A question I am sometimes asked is if I go to an auction to buy a property, how do I bid?
The first starting point before you do anything is to sort out your finance, sort out your survey and sort out the legal side, that is a given. You need to decide the maximum amount you are prepared to bid. You need to do your research, research values, you need to know how much the properties worth, you need to take into account its condition, you need to take into account what you are going to do with the property when you have bought it. All of that is going to take work.
A great resource we can all use if it’s a residential property is going to be Rightmove sold prices but you are going to need to take professional advice from a valuer or from estate agents, but you need to know what the maximum price is you can afford to pay because there is going to be a price beyond which it makes no sense at all to buy that property.
How are you actually going to bid in practice? You can go to the auction itself, you will have to register, there will be a registration desk as you go in, the auctioneer will want to know who you are, they will want your details. They will want to know crucially that if you are the successful bidder then you can actually pay the deposit.
You will be required to pay a deposit, that could be 10% of the purchase price, and they will want to know how you are going to pay that.
In the old days they would want you to produce a bankers draft, in this day and age they may be a little bit more flexible about it, but you will need to check with the auctioneer before you go how they expect you to make payment, because you will need to have that money if you are successful.
There is no point bidding if you can’t then pay your 10%, you won’t get the property. So that is something that you need to do.
At the auction itself sometimes it is a good old fashioned put your hands up if you are bidding. A lot of people get worried about if they are scratching their nose, they might end up buying something they don’t want. Auctioneers are used to that kind of thing, it is not really going to happen. You might want to put your hand up, often nowadays they will give you a paddle that has a number on it and you hold your paddle up when you are bidding.
Going to the room is only one way of doing it and in this day and age you can have telephone bidding. With telephone bidding you would tell the auctioneer that you want to bid by telephone. When your lot comes up the auctioneer’s clerk or assistant will call you and they will take your bids over the phone.
If you are actually at an auction, watching this can be slightly frustrating because the biddings going on around the room and the clerks going back and the auctioneers waiting and waiting for the clerk to get their client to come up with a figure and it invariably seems to be the case that the person on the phone thinks they’ve got all day in thinking about it, which leaves the room getting rather inpatient.
Because we are now into the 21st century a lot of auctioneers show their auctions live on stream. If you can get on live on the internet you can bid on the internet which is ok if the technology works but if your Wi-Fi cuts out at the wrong moment and you don’t get the property that can be frustrating.
Or you can have a proxy bid which is where you tell the auctioneer the maximum amount that you are prepared to bid, and they will bid for you.
You will sometimes see when you are at an auction that the auctioneer will say that they have proxy bids on this property, and they will be taking bids even though no one is actually bidding. That is because they are basically bidding in their head for a potential buyer. When they get to the maximum amount the buyer is prepared to pay and they haven’t bought the property at that stage then they have to drop out. You could be bidding against someone who is being represented by the auctioneer.
What is the best way? In my opinion I would go to the room and I would bid myself. I would get to see what is happening. I think it is a great way to educate yourself in property, to see what the market is like, to see what is being bid on, to see what is not selling.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
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