Property auctions provide the perfect opportunity for investors, whether you’re looking to add to your portfolio or release some capital.
As a buyer, you can be confident that the sellers are fully committed, that you can’t be gazumped and completion will take place within a fixed time frame of just a few weeks. And as a seller you know you can set your reserve price to ensure the property doesn’t sell for less than you need to achieve and leave the rest to the auctioneer who will organise enquiries and viewings.
Plus, at SDL Property Auctions, as a buyer, you will have the pick of the properties around the country and as a seller, you know your property will be marketed to a huge network of committed buyers.
To help you get the best out of property auctions, whether you are buying or selling, here are my top tips:
If you’re adding to a rental portfolio, look for tenanted properties that allow you to hit the ground running. You’ll skip the void period and have a guaranteed income as soon as the purchase completes, eliminating the task of finding a new tenant. Similarly, properties which have been let recently can be a good investment as they should be ready to rent legally. You will want to carry out your own checks for your own peace of mind, too, but this will be much quicker than starting from scratch.
If you’re selling, consider keeping your tenant in situ, as this will increase your property’s appeal for other landlords. If you have a problem tenant in one of your properties, an auction sale could save you the time, money and hassle of trying to resolve the issue. Don’t feel guilty about passing the problem on; you will be required to disclose an ongoing dispute so the new owner will be fully aware – and sometimes a new landlord can break the cycle. There are hundreds of buyers looking for tenanted properties each month and they are unlikely to be deterred by a problem tenant.
Do your research
When searching for properties to add to your portfolio, if possible try to view them in person. Auction viewings are short so take a checklist. If you wish your tradesperson to see the property, ask them to book a separate appointment as viewings are currently for one household at a time. Another option is to share the link to the video tour, so they can take a good look and give you an idea of refurbishment costs before you commit yourself. Having a rough idea of costs before the auction allows you to plan your budget and set yourself a bidding limit.
When buying, if you wish to extend the property or make any significant changes, make sure you check if planning permission is in place. If it’s not, don’t make any assumptions; it’s always safest to make your own enquiries with the local authority.
If a property you are selling is ripe for extension or conversion, having planning permission in place can make it more attractive to buyers and you will most likely recoup the costs through a higher final sale price. For properties which have already been extended, you’ll need all the documentation relating to planning permission, or be able to prove it was a permitted development, as this will be required for the legal pack.
The importance of the legal pack
The legal pack ensures buyers know exactly what they are committing to when they bid. When considering a property for purchase, check this carefully and ask a solicitor or conveyancer with experience of auctions to check it for you, too. Look for any special conditions of sale; examples include extended completion times, additional fees and the tenancy schedule, including details of arrears where they apply.
If you are buying to let, check for any leasehold or occupancy restrictions. Check the Energy Performance Certificate, too, as a property must have an E rating or higher to be let legally. If it is lower than this, the EPC will tell you if it can be improved, how and estimated costs.
When selling a property, work with a solicitor to create the legal pack. My top tip for sellers is to choose a company wisely as not all conveyancing specialists are familiar with auctions, and the different auction types now available. Your solicitors will help you compile the necessary documentation such as the property information form, fittings and contents form, current tenancy agreement if the property is let plus details of any arrears if applicable.
We have trusted and experienced legal partners at SDL Property Auctions that provide legal packs offering the compliance you need, along with a sensible price for the legal pack. Most auction companies can recommend someone to you who they trust and can meet the tight timescales needed.
Get in first – or last
Once you’ve found your perfect property, if you’re keen to get moving consider making a pre-auction offer. Some sellers will agree to a sale under auction conditions prior to the auction day. If there has been a lot of interest in the property, the owner may wish to see how the competitive bidding in the auction develops but if you don’t ask, you don’t get.
Not every property will sell in an auction, so it’s always worth checking out the unsold lots as sellers will be highly motivated to sell and open to offers. Some sellers choose to disclose the reserve price post-auction so you know how much you need to offer. Others choose not to, but an available price will usually be given.
Plan your finances
In an auction, everyone benefits from the fixed timescale. As a seller, you have the reassurance of knowing you will receive your money within 28 days of the auction, freeing up your capital to plan your next investment. If you need the money faster – maybe you have seen another property you wish to bid on – you can arrange auction finance through a specialist firm or broker to bridge any gaps.
The beauty of auctions is that everyone wins. And savvy investors know how to use them to their best advantage to maximise the property portfolios.
*Andrew Parker is the managing director and auctioneer at SDL Property Auctions.