Property Auctions. A Consumer Guide

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1 Chartered Surveyors Auction Booklet /09/ :51 Page 1 Property Auctions A Consumer Guide 1

2 Property Auctions A Consumer Guide Property Auctions are a useful way of buying and selling property and are often popular with buyers and sellers - whether theyʼre owners, occupiers, developers, financial institutions, receivers or investors - given the speed at which the process can take place. The Society of Chartered Surveyors Ireland, which is the largest professional body for property and construction professionals in Ireland, in conjunction with RICS has produced this consumer guide on auctions to explain the auction process from both a buyerʼs and sellerʼs point of view. Members of the Society of Chartered Surveyors Ireland are regulated by a strict code of conduct which is enforced by the Society in conjunction with RICS, the global professional body for Chartered Surveyors with over 100,000 members worldwide. Buying at Auction There are a number of advantages to buying a property at auction which include: Certainty, control and transparency as a buyer, you are in control, deciding when to bid and how high or low you wish to go. A purchaser is able to buy the property at a price that was achieved competitively against other bidders in a transparent process, and if your bid is successful, then the property is yours on completion. The vendor cannot withdraw. It is possible to buy properties quickly. If you are well organised, properly advised and have the required financial resources, contracts are signed on the auction day, and the sale can close within a matter of a few weeks following the auction. You may find properties are on offer with attractive low guide prices, although the eventual sale price will be determined by the level of competition in the room. 2

3 Before the auction what to do 1. Get the Brochure and property details 3. Auctioneersʼ Procedures As a potential buyer, your first step is to get a copy of the property brochure from the auctioneer or visit their website. This contains the details of the property or properties to be auctioned. Always deal with the auctioneer direct this way you can be sure you have the most accurate and up-to-date information. The auctioneer will usually publish the Advised Market Value (AMV) or in some instances a disclosed reserve price this is the minimum price that the vendor will accept for the property. It is also important to view the property and the auctioneer will advise you of the viewing times. 2. Obtain the legal pack (Contract) From the sellerʼs solicitor you will need the legal pack, which contains the contract and other documents such as title information, maps and other particulars. It will also contain any addendums, which tell you about any additions or amendments to the brochure that have come up and might affect the sale of the property. Usually you will have your solicitor request the contract from the sellerʼs solicitor. Once you have decided that youʼre interested and intend to bid, tell the auctioneer that you are interested in the property and keep in regular contact. You need to find out what the auctioneerʼs procedures are for the following: Proxy, internet or telephone bidding (if you or your solicitor or agent canʼt attend the auction) Signing the contract Paying the deposit VAT in certain circumstances VAT is payable on the purchase price. 4. Arranging Finance It is important that finance is arranged prior to the auction. The auctioneer will require a deposit and once the hammer falls you must complete the sale. To arrange a mortgage, the financial institution will require you to complete a mortgage application form. This form will require your personal and financial details and information on the property you wish to buy. When submitting your application you will also be asked to provide various information which will normally include a salary certificate (completed by your employer/s), a recent P60, 3 recent payslips, 6 3

4 months current account statements, a statement of existing borrowings, statement of personal savings, valuation fee (if necessary) and photo id (copy of driving licence or passport). 5. Valuation of the Property After receiving all your information the financial institution will then send out a valuer to inspect your chosen property and to prepare a valuation report. The valuation report is sent to the institution and once they are satisfied, they will issue written loan approval. 6. Arranging Life Assurance It is normally a condition of your loan approval that you obtain life assurance up to the amount and for the term of the loan that you intend to borrow. This is a very prudent measure as if you pass away the loan you have obtained will be paid off in full by the life assurance company leaving it unencumbered for your beneficiaries. There are many life assurance providers in the market place. The Society of Chartered Surveyors Ireland produces an annual House Rebuilding Guide, which contains a straight forward calculator to enable you to determine the appropriate level of insurance you require in respect of house rebuilding costs. The guide is free of charge and is available at Some properties, which are part of private managed developments, have block policies in place for building insurance (not contents) which is payable out of the annual managed service charges. 8. Arranging a Building Survey A Chartered Building Surveyor will be qualified to carry out a building inspection on your behalf. It is recommended to have a building survey carried out before purchase to identify any major or minor faults with the property. A list of Chartered Building Surveyors is available at 7. Arranging Property Insurance It will also be a condition of your mortgage that you hold an adequate level of building insurance prior to taking out your mortgage. This is an important form of protection, which will cover you against most forms of damage to your property. 4

