AUCTION PROCESS
WHAT IS INVOLVED IN SETTING UP AN AUCTION
If you want to auction a property you can contact the Auctioneer via telephone, e-mail or make a written application. If the property is suitable for auction you will need to pay the Lot Inspection Fee and you will be sent an Agency Appointment Form by electronic mail to complete, sign and return to Equity and Law.
Property Inspection Fee
In order to make effective use of our time, cut out time wasters and to keep our commission charges to a minimum, Equity & Law charge a fee to cover the inspection of each lot. This fee can be negotiated for multiple listings. Institutional and corporate rates are available upon request.
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Fees for Property Inspection
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V.A.T
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TOTAL |
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Inspection and Auction set up fee
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£ 260.00
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Researcher
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£ 65.00
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Photography
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£ 60.00
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Listing on website
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£ 20.00
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Preparation of Auction Listing and Administration
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£ 75.00
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Total
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£ 480.00
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£ 84.00
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£ 564.00
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After your property has been inspected and researched thoroughly the Auctioneer will contact you to discuss how best to run the auction. This will include deciding on whether your property can be included within an existing auction within your area or the need to set up a single property auction. The rates are the same for this service but there may be a small charge for the venue. (No charge if auction is held on the premises).
The Auctioneer will also discuss the following points with you:
· Date, time and venue for the auction (8 to 13 weeks from start to finish)
· ‘Reserve Price’ discussed and agreed in writing
· ‘Price Guide’ discussed
· Target date for completion
· Auction strategy
· Valuation of Lot(s)
· Brochure layout & property particulars
· Photography
There is no additional charge for your property being entered into the Auction Catalogue and every property will be given at least one full page.
You will then need to appoint a Solicitor in order for them to prepare the contract and the general conditions for sale. Using this information, a Brochure is prepared and sent out to interested parties.
Equity & Law will upload details of the property to www.equityandlaw.co.uk and our associated websites and begin to market the property by distributing details to new enquiries and our existing database of clients, who are waiting for new properties to come on for auction.
The auction strategy extends to assigning various responsibilities to key members of staff and the auction venue is reserved. Equity and Law will continue to monitor results and progress and will maintain contact with all interested parties up to the day of the auction.
Facilities will be prepared for Telephone and Proxy Bids. The Auctioneer will personally hold details of all Proxy Bids confidentially and securely until they are revealed in the Auction.
There will be a consultation with the Management Team prior to the Auction, during which time any relevant matters can be discussed with the Auctioneer dealing with the Lot in question.
On the day of the Auction staff will be available for manning the telephone and arranging the general layout of the building.
The general conditions, additional general conditions, special conditions, amendments, other conditions and any other documents will be available for viewing at the Auction.
At the due time, unless otherwise directed by the Auctioneer, the Auction will start. When the property is sold the winning bidder must come forward and sign the Contract for the purchase of that Lot and pay the deposit as stipulated and the agreed date for completion must be adhered to.
The Auctioneer will notify The Management Team and/or Vendor of the outcome of the auction as soon as possible after the auction. Equity and Law will then publish the results of the auction on its website.
All documents will be forwarded to the Vendors Solicitor, after the deduction of any fees due on the sale.
If the property fails to sell at auction Equity & Law will continue to promote the sale of the property and will if necessary enter the property into the next available auction. No additional fees will be charged for this service unless additional advertising is requested and our commission on the sale will still be payable. Equity & Law work on a 'No Sale No Commission' basis. Please note that if you decide to withdraw prior to the auction there is no penalty charge payable for doing so.
Auctions
The Basics
Auctions tend to fall into four categories according to their size and a summary of these is shown below:
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No of lots
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Likely audience
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Likely venue
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Large composite
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100+
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300+
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Hotel conference centre, theatre
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Medium composite
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5-100
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200-500
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Hotel/conference centre
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Smaller composite
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2-5
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10-100
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Hotel, church hall, pub, restaurant
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Single lot
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1
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10-75
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Hotel, pub, restaurant, on the premises
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Types of property
A full range of property types is available through the auction rooms, however, auctions have tended to concentrate on certain types of properties, which are specialised or that generally do not appeal to the traditional owner occupation market. These include:
· Unusual or specialised property or businesses
· Houses that are unique because of their age or history
· Property where a lot of interest is expected
· Unusual buildings, such as a conversion or potential conversion that appeal to people looking for something unique.
· Property with potential or actual development potential – e.g. development land, conversion or redevelopment.
· Property that wont sell
The auction has often been the last resort for properties that have not been able to sell in the market by any other means. This could be for of a number of reasons such as the property is:
· Derelict or is suffering from major disrepair
· Subject to Legal Action
· Sold with unsatisfactory legal title.
