Commercial property auctions are growing in popularity once more. Here Prideview Group offers some key advice for those property investors wanting to buy or sell at commercial property auctions.
Advantages Of Buying Commercial Property At Auction?
Investing in commercial properties can be a complicated process, but buying properties at auction can be a more straightforward affair. Commercial property auctions have a quicker transaction time frame than the traditional lengthy process of purchasing a premise. In fact, completion time usually takes place within 28 days, which is helpful if you don’t have the time to wait for months to buy a commercial property in the traditional way. As soon as you raise your hand and the hammer falls, you know the property is yours. You have a comfort and assurances that the buying process won’t fall through because the vendor has changed their mind and increased the price or that you won’t be gazumped. As a buyer at an auction, you essentially determine the price of the property instead of agreeing to a price set by vendors or agents and you are more likely to find a property below its market value. As an investor, you will be able to purchase cost-effective properties and have a profitable return on your investment, especially if the bidding doesn’t get too high.With other bidders fighting for the same property you have an extra assurance that you have a valuable property in mind. Another advantage of buying commercial property at auction is that you will have absolute certainty when the property will be handed over to you, as the completion date is clearly set. Through auctions, you have an honest knowledge of how many people are interested in each property, instead of the uncertainty of the traditional process. Having a professional who knows how to navigate commercial property auctions is essential to help you through the buying process. For a complete assurance and confidence in purchasing the commercial property you need, contact Prideview today and let us help.
How Commercial Property Auctions work
If you’re new to property investment, the chances are you haven’t been to a commercial property auction before. Even if you have bought at residential auction, it can be overwhelming to be in a room amid professional agents and large-scale investors who are all well-versed in the organisation and management of commercial property auctions. And, like many investments, the auction process can often feel risky – not to mention stressful. That doesn’t mean you should bypass them all together. On the contrary, there are many reasons why it can be beneficial to buy at auction. If you do decide to go down the commercial property auction route then our team of seasoned commercial property auction consultants are ready to help. However, to give you a taste of what to expect before you enter the auction world, we have explained the process here so you have greater understanding in advance.
- Pre Auction
This is the time for preparation and research. Firstly you need to find a property you’re interested in. There are many ways you can search for a suitable property, including taking a look at our own portfolio of commercial properties for sale. But when buying commercial property at auction you’ll need to also browse through auction catalogues which feature multiple properties (known as ‘lots’). These are available approximately three weeks before auction, and can be obtained through the auction houses direct, or by subscribing to their mailing list. However there are literally thousands of properties available which makes this process time consuming and often exhausting – especially in such a limited time frame. Next, there’s the paperwork. At this stage you should have a lawyer on board, preferably one with auction experience, who can advise throughout the process. This is the time to make all your enquiries and have any necessary legal checks or surveys done, as well as reading over terms and conditions. You can also obtain legal packs, which you can download or gain from the auction house, containing all the information you and your solicitor will need to know, so that they are able to perform due diligence. Make sure you’re also familiar with all the costs associated with the purchase between you and the auction house, and that all your finances are in order. If you’re successful you’ll need to pay a deposit, usually 10% of the final price, on the day. It’s also worth noting that it’s possible to submit an offer prior to auction. This needs to be in writing to the auctioneer who will then consult with the seller. If your offer is accepted, contracts will be drawn immediately and exchanged. Finally there’s the all-important viewing. This is arranged through the auction house prior to the day. This is where you should be checking that the property meets all your needs.
- Auction Day
Auction day can be both exhilarating and nerve-wracking, which is why preparation is essential. Your first key step is to make sure the property you’re interested in hasn’t been sold prior to the auction. Next, ensure all your information and paperwork, such as mortgage, deposit and any identification is in order to facilitate a successful purchase. You don’t need to be present on the day of the auction – bidding can be done on your behalf by your agent or solicitor. One auction quirk to be aware of is that the guide price can change right up until the day and as the auction proceeds. It is imperative you therefore check the guide prices, and the addendum, for other changes that may have occurred, as this could change your mind about a purchase. The auctioneer will also check that all attendants have this addendum and read out any alterations before it starts.
Then comes the auction. Bids need to be made clearly and will be acknowledged by the auctioneer. Bids will be raised accordingly until the reserve has been met, finishing with the final bid and the infamous “going, going, gone – sold!”. If the reserve is not met, the property will be withdrawn and there is an opportunity to purchase post-auction by placing a private offer with the auctioneer, or by contacting the seller. But it’s critical to know that once the hammer goes down, the property is sold. You are legally and contractually liable to purchase the property, or else you can lose your deposit or be sued.
After the auction contracts are exchanged, you will naturally be required to pay your deposit, with the remainder amount due by the completion date on the contract. This is usually under a month, especially if all due diligence was successfully performed prior to the purchase. We understand that all this can be a lot to take in, which is why it’s not only helpful – but time-saving to employ the services of a professional, dedicated team with industry experience in commercial property auctions, especially in London. If you’re ready to buy a commercial property at auction, get in touch today and our highly experienced team will help make the process easy and stress-free.
