Advise Your Solicitor Please give a copy of the Auctioneer's sales particulars to your solicitors so that they can begin to make the necessary legal enquiries. Local and other Searches will be supplied with the Contract papers so that these do not need to be carried out by your solicitors but the buyer will be expected to reimburse the cost of these Searches in addition to the purchase price. You will enter a legally binding Contract if you bid is successful at the auction.

  4. Arranging Finance Since you will enter into a binding contract at the fall of the hammer and pay a substantial deposit (normally 10% of purchase price), it is essential that all financial arrangements are finalised well in advance. This is particularly important if you need to arrange mortgage finance. If this is the case, it must be arranged well before the auction day. The completion date is in accordance with the Auctioneer's sale brochure, as stipulated in the Contract.

  5. Insurance Once a property has been sold and Contracts exchanged, it will become your responsibility for insurance cover. Make sure you have taken out cover from the date of the auction up to the legal completion date. Your solicitors will advise you accordingly.

  6. Sale Prior to Auction Please check with us a few days before the sale that the Lot you are interested in purchasing is still available. It may have been sold prior to auction.

Auction Day

  1. Arrive Early It is best to allow plenty of time before the bidding on your particular lot begins. If possible, meet the Auctioneer and let him know which particular lot you are interested in.

    (It is possible that there may be some last minute alterations, and these will be announced at the time of the sale.)

  2. Bidding Be positive. Signal your bid by definite movements, for instance raising your hand or catalogue. If you have any doubts about bidding then speak to your solicitor who may arrange to do this for you.

When the Auctioneer announces "Going for the first time, going for the second time, going for the third and last time - sold" this is the final stage of the sale process and you must not leave it too late if you want to bid.

  1. Telephone Bids & Nominated Representatives Telephone bids to the Auctioneers' Offices prior to the sale cannot be accepted. If you are unable to attend the sale personally, then you must nominate a representative who must have full authority to bid and act on your behalf. The representative must have authority to sign the Contract on your behalf and provide the deposit money.

  2. Success If you are successful with the bid, come forward after the sale in order to sign the sale Contract. You will be asked to provide a cheque for 10% of the purchase price, made payable to the seller's solicitors and indicated on the particulars of sale.

Contracts are then exchanged and the seller's signed contract should subsequently be delivered to your solicitor, for them to take further action following the exchange.

  1. Withdrawn Lots If the property that you are interested in is withdrawn at the sale because it failed to reach its reserve price, please speak to the auctioneer, who will register your interest.

 

For further information on buying a home and many other useful topics, go to the RICS website http://www.rics.org/uk/knowledge/consumer-guides/

We hope these notes are helpful. If you require clarification on any point, please do not hesitate to contact us!