We are seeing more property auctions being held as the commercial property market speeds up across the West Country – and they can be a great source of bargains and provide fantastic investment opportunities for those with a bit of spare cash.
The auction process is much faster and more exciting than any other way to buy a property, and that can be a great advantage. But it also the spells danger point for the unwary.
So as a veteran of many auctions – helping people buy land, offices, farm buildings, wrecks to transform or build their investment portfolio – here are a few things to bear in mind: if you are going to make a bid.
The most important thing is to do your research in advance and take off those rose-tinted spectacles while you do it. Be sure to know precisely what you are bidding on – what is included in, and excluded from, the sale.
Request a catalogue and property details and go through them with a fine-tooth comb. Get the opinion of a professional surveyor or valuer in the same way as you would if you were buying in the traditional way.
View the property as many times as you can and let your professional adviser view it. If things are in a poor state, consult builders and other professionals to check the cost of likely repairs. You may have grand plans for the property, but is it subject to planning restraints? Are there any other hidden caveats and conditions you will have to adhere to?
The second the hammer goes down the property is yours and there is no going back, so you must make sure you have the finances in place. Check special conditions on the sale – sometimes you are liable to pay the seller’s legal fees or other costs. and this may be something you have not taken into account.
You must either have the cash or the finances firmly in place before the auction. and because you do not know the final price in advance finances can be a little more complicated than a more traditional purchase. You will need to have ten per cent cash immediately available when the hammer goes down.
On the day itself, stay calm and don’t get swept along with the excitement of the auction. It is far better to let the property go to someone else than to pay more than you bargained for. Keep within the bracket of spending that you set yourself. If necessary get a professional to bid on your behalf – they will be less emotionally involved.
Remember that most lots will have a reserve price – the minimum a seller is prepared to sell for – and is very different to the guide price you have been given, which is the amount they expect to sell for.
If the auction doesn’t meet the reserve price the seller will retain the property, but there may be an opportunity for you to negotiate a deal with them and the auctioneers may act as agents after the auction. It is worth asking if the property failed to sell and you were keen to buy.
Buying at auction is not for the faint-hearted. It can be exciting and fun but can also be frustrating and time-consuming. But Preparation is the key. Getting quality experts on your team and having an eye for a bargain can make commercial property buying at auction very profitable activity indeed.
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