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Property Auctions Auctions are a subject that people look forward to or are scared to death of. Auctions allow you to
Contrary to popular myth they do not always give you properties at a knock down price, and many choose to sell properties via an auction as they feel they may get a higher price. Looking at auction results against expectation, there are examples of both properties going well under expectation and going well above. Like all auctions the price something reaches depends on how many people are bidding and if those who are, know when to stop or are not going to be beaten at any cost. There are several hundred companies who sell properties by auction, some large national companies with sales catalogues similar in size to a telephone directory, down to small local sales with a handful of properties. Within the reference section of this site we link to some, and within the publications side is a directory of all that have been identified with information on each. Each year many thousands of houses will be sold by auction, some in auctions with well over a hundred properties and some in auctions on there own or with just a few others and every variation in between. Most months there will be around 100 auctions, but not equally spread, so that some days you can have up to 12 auctions in a single day. In addition there are many commercial auctions normally a smaller number but larger values, and some of these will have plots, property for conversion and some odd residential, as well as flats over shops and collections of property in portfolios. How it all works In concept you get hold of the catalogues. This involves calling a long list of premium rate lines to request catalogues or paying a subscription to the larger firms and requesting copies from the smaller ones. One problem you will initially see is in knowing when each auction is being held and when to go after the catalogues. Some are advertised in the Estates Gazette (out weekly on Saturdays) and some in Daltons Weekly (Thursdays), while for others you need to create a diary, based on snippets from older catalogues, watching their web sites and some detective work. Most do advertise but unless you take every local paper you would not come across them. There are also newsletters and other subscription services that claim to keep you informed of sales coming up, and a subscription service that tries to index every property for sale across all auctions. Going back to individual auctioneers, having got their catalogue. Many also have lists of expected figures each property will achieve, some on more premium rate lines that you have to use a fax to suck it out while others are on web sites. Often these lists will come out a few days after the catalogue. Later more premium lines allow you to get lists of what their properties raised. Most catalogues come out 3 weeks before the sale, so you have not got a lot of time, you have to identify the properties that may be of interest, see what viewing arrangements are and go to see them, get information packs or information and carry out whatever other surveys, valuations and research that you would normally do post making an offer and before completion. Luckily a lot of the information you will need will be available, but you may still have to see planning people, maybe listed building people, get builders quotes and more, not to mention getting the building society or mortgage source to move fast, if you need the funding to complete. Given that you both have a very limited amount of time and want to limit the number of lenders valuation surveys you pay for, you will see you need to be very organized and have thought about what you need to do in order, as well as having phone numbers and the like already sorted out. As far as funding goes, you either decide to buy it first for cash and mortgage later, perhaps after adding value. Or you need to have an agreement to fund you to a limit subject to the survey, so everything is in place when required. Another option that some use is bridging funding, as this can be easier to arrange quickly, particularly if you already have a trading history and some property. When looking at the conditions within the catalogue look out for
As soon at you are seriously interested it is worth telling the auctioneer of your interest in each particular property, so they can keep you informed on any changes and in the event of an offer being made or it being withdrawn. You can also if you wish put in an offer ahead of the auction but if you do and it is accepted then you have to be able to pay immediately. When the day of the auction comes you can attend and bid, or let the auctioneer bid for you up to a set figure, with some you can take part over the phone. Ideally attend as there may be a last minute announcement or change, plus you may get it for a lower figure if you look less keen and don't get involved in over excited early bidding. Whichever way, you need to set an absolute upper limit, and get into the habit of never going a penny over your maximums you set. The mistake that some people make is in setting a target as opposed to a top limit and then getting carried along and bid far more then they expected to. Some even mislead themselves by saying the property looks more valuable because a number of people are keen to get it. From the beginning you have to accept with auctions that some properties will go for well over their value and some well under. Some properties will have a reserve price and perhaps 10% of properties may not meet this, but after the auctioneers may be able to talk to the owners and see if an offer that you make would be acceptable. Some other properties will have no reserve and often you can guess which ones on the basis of who is ordering the sale. A building society who have repossessed a property for example is only interested in getting back the balance outstanding, and where property is being sold to split an inheritance most times people just want their share as fast as they can. Getting an understanding of auctions Decide on one or two companies to follow at first, and phone and get their sales catalogue sent to you. Many you will find have premium lines so in effect they sell you the catalogue. A few you can order direct from their web sites without cost, but may limit you to one free copy. Another premium line will often give you a list of expected prices and later even another will allow you to get a list of prices reached. Some information for some of them may be on websites or you may be able to download catalogues and information from their web site. Smaller auction houses and some specialist sales may have free catalogues. If you want all