If you are looking to buy property, property auctions are, often, the best place to bag a commercial property bargain and come with many benefits. They offer certainty of sale, the sale usually put through quickly and it is usually a fairly straightforward process to complete the sale.
In the past, these auctions were almost exclusively the realm of regular property investors but, these days, you are as likely to encounter entrepreneurs and first-time buyers, adding to the competition on the auction floor.
Property auctions are no doubt exciting places – the competition for success, the tension as the bids come in and the elation of winning a bid! For first-time attendees, they can also be daunting and confusing especially when surrounded by veterans who know all the tricks and processes.
The key to getting the most out of property auctions is to be prepared and know how everything works. These simple tips will help you be one step ahead when attending property auctions:
Research the lots before attending
Auction houses will release the details of the available properties well in advance of the sale. Make sure you look over your options before attending and do thorough research. Head to the auction with a few options you want to bid on, or just the one if you have narrowed it down that far.
Visit the property before the auction
The last thing you want after a property purchase is a nasty surprise! When looking at properties to buy think “why does that have such a low starting price?” It could be that the seller wants to encourage a strong bidding war, or it could be that there is something wrong with the property.
You simply won’t know unless you visit the property. Will it need massive renovations and structural updates to fulfil your needs? Does it match the description on the listing? Is there anything that hasn’t been mentioned?
You can also get a feel for the local area and the real-world, practicalities of the property.
Read the legal pack
Read all the facts and procedures about the auction before attending. When the hammer drops, that’s it, no backing out. Legal packs outline why the property is up for sale and why it might not be available on the general market including why the property might be uninsurable and any other issues it might have.
The pack will also help reassure you that everything to do with the property is above board and help avoid any nasty surprises.
Set your maximum bid and stick to it
In the hustle and bustle of the auction house, it is very easy to get swept up in the excitement and enter a bidding war that you can't afford. Set your maximum bid according to what you can afford and don’t deviate from it, no matter how tempting it is.
Remember that most properties will sell above their guide price, as this is generally the lowest price it is expected to sell for. Don’t go in expecting it to sell at that price and you won’t be disappointed when the price rises massively above it.
Make sure you have the funds
Sales at auction happen quickly and people are often caught out not having the funds available to carry it through. Don’t be one of those people scrambling for property funding.
When you make a successful bid at an auction you are legally obliged to complete the purchase and will have to put down a 10% deposit immediately. In most cases, you will then have to complete the financing in a time frame of 14 to 28 days (although we offer longer at Commercial Hub). You’ll lose your deposit if you miss the closing date.
At the auction make sure you ask about the payment process and remember to take valid ID with you.
Consider VAT and Stamp Duty
When planning your budget for your bid, be aware of Stamp Duty and whether you need to pay VAT on the property. Many first-time bidders go in expecting the sale price to be the only cost involved, and it rarely is.
If you fully understand the costs and implications, there can be some advantages. For example, there can be tax breaks when turning a commercial property into a residential one. Also, investigate the flat conversion allowance to see if you can claim the VAT back after completing the conversion.
Do full research into the different tax implications and potential savings before going into the auction.
Following these simple tips will make sure you are getting the most out of property auctions and lead you to a successful bid without any complications.