Buying or selling a property at a public auction has one huge benefit over the normal "private treaty" arrangement - certainty. At the moment the auctioneer brings down their hammer and announces that a property is "sold" to the highest bidder, a legally binding contract is created between the seller and the buyer to transfer ownership at the price agreed in the auction room and on the date specified in the auction particulars. No arguments about price, no gazzumping, no chains to worry about, no last minute changing of minds - the auction deals with all these potential issues at a stroke.
Selling by Auction
The main benefit of selling at auction is that you know precisely how much money you will receive and the exact date you will get it. It is also a public event, so if you need to ensure that the sale is conducted openly, impartially and fairly, then an auction may be the best way to achieve this.
On the minus side, there are potential drawbacks and risks. You need to employ the services of a qualified auctioneer and make a commitment at an early stage to the auction process. In effect, you are entrusting the auctioneer with a sole agency, so you must choose the auctioneer carefully. The auctioneer may expect you to pay for all the auction expenses in addition to the normal commission and this will include the advertising and publicity of the sale, such as the production of the auction catalogue or particulars. Although many auctioneers are also estate agents, the responsibility for conducting a public auction is a specialist job that requires extra skill. Solicitors will need to be instructed to prepare the auction contract and make available information about the property title to potential buyers and their solicitors. You have to agree with the auctioneer a reserve price, below which the property cannot be sold. Finally, when it comes to the day of the sale, everything depends on having some serious bidders in the room who are ready and willing to commit themselves to the deal.
Buying at Auction
You need to do all your homework well in advance of the auction day. Visit the property as many times as you like to satisfy yourself that you know what you are getting. If you need a mortgage, this must be all sorted out with a written offer of a loan in your pocket. You need to ask your solicitor to carry out all the standard legal enquiries beforehand and if you want a survey carried out then this must be done as well. Before you go into the auction room you must have enough cash available in your bank account to pay the deposit (usually 10% of the sale price) before you leave and this will probably need to be in the form of a bankers draft; the detailed requirements are explained in the particulars of sale and if you are in any doubt then you should talk to the auctioneers well before the sale day so that you have time to sort out the details. Don't take any chances, because if you are the successful bidder, you are legally committed to the deal and there is no going back - if you break the contract the seller can sue you for any losses and you will almost certainly lose at least the amount of your deposit and possibly more. Last but not least, you must arrange insurance cover for the property effective from the date of the auction, because you become fully responsible for the property from the auction date, not the completion date. A strong nerve is a definite advantage.
On the plus side, you know that the property is yours. The seller will not back out and you will be able to move in at the appointed date.