The golden rules of buying at auction
Whenever attending an auction it is always advisable to do one key thing above all others. Do your homework. As the motto goes fail to prepare – prepare to fail. Auctions are not dissimilar in that sense. So here are the golden rules of buying at auction. Remember the golden rules of buying at auction are not definitive if you have good rule please let us know!
Research, research, research and a bit more research
Do not be afraid to investigate your chosen asset. It doesn’t matter if you are buying a house at auction a car or precious stones. Research the asset, make sure your numbers stack up. Make sure you carry out a dry run. Go to the auction venues and ask the professionals anything. The vast majority of auction houses are ready and willing to answer your enquiries. They will relish the opportunity to explain why the asset is such a wonderful investment. If you are buying a property, go through the full legal pack. A legal pack is an evolving piece of information and it is being continuously updated until the auction date.
Know the Lingo
Understand the terminology being used at the auction house including, what is the guide price, the reserve price and sale price.
Check your numbers
Go over the numbers, understand the returns which an asset can generate. If it’s a property look at the rental yield and compare them to neighbouring properties. There is a wealth of information available for first-time property investors including price comparison sites like Zoopla and Rightmove and the governments own Land Registry. If you are looking for a classic car, speak with professionals in the car industry to get their thoughts. When bidding, you should give yourself a firm final offer that you will go to and reduce it by 5%-10%, so should you feel you need to outbid a competitor you will have an additional 10% headroom and if you can get it cheaper all the better.
Get your finance
Speak with a commercial finance broker so they can arrange the finance you need. You don’t want to go to an auction bid on a property exchange on the property only to realise nobody wants to lend you the funds you need to complete within 28 days. The same is true for art, get your finances together speak with specialists who can look into the provenance of a piece of art and arrange a loan for it.
When you arrive
Make sure you arrive in good time, make yourself familiar with the setting. There will be lots of people milling around, but remember to register! Take two forms of ID, if you are unsure of what ID you need to take on the day, contact the auction house in advance. Have to hand you bank details. If you are successful on the day, you will need to pay a 10% deposit of the winning bid and the auction house fees. Additionally, have your solicitors details to hand ready for the exchange.
Bought before auction
Don’t be surprised to see assets being pulled from the auction. If it is listed, it can be bought beforehand. If you want to bid for a property, car, artwork and you are prepared to go to the sellers asking price, it might be worth your while to make an offer before the day.
How can we help you?
We work closely with a number of auction houses and alternative finance lenders and are able to get attractive lending rates for sought after assets at an auction. Contact a member of the Azurian team to learn more about purchasing at auction.
If you are looking to buy a property at auction, take a look at our auction finance calculator to get an understanding of the costs involved.