Rise in failed deals prompts more to buy homes differently
Think buying a house and you think estate agents. But increasingly people in the South-West are turning to auctions to buy a home or land because they want the certainty a deal will go through.
The number of “fall-throughs” – the term used for when the house buying process falls apart for after a sale has been agreed – has increased by 12% since 2013. Combined with the popularity of TV shows such as the BBC’s Homes under the Hammer, it means more house buyers and sellers are going to auctions in a bid for certainty.
Estate agents and country living experts at Luscombe Maye, which holds auctions through the year, have seen the rise first hand. Its next auction is on Thursday, 12th March 2015 at The Smithaleigh Hotel in Plymouth.
Senior Partner Stuart Hext is the man with the gavel. He said: “It can be frustrating for people to find their dream home only to lose it after the ‘sale agreed’ sign has gone up. It can be for so many different reasons - from financing issues to just a change of heart on
behalf of a buyer or seller. It means you are back to square one and often money has been spent in terms of surveys, searches and solicitors. Auctions provide certainty – you have to buy or sell on the day and it is binding.”
Auction Finance - a lender in the property auction industry - recently revealed an increase in the number of sales it financially supported compared to the same period in 2013. Nationally the rise was 135% but just in the South-West the increase in homes sold at auction rose by 266%.
The Essential Information Group - the property auctions aggregator - supports this. Last September (2014) the number of lots sold in one month was the highest number recorded since 2011, it says.
Selling by auction is a more certain way of selling. If the property reaches its reserve in the auction room then the buyer has to pay a 10% deposit and sign a contract constituting an exchange of contracts with completion usually 28 days later.
Said Stuart: “Another big advantage of the auction process is that it is very transparent, buyers like it because they can see who is actually attending the auction room, who is bidding against them and knowing that they are not overpaying if their bid is just a little over the under-bidder before them.”
Now Luscombe Maye has created a guide on auctions for those thinking of joining the trend.
Said Stuart: “It can be daunting at first but by following simple rules it can not only be productive but also very enjoyable.”
Luscombe Maye’s Auction Do’s and Don’ts:
Dos
Do your research
Look on estate agent’s websites, in property papers and magazines for the auction properties on the market, websites like Rightmove.co.uk and ukauctionlist.com for starting points.
Do go to other auctions so you know what to expect
Around 30 lots can be sold in an hour, so it is a quick process. If you haven’t bid at an auction before it is a good chance to see what happens to prepare yourself. Before you do, make sure you have your finances in order. You are required to pay a 10% deposit of the purchase price on the day, you should have access to the remainder within 28 days.
Do read the Legal Pack
Ask your solicitor to look over it too.
If there are planning permissions or tenancy agreements, for example, you will find them in here as well as deeds and energy performance certificates. Once the hammer falls, that property is yours so you need to know what you are getting into.
Do check if additional documents are available
They are sometimes produced on the day of the auction, so make sure you check these prior to bidding.
Do line up an insurer
If you are successful with purchasing a house at auction, it is instantly yours so you will need to get it insured.
Don’ts
Don’t go to the auction without viewing a few properties first
You might have a particular one in mind but if there is other competition for it then it might be sold higher than your budget allows.
Also it will give you a basis of comparison to assess whether or not the price you are paying for the property you are interested in is too high/low or about right.
Don’t panic
The auction can move fast and the property could be yours within minutes, but it is important that you stick to your budget.
Don’t forget when the hammer drops a successful bid is legally binding
It is serious business, so if you can’t produce the deposit that day then buying a property at auction is not for you.
Don’t go to the auction without a mortgage agreement
You will be in a much stronger position of the mortgage has been agreed in full and not just in principal.
Don’t miss out because you can’t attend the auction
With written consent, you can arrange for somebody else to bid on your behalf or you can bid over the phone and also bid by proxy.
For further information on Luscombe Maye auctions, additional advice from Stuart Hext as well as a guide on Auction Etiquette, visit: www.luscombemaye.com
