Other from traditional property sales, property auctions are considered another effective way to sell and acquire properties in the UK. According to data from the Office for National Statistics, 652,000 homes were sold in England and Wales in 2020, with around 18,000-20,000 of those residential properties sold by auction. This accounts for 2.2% of total home sales. While not a large proportion of sales, property auction sales are a significant one. Let’s take a look at the advantages and disadvantages of buying or selling an auction property.
Auction property purchases are considered suitable for sellers with a subjective value who want to market their properties to a large audience of potential buyers. Auction listings can be put online by auction houses and can attract bidders across the world, meaning that sellers do not have to simply rely on regional auction houses within the UK. This will expose the property to a wide range of potential buyers. Statistics suggest that if you put a property up for auction, you have more than a 50 per cent chance of success of selling them this way.
Auctions can be attractive to property investors as they may secure assets below market value. It is also attractive to sellers as a reserve price can be set up to ensure that you don’t sell for less than an amount you are comfortable with, hence it creates a win – win situation for both sellers and buyers!
Advantages of Auction
The main advantage for selling property at auction is that it is normally quicker than the traditional sale process. Auctioneers provide certain information and searches concerning the property before bidding begins, potential buyers are made aware of the basic information about the property, and only serious buyers join in the bidding process. Then, as soon as the auctioneer bangs his gavel on the desk, the sale is complete. The successful bidder will sign the contract with an actual date of completion determined and pay deposit right away, meaning there is minimal risk of the sale falling through. Transparency and certainty are considered key advantages of an auction sale.
Risks of buying a property at auction
If you are potential buyer, you should also bear in mind the risks of buying a property at auction.
Firstly, you may not have enough information about the property at the time you enter into a binding contract to purchase, whether that’s the structure and conditions of the property itself, or the legal implications. This causes a major dilemma due to the fact that it will be a waste of money and time to investigate the title if you do not eventually succeed in bidding, but it would also be too late to raise requisitions on the title after you have entered into a contract.
Secondly, given the tight timeframe to complete, usually within 28 days, you may not be financially prepared in advance, particularly if mortgage financing is required.
Thirdly, if you are not familiar with the market and procedures, you may find yourself overpaying for the property! Since auction sales are usually subject to Common Auction Conditions, if you are not a professional bidder, you may not have sufficient knowledge of the relevant terms applicable to your purchase. This may cause you to eventually find yourself stuck in the middle of some onerous terms which you have not anticipated.
It is therefore advisable for you to consult your solicitors prior to entering any contractual relationship. Lisa’s Law is experienced in dealing with both residential and commercial properties auction cases and you will be advised extensively throughout the process. Feel free to contact us if you have any enquiries.
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