Bidding for success - how you can seal the deal
Donal Buckley gives his 10 top tips for success when buying a property at auction
A sure sign that the housing market is returning to its old ways is the pick-up in auction activity by a number of agents in the peak auction month of May. During the boom, an auction was a common process for disposing of high-end property and also those properties that were most difficult to place a value on.
While Allsop has dominated the auction market for the last three years, recently other auction houses have been getting in on the action. Earlier this month, Ganly Walters brought 14 properties to auction and sold one beforehand, 11 under the hammer and the remainder were acquired soon after the sales session had concluded. It suggests that there's a bigger appetite out there for this sales process.
Then there's been the sporadic auction sessions of Lisney, formerly the biggest auctioneer of property through the early boom years. Since the start of this year, Lisney has auctioned a trophy home on Elgin Road, in Dublin 4, in February with an AMV of €3.75m and it ended up selling for €4.8m. The following month, a property on Nutley Avenue sold for €2.16m after it was AMVed at €1.8m. The same agents also achieved €2.6m for a property at Eglinton Road, also in Dublin 4, which was guided at €1.8m.
The houses going to auction recently are not just the types that have proven slow to sell by private treaty or properties that the banks or those in debt are anxious to dispose of. Once again, auctions are starting to include family homes in sought-after areas of Dublin.
But the auction process has its own drawbacks, not least, as we saw during the boom years, auctioneers deliberately offering understated AMVs (advised minimum values) in order to fill the auction room.
As auctions once again become more widespread, here's your guide to getting the best from them:
1. Phone a Friend
It's too easy to get carried away on the day, believing that a home is worth more than you budgeted for it. Having a friend or expert (solicitors often fulfil this role) to bid on your behalf can ensure that you don't get carried away. I have been to an auction where one bidder got so carried away that he had to be restrained with his bidding – a kindly auctioneer pointed out that he was bidding against himself and so the auctioneer didn't accept the higher bid.
2. Stick With Your Target Property Type
While it's no harm to sit through the auctioning of other properties to see how the process works, by no means get tempted to engage with a property you're not interested in and haven't checked out properly. I have also been at auctions where a bidder came to buy one property but went away owning a different one that he had never seen.
3. Don't Bid Without A Survey
Do your homework. Make sure not just to have inspected the property well in advance of the auction but to also have got an expert building surveyor to scrutinise it. Most properties have some sort of hidden problems attached. You should be clear what they are before sitting down in an auction room.
4. Be Clear On What Else Is Available
It also helps to look at other similar properties in the same area and to check out the property price register and see what prices are being asked and achieved. Then work out how much you are willing to pay.
5. Bank, Money and Legals – Tick the Boxes
If you need to borrow, make sure that your bank has sent their valuer and given full, written, up-to-date approval to buy the particular property. If necessary, arrange an independent valuation. Visit the auctioneer and ask questions. Also request a copy of the legal pack including maps and conditions of sale and have them checked by your solicitor.
In the case of the Allsop auctions, possible bidders also need to register with the auctioneers in advance in order to ensure they will be admitted.
You will need a 10pc deposit to be paid on the day if you are successful in your bidding, so ensure you have a chequebook at hand and funds in your account. Most auctioneers will not accept cash, credit cards or debit cards. They also need identification such as driving licence or passport as well as a utility bill or bank statement for proof of your address.
6. Gauge the Interest
One way that auctioneers gauge the level of possible buyer interest is by the number of requests for legal packs. Do ask the auctioneer how many legal packs were issued as that may give some indication as to the number of competitors.
7. Know the Process
When the bidding reaches the reserve price (often not disclosed beforehand), the auctioneer will declare that the property is on the market. Unfortunately minimum reserves, or the lowest price an auctioneer will accept, are very rarely disclosed before an auction.
Even in the case of the Allsop Space auctions, they do not disclose the minimum reserve but rather the maximum reserve. In most other cases, auctioneers will publish an advised minimum value or AMV but that is no more than a guide.
Stick to your maximum price limit and prepare yourself for the chance you might not be able to purchase the home.
8. Have Bidding Sense
People tend to arrive early to get a place at the back of the room so they can (a) be seen clearly by the auctioneer, and (b) they can clearly see who is bidding.
Don't bid before you have to. Indeed, it may sometimes be best to allow others to bid away until the auctioneer declares that the property is on the market. Before the auctioneer signals that he has accepted the highest bid, he will point to the highest bidder and state the final amount bid.
Some people worry about dummy bids by a friend of the vendor who is trying to inflate the price. Auctioneers do not condone this. If you believe this might be happening, then hold off bidding until the fraudster stops as they won't bid over the reserve in case they get stuck with a property they don't want.
I recall being at one auction where a buyer bid €300,000 for a large farm that was guiding more than €2m. The auctioneer told the bidder that he shouldn't be insulting him. The bidder replied: "I was only trying to help you get the bidding going."
Once the hammer falls, there is a binding contract, which is subject to the conditions of sale. If you're the buyer, you will be asked to sign the contracts and pay a non-refundable deposit, usually 10pc of the purchase price. It will need to be paid immediately on completion of the auction.
If there are no bids or if the reserve price is not reached, the auctioneer may well withdraw the property and seek to sell it by private treaty.
9. Strategy for A Withdrawn Property
The auctioneer will warn the audience of his plans to withdraw the property and that he will usually negotiate in private with the highest bidder. If you can afford to offer a higher bid and are still interested, then it can be an advantage to be the highest bidder when the property is withdrawn.
If you are not the highest bidder when the property is withdrawn, by all means do approach the auctioneer after the auction and offer a higher bid. Don't be afraid to make it clear that you are interested at a particular price level and leave your contact details, with the price marked clearly, with the auctioneer.
However, the main problem with auctions is the limited timescale for buyers. Usually it may take less than four weeks from the date the property is launched until the date of the auction. It is best to have your funds in place well in advance of even considering buying at auction.
10. Don't Give Up
You may have to attend numerous auction sessions before your bidding proves successful.