Buying and selling properties through auction has always been a staple of the real estate market. And to this day, it remains one of the best ways to purchase properties at bargain prices. Unfortunately, numerous misconceptions around properties that go up for auction also exist, some of which are entirely unfounded and can be easily dispelled.
“Only properties that have been repossessed by the bank go on auction.”
Voluntary auctions are events where the seller puts their property on auction themselves in the hopes of increasing the selling price when prospective buyers are pitted against one another. These auctions aim to benefit the seller and offer buyers a more exclusive, hands-on arena in which to bid for the property they want.
Often, the market for a specific property is so exclusive, that listing it publicly will simply be a waste of time. In such cases, voluntary auctions provide sellers with a quicker turnaround time on the sale when only parties who have already shown interest in similar properties are invited to the auction.
“Properties on auction are usually falling apart and require extensive maintenance.”
With voluntary auctions, the state of the property rarely needs scrutinising, as the demand for the property is what brought the auction about. With bank and sheriff auctions, though, where homeowners have fallen in arrears with their bond repayments, or properties have been repossessed, the current state of the property may be of concern.
However, even while abandoned and derelict properties do go on auction regularly, most of the properties sold on auctions are there simply because of the homeowner’s financial situation, and not the property’s unsellable structural state.
“Your bid is blind and you never know what you’re really getting yourself into.”
A big concern for many buyers is that bids are final and cannot be reneged upon. That doesn’t have to mean you buy something you’ll regret, though. With property auctions, potential buyers are still able to request viewings of the properties on auction beforehand, as with regular properties on the market, so they do not enter the auction blindly.
“As a seller, you have to take what you get when the final bid comes in.”
Due to the discounted prices of properties sold on sheriff auctions (often going for less than 50% of the property’s value), sellers may be concerned that their property will be sold for less than they would have been able to get with a regular marketing approach, and that they will be forced to accept whatever bids they get on the day. But this is not the case. Auctions usually come with a ‘subject to confirmation’ clause, which allows the seller to accept or reject the final bidding offer. Sellers are also guided through the process by auction brokers who will advise them on realistic prices and help them create a competitive platform that will benefit them.
“Only people with enough cash on hand can partake in auctions.”
For buyers, the notion that they must have the money on hand is also one that needs to be dispelled. As with regular property purchases, financing can be used to purchase many properties on auction. The only catch is that the financing needs to be approved before you place your first bid to avoid placing a winning bid and not being able to commit to it. That said, there are auctions that demand payment immediately after the auction – the terms of such an auction will be disclosed beforehand, however.
Auctions can be hugely beneficial platforms for both buyers and sellers, as long as they are aware of the processes and the potential pitfalls. If you have your eye on a property on auction, or simply want to know more about the benefits that auctions may hold for you, get in touch with us and let us help you navigate your way to the auction floor.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)