5 The Auction Day Now that you have had the property surveyed, have obtained loan approval and your solicitor has satisfied his/herself in relation to the title and advised you of the conditions of the sale of the property you wish to buy, it is time to attend the auction. Always make sure you know where the auction rooms are and leave plenty of time to find parking. Many prospective bidders decide to bring their solicitor or auctioneer to represent them at auction. This can actually benefit you especially if a property is withdrawn as the reserve price has not been reached and if there is after-auction negotiations. Your Chartered Surveyor/Auctioneer will be able to negotiate on your behalf afterwards. Some tips for Auction day Arrive early and ensure that you have a good place at auction room Set your maximum bid limit Ensure that the auctioneer can see you and your involvement in the bidding process Do not be pressurized into making bids that you are not comfortable with or cannot afford Take the advice of your Chartered Surveyor/Auctioneer or solicitor (if they are in attendance with you). ʻOn The Marketʼ Once a property is declared ʻon the marketʼ, it will be sold if there are no higher bids. When the lot is sold Before the hammer goes down, the auctioneer points to the highest bidder and states the final amount bid. Once the hammer falls, there is a binding contract, which is subject to the conditions of sale. If youʼre the buyer, you will be asked to sign the contracts and pay a non-refundable deposit. If the lot is unsold If a lot doesnʼt reach its reserve price, the auctioneer will say that it has not been sold (withdrawn) and doesnʼt bring down the hammer. If youʼre the highest bidder and the property is withdrawn, then there may be an opportunity to negotiate afterwards. 5

6 Selling at auction The advantages of selling at auction are: Certainty - a binding contract is signed by both the purchaser and the vendor immediately after the auction The successful bidder is legally obliged to complete the sale once the gavel falls Good marketing exposure most auction properties are advertised and in national & local press or online Good sale price with a set guide price, your property should be able to achieve the best possible market price Speed the sale is relatively quick Before the auction 1. Approach a Chartered Surveyor/Auctioneer If you want to sell a property at auction, first ask the Chartered Surveyor/Auctioneerʼs advice about its saleability, and what they would recommend as the Advised Market Value (AMV) and discuss the likely reserve price. Once you have checked the date and venue of the proposed auction, ask the Chartered Surveyor/ Auctioneer for details of the terms of appointment. You need to agree these before the Chartered Surveyor/Auctioneer does anything. Chartered Surveyors/Auctioneers have to follow a number of statutory regulations, including the Auctioneers & House Agents Acts. Society of Chartered Surveyors Ireland members are also obliged to comply with the rules of conduct of the Society. You will need to discuss the following with your Chartered Surveyor/Auctioneer Their commission if the property sells at auction, or if itʼs withdrawn or sold before the auction, or sold after the auction Putting up sale boards at the property Advertising including costs Inspections by potential buyers Proxy, internet and telephone bidding Identifying the successful bidder, getting the deposit and signing the contracts Dealing with post-auction negotiations. 2. Instruct your solicitor You will also need to instruct your solicitor to prepare the conditions of sale Act on your behalf in the auction room, including signing the contract 6

7 3. Prepare Auction particulars The next step is preparing the auction particulars. The particulars must be factual and accurate. You must ensure that you have revealed anything that could affect the sale of the property. While the auction properties are being advertised, the Chartered Surveyor/ Auctioneer should tell you about the level of interest in your property and let you know if you get any prior offers, unless their terms of appointment state otherwise. 4. Building Energy Rating Certificate From 1 st January 2009, a BER certificate became compulsory for all qualifyinghomes being offered for sale. Sellers will need to arrange a BER assessment. A list of assessors can be found on the Sustainable Energy Authority of Ireland website Auction day If the lot is sold Even though youʼll probably be at the auction, when the hammer comes down it signifies a binding contract. At this point the contracts are signed by the purchaser and vendor and nonrefundable deposit is paid. If the lot is unsold If the lot doesnʼt reach your reserve price, you need to know what the Auctioneerʼs procedure is for dealing with properties withdrawn at auction Conclusion Auctions are a very efficient and transparent method of selling property. Properties are well advertised, generally have clear title with no encumbrances, buyers have finance in place and all surveys carried out in advance of the auction. placed to advise you on the best method of disposal of your property. For further information and a list of Chartered Surveyors/Auctioneers visit Whilst not all properties are suitable for auction, your local Chartered Surveyor/ Auctioneer is best Please Note: This is intended to be a general consumer guide outlining the general procedure for buying and selling at auction. You should note that local market conditions can vary and your local Chartered Surveyor/Auctioneer is best placed to advise. 7

8 Dating back to 1895, the Society of Chartered Surveyors Ireland is the independent professional body for Chartered Surveyors working and practicing in Ireland. Working in partnership with RICS, the pre-eminent Chartered professional body for the construction, land and property sectors around the world, the Society and RICS act in the public interest: setting and maintaining the highest standards of competence and integrity among the profession; and providing impartial, authoritative advice on key issues for business, society and governments worldwide. Society of Chartered Surveyors Ireland 38 Merrion Square, Dublin 2, Ireland Tel: (0) info@scsi.ie Advancing standards in construction, land and property, the Chartered Surveyor professional qualification is the world s leading qualification when it comes to professional standards. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining the Chartered Surveyor qualification is the recognised mark of property professionalism. Members of the profession are typically employed in the construction, land and property markets through private practice, in central and local government, in state agencies, in academic institutions, in business organisations and in non-governmental organisations. Members services are diverse and can include offering strategic advice on the economics, valuation, law, technology, finance and management in all aspects of the construction, land and property industry. All aspects of the profession, from education through to qualification and the continuing maintenance of the highest professional standards are regulated and overseen through the partnership of the Society of Chartered Surveyors Ireland and RICS, in the public interest. This valuable partnership with RICS enables access to a worldwide network of research, experience and advice. 8