· Sold with major fencing, paving, drainage or other responsibilities.
· Sold subject to easements, covenant, access or other restrictions, which prevent its’ satisfactory use.
Repossessions
Properties that have been repossessed by the lenders often find their way to the auction rooms.
Investment properties
Tenanted properties are frequently sold at auction. Particularly ones where there are sitting tenants in place and therefore there is no realistic chance of obtaining vacant possession. In these cases properties tend to be valued in terms of their future value once they become vacant, or in some cases in relation to their rental incomes i.e. their yields.
Portfolio investment
Some property investors will look to dispose of all or part of their portfolio in a single auction. Some entrepreneurial buyers have bought these portfolios and then made a profit by breaking them up and selling the properties individually.
Property details
Equity and Law will print detailed particulars for each property that are similar to those provided by an estate agent. These contain information about the date, time and venue of the auction. These details are also listed in the auction catalogue. The catalogue and the particulars content are both controlled by the Property Misdescriptions Act 1991, as are those that are produced by an estate agent. Their description should give you a pretty good ‘feel’ for the property.
The property details should give sufficient information for bidders to make an initial decision on which property to bid for. Equity & Law auction details give a guide price to the expected sale price.
Conditions of sale
Make sure you and your solicitor thoroughly prepare the conditions of sale. These are the terms on which the successful bidder will buy the property. They regulate not only the bidding, but also any obligations the bidder is under. They give a full and definitive description of the property and describe what happens after the bid is successful.
Types of conditions
There are generally up to 4 types of condition that apply to the sale:
1. General conditions.
2. Additional general conditions.
3. Special conditions.
4. Other conditions.
These conditions should be available in the Auction Catalogue and at the auction.
On the auction day the winning bidder will be required to make a deposit of 10% of the purchase price or a specified minimum sum if their bid is successful and payment of the balance of the purchase price 28 days later.
Timetable
For most auctions we allow a time scale of normally about 3 month, in order to allow for all the preparatory legal work to be prepared and the property marketed to its full potential. It is important to allow bidders as much time as possible to see and carry out their preparations to purchase at the auction. This timescale can be shortened, but by doing this, this will not allow enough time for the buyer to properly prepare.
A useful timetable guide for buyers attending your auction:
The days prior to the Auction:
30 See advertisement and apply for auctioneer’s catalogue
28 Receive catalogue
26 First inspection of property check auctioneer’s particulars
25 Instruct valuation surveyor
23 Read and understand the conditions of sale
20 Receive surveyor’s report
19 Instruct solicitor, visit accountant
17 Second inspection of property, assess quality of tenants
6 Consider a pre-auction purchase
5 Check solicitor’s report on title
3 Decide on a maximum bid
1 Final visit to property prior to the sale
AUCTION DAY
Bid successfully, Exchange contracts or memoranda and pay a 10% deposit (or minimum specified)
Types of bid
The most obvious and common form of bid is the one received directly from the person at the auction. However, there are other ways of bidding; telephone bidding for one, another way is if a buyer doesn’t want to do the bidding themselves, is to employ an agent. An auctioneer, solicitor or other professional experienced in the saleroom could act on a buyer’s behalf. Alternatively they could elect to make a proxy bid by instructing the auctioneers by letter, fax or e-mail to bid up to a specified limit. In both telephone and proxy bids the bidder will still need to ensure that the 10% per cent deposit is covered.
What happens if the lot remains unsold?
The main reason that properties remain unsold is that they have failed to meet their reserve. In these cases the properties are frequently available afterwards by negotiation. This could be an opportunity for interested parties to approach the Auctioneer and negotiate an offer for the Lot. Equity and Law will continue to offer the property for sale until it is sold at another of our auctions or withdrawn from the market by the Vendor.
What happens if the buyer fails to complete?
Be under no illusion. When the gavel falls, the bidder will have entered into a contract to purchase the property. A condition of the contract is that the successful bidder exchanges contracts of memoranda and pays the deposit immediately. If they renege on the contract, the seller can take the deposit and is then entitled to resell the property. They are also allowed to claim any shortfall as a result of a resale at a lower price. The only opportunity for purchasers to extricate themselves from the contract is if the seller has significantly described the property incorrectly. In these circumstances it may be possible for the contract to be cancelled because of a breach of the Unfair Contract Terms Act. This type of a situation is a rarity and that is the reason for ensuring that the proper preparations are made prior to the auction itself.
What is a composite auction?
This is simply, one where different types of property are offered. For example uses such as: residential, commercial investments, shops and factories to name a few.