their catalogues, then you will find some have free registration systems to send them to you, others have an annual subscription for all catalogues and information and others you have to call for each one separately. To get them all would work out to be expensive, and probably not economic unless you have a large number of properties to get. Once you have had a chance to select those properties of interest, most will have packs available that include all the information that would be supplied to your solicitor after a normal agreement to purchase and pre completion. Being provided by the seller or their solicitors they will vary in quality. As we mentioned before there will usually be cost for these, probably around £10 each, so only get the ones you feel are a realistic possibility for you to buy. What I would class as desk research is important and can save you charging all over the place, this is using the web and information services available, some you will have to pay for. Also make a lot of telephone calls. With a little imagination you will be surprised at just what you can discover. However as you learn, record it, creating your own reference information that will be of use again, also make lists or databases of contacts, and remember to thank everyone who helps you so that they will be pleased to talk to you again. The first few properties I would suggest you do not actually bid on but just go through the entire procedure short of the loan application and valuation, and then attend the auction to see just what it goes for and how things run. Whatever the price it goes for and however good a job you have done, don't be tempted to bid this time, this is for experience only. Next make sure you either have the agreements that a mortgage will be forthcoming subject to valuation or that you have the cash and then seriously start looking. However time is not critical, you can take as long as it takes to find the best deal or deals available. Although in rising markets doing nothing costs you money, good buying can make you a lot more even if it takes a few months more to achieve. TipsWith many people now turning to auctions, and prices rising, you are going to have to look at far more properties per buy than you would have done in the past. However many of those buying are looking at it as if they were buying a home, so you will get to see which properties are going for a premium and which ones you have a good chance to get at a discount. At no point loose sight of what you are going to do with it once purchased, what is the rental market you are aiming at, and does it exist in the area. There are a number of information services and online subscription services that may help, as they may cut down the need to get as many catalogues, however as they often have to get the catalogues before they can put them into their database and select the ones that match your criteria you may find you lose valuable time. Subscription services may have very many subscribers, so perhaps identifying those properties that are not included might help identify those with less competition. Remember that auctions are just one of many ways of obtaining property, so you have to compare what you can get by auction against what you can get by other means. There are quite a few costs involved in travelling about, getting surveys done etc for a number of properties for each one you buy, so factor this in when comparing prices by various routes. Some smaller local auctioneers may not be excited about your interest, they may not see the sudden interest by many in auction properties as something that is sustainable, and fear loosing the local builders/developers who normally snap up the bargains at their sales. Their regulars are important to their long term survival. Some may even have arrangements with some of these. You may also come across rings, this is where a group of people are buying as a group, to reduce competition, and keep down prices, later they meet and have an auction of their own splitting the savings. This is not supposed to happen, and is illegal so don't join in. Make sure you understand the trading terms, if pre approval is required to bid, or you may find you are all ready to bid and can't. If you have to travel some way, check the day before that the item of interest is still in the sale. Don't be put off by loosing purchases, or by silly prices being paid. This will happen, and you may have to go through the whole exercise a number of times before you get the deal that makes sense. Don't be tempted to try to even up the chances by going after a large number, you just wont have the time to properly research each option in the time you have available and to consider all the aspects unless you have a lot of experience and a good database of background information. Luckily at the early stages you don't need to purchase many and later on the number grows in line with your experience. If you view auctions as a game, a treasure hunt, then perhaps you will enjoy it. We have asked Maximum Coverage Ltd (MCL) to look at producing an e-book or report based upon their auctioneers database so you can see who all the auctioneers are and share in a lot of the information MCL have. This also tells how to get hold of catalogues and which ones can be requested for free over the internet. We are considering adding a table of coming auctions so you can see when and where they are being held using the e-book/report you could then get at more information. MCL as you will know run the club services for us so have a lot of information, that is used to help members find properties, and the finding service may include using auctions where members wish. Some links to auctioneer sites are included in the reference section, this tends to be most of the larger ones. Latest positionEnd July 2003, the auction market is strong, no sign of prices dropping or any increase in the number of properties unsold. Bargains can still be found. Within the last week we see one house sold for under £5,000 (North), and a flat near Swindon M4/Wiltshire for just over £60,000. Building plots at reasonable prices, and sites with potential as plots representing bargains in a number of areas. August 2003 - We see in a catalogue an end terrace 2 bedroom house in South Wales, expected to fetch £12,000, with an estimated rental value quoted as £4,680 per annum. The house next door is also in the catalogue with the same guide price. March 2004 - New records being obtained at auction, property sold end of last year and resold now showing increases. No sign of a weakening market, even where poor scheduling as made a number of sales appear in the same city in the same week. |
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