The latest figures show that property auctions are still a popular way of selling homes and business premises, in spite of all the difficulties posed by the coronavirus pandemic. Around 15,000 houses were sold through this method in 2020, according to the website Home Selling Expert. This figure accounts around 2.2% of the market, a higher percentage than the year before, and doesn’t even include any commercial sales.

Maunder Taylor specialise in commercial property investment in London and Hertfordshire. Here we examine some of the advantages and disadvantages of buying at auction, provide some tips on how to approach it and how we can offer comparatively risk-free alternative methods of getting on to the property investment ladder.

The Advantages of Auctions

It’s Quick – Sales of commercial and residential properties can be completed much more quickly at auction than during a conventional sale. After the auction’s bidding process has concluded, you usually have 28 days to pay the outstanding amount and you can sign most of the key documents straight away. Contrast this with the length of time you could have to wait to complete on a home purchase, particularly if there are several linked sales involved; if one sale falls through, then the whole chain may collapse.

You Could Find a Bargain – Some vendors may be desperate to sell, because of financial difficulties or other personal reasons. The property itself could be in a poor state of repair (which means it could be purchased as a renovation project) or if could be the subject of a bank or mortgage repossession, which should also lower the price.

The Disadvantages of Auctions

The Hidden Costs – Even if you find what you believe to be a bargain, you may still need to factor in building and materials costs if renovation work needs to be carried out. This will apply even if you carry out some of the work yourself.

If your finances aren’t in order before you start bidding, you could risk losing your initial deposit. Private treaty vendors and the HMRC both treat the fall of the hammer as ‘deal done.’

The Risk of Getting Carried Away – It’s easy to get caught up in a bidding war if you’ve set your sights on one property in particular, and so has someone else. This can drive the price up to beyond what you can really afford. If you have a financial limit, you should always stick to it.

The Different Process – It can be very easy to fall into a number of traps when it comes to buying anything at auction, which can catch out those who are unfamiliar with the process.

For instance, what looks great in the auction catalogue might be rather different in real life. Photographs of ‘dream homes’ won’t give much of a clue to the surrounding neighbourhood, or any traffic or noise issues. If you invest in any type of commercial property, then you may not be able to change its use or modify it; you will often be restricted by any planning permissions which are already in place.

There’s also the etiquette and process of the auction itself, which can catch out the first-time investor. Do you know how and when to bid, for instance?

You Don’t Know the Reasons for the Sale – As we pointed out in our previous blog, there are many reasons why properties end up at auction; unexpected liabilities or project-cost escalation, failing rent payments, unplanned delays with permissions and licences. You could be liable for some or all of these if you purchase the property.

What You Should Do

If you decide you would like to buy a property at auction, then there are a number of key steps you should take.

Carry Out Plenty of Research – Try to find out exactly why the property has come on the market. If you are able, visit the home or business beforehand and preferably more than once; what looks idyllic during the afternoon can look very different at night or during rush hour.

Use a Chartered Surveyor – They will give you an expert, unbiased opinion of the state of the property, including any serious structural issues which will need to be put right. You can do this before you commit your cash.

Ask For All the Details – The auction catalogue should contain some of these, but there is other material which you are entitled to ask for. Ask the auctioneers if they have a full legal pack; this may contain information about legal searches and any hidden covenants which apply to the property. Keep in contact with the auctioneers in the month between the catalogue being issued and the auction itself, as the conditions of sale can be altered or amended at the last minute. Sometimes properties featured in the catalogue can be withdrawn from sale or sold before the date of the auction.

Commercial Property Investment in London from Maunder Taylor

If you want to avoid many of the risks which can be associated with purchasing homes or commercial premises at auction, then there is another way – come to Maunder Taylor. We have a growing portfolio of commercial properties, which typically offer a yield of 7-8% per annum.

We can put you in the picture about any outstanding planning permissions and legal issues beforehand and you can spread the risk by opting for shared rather than direct investment. Our property management service means we can also take over any day-to-day running as well. For more information about our commercial property investment department, follow this link.

We also operate an estate agency, specialising in homes in the Totteridge and Whetstone areas, if you would prefer to buy a home in a more conventional manner. To see our latest residential properties for sale, click here.