Glossary Of Auctions
Attending auctions might seem daunting, especially as there are many unusual and uncommon terms used during the process. Whether you’re looking to attend your first auction, or simply want to be informed, this beginner’s guide will help you. Critical Path These are a number of key tasks that must be taken by the auction on specified days, in order to reach desired goals. Absentee Bid This is a method of bidding for people who can’t or don’t wish to attend an auction. It’s common for an absentee bidder to submit an offer on a propertybefore the auction, with the amount of money they are willing to pay. Agent An agent acts on behalf of an individual or entity, when bidders are absent from the auction. Appraisal A written, sometimes simply oral, statement that is the impartial and independent opinion of the value of a property. This is true to a specific date and may be used by the auction to set a reserve price for the property during the auction. As Is Properties sold “As Is” are at the buyer’s discretion and responsibility. Bidders are encouraged to inspect a property closely, as it will be sold exactly as it is. Auction Plan The plan made in order to have a smooth pre-auction, auction day and post-auction successes on closing properties. Auction With Reserve This type of auction means that the seller or his agent is allowed to accept or decline any and all bids. Auction Without Reserve Also known as absolute auction, in which a property is sold to the highest qualified bidder without any conditions. Bank Letter Of Credit This is a letter from a bank certifying that someone is worthy of a certain level of credit, and it’s often requested by prospective bidders who aren’t paying with currency at the auction. Bid This is the prospective bidder’s offer of a price that they are willing to pay for a property. Bids are usually done in increments established by the auctioneer. Minimum bids can be announced in an auction, and the auctioneer will only accept bids at or above that price. Bid Caller Sometimes also known as the ‘auctioneer.’ The person who calls and recognises bidders during an auction. Bidder Number Prospective bidders registered at an auction are issued an individual number. Bidders will also have a paddle issued with a number, so they can bid on properties. Buyer’s Premium A buyer’s premium is an advertised percentage of the high bid that is added to the bid price. It determines the total amount to be paid for a property. Carrying Charges These are the costs involved in owning a property intended to produce income (by sale or rent) but has not yet achieved any income. This includes insurance, taxes, maintenance, management and other such expenses. Catalogue This is a publication that describes the available properties for sale at an auction. It can include descriptions of the properties, photographs, and terms and conditions of the sale. Conditions of Sale Conditions of sale are commonly announced by the auctioneer before the auction begins. They include legal terms that govern an auction: buyer’s premium, terms, methods of payment, and any other relevant information. Due Diligence This is the process of gathering information about both the condition and the legal status of properties to be sold. Hammer Price The price the highest bidder establishes, which is acknowledged by the auctioneer before dropping the hammer or the gavel. Listing Agreement This is a contract between the auctioneer and the seller, authorising the auctioneer to conduct the auction and setting out the terms of the agreement. It also solidifies the rights and responsibilities of each party. Market Value This is the highest price that a property will bring in an open and competitive market. Both buyer and seller aren’t under compulsion of buying or selling, and both have knowledge of relevant facts. Memorandum This is also known as ‘bidder acknowledgement’ or ‘broker acknowledgement’. The memorandum is signed by the parties who are either on the auction floor or in the contract room. No-Sale Fee This is a charge that has to be paid by the owner of a property offered at a reserve auction in the case of no sale being made at said auction. On-Site Auction An auction can sometimes be conducted on the premises of where the property is located. Participating Broker This is also known as a ‘cooperating broker.’ The term refers to an estate broker who registers a prospective buyer with the auction company, in keeping with the terms and conditions for that particular auction. The broker earns a commission if his prospect is the higher bidder and closes on the property. Preview A property is available, at a specified time and date, to be inspected by prospective buyers. Sealed Bid Confidential bids are submitted to be opened at an agreed date and time. It is not a true auction as it does not allow for the competitive marketplace to react. Tie Bids Although rare, on occasion two or more bidders might bid the same amount at the same time. This must be resolved by the auctioneer. Trustee’s Sale This is a sale at an auction by a trustee. Withdrawal The removal of a property before bid or failure to reach a minimum bidding price. It is also tied to an ‘auction with reserve’.
Ensuring Success At Commercial Property Auctions
Now you are aware of the commercial property auction process and terminology you may feel you have more confidence in the sector and be keen to get started. Before you do, you may want to attend a few auctions without any intention to bid. In this way you can become more used to the environment, understand the procedures better and increase your understanding of the language used. However the safest solution would be to have a professional property consultant represent you, in order to protect your interests and enable you to get the best value for your money and requirements. This is where Prideview Group, with its considerable experience and reputation in the commercial property market, particularly in auctions, can help. Not only have we earned a renowned reputation for our professional insights and expertise, but our long-standing engagement within the industry has allowed us to develop an expansive network of contacts throughout the UK and beyond. We scour the commercial property auction market to find investment opportunities that are a perfect match for your needs. Over the past few decades, we’ve dealt with thousands of auction properties, and know the marketplace inside and out. If you want to know more about how Prideview can help you, contact us on +44 (0)203 113 2142. To keep up to date with all of our latest news you can also follow us on Facebook, Twitter and Instagram.