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Property Auctions - Cut Out Competition - Howard Gooddie

"I always try to do a deal beforehand because you never know what opposition you are going to come up against at auction. But you should never show your hand in case it does go to auction." - Michael Kirby, Chartered Surveyor.

Negotiating the purchase of a lot before auction is not at all unusual. Before the day of the sale, you may feel confident enough to risk negotiating for the property. Lucky buyers can acquire bargains in this way but they do run the risk of 'disclosing their hand' to the auctioneers and they can be passing the initiative to them.

Whether you take up such an initiative is undoubtedly a gamble. Only you can decide whether it is worthwhile in the light of your desire to buy the lot and to beat the competition that might take place on auction day. On the other hand, by revealing your interest so soon, you can lose what would otherwise be a strong position in your bidding at the auction.

Before you start such negotiations you will no doubt have decided how much you wish to pay for the property. If you are endeavouring to buy before auction, this must be either because you wish to buy the property noticeably cheaper than the amount you are ready to pay on auction day, or because you want the lot so badly that you do not want anybody else to have the opportunity to purchase and 'bid you up' on that day. The decision is entirely yours. You must realize that disclosing your interest and your figure at this time gives the auctioneer and the seller an opportunity to adjust the reserve and take into account the amount which they believe you are prepared to bid.

By bidding before the auction you are likely to remove any opportunity of buying the property any cheaper than your pre-auction bid. But this has to be balanced against the advantages of cutting out the competition. If you decide to bid before the auction, you must be prepared to negotiate quickly and if your bid is successful, to sign a contract and pay your deposit even faster. The auctioneer will require you to exchange contracts before the auction, (and probably by several days in advance). You have an even greater need for speed.

If you have decided to buy before the auction you must be aware that there could be other people who have a similar desire to buy early. If, therefore, you have agreed a pre-auction purchase, you should not then leave your solicitor to exchange contracts or memoranda in the normal course of 'legal' time. You should press him to complete his enquiries at top speed and to exchange contracts or memoranda as a matter of urgency. You will have to provide your 10 per cent deposit at the time the exchange takes place.

Many auctioneers are willing to allow you to leave your deposit with them and to complete and exchange memoranda or contracts in their office. This will speed the passage of the sale but it is not recommended unless your solicitor is satisfied with his enquiries about the title and background to the property. Only those who want a lot so badly that they are prepared to risk irrevocably committing themselves to a purchase before their solicitor is satisfied, should proceed before then.

Having exchanged, if you then decide to 'go back' on the purchase, legal sanctions (including loss of your deposit and other responsibilities to meet damages) will follow. The same sanctions apply if you succeed with a bid on the auction day itself and subsequently withdraw. You must realize that a purchase prior to the auction does not change any of the procedures, responsibilities or actions other than those that relate to attending and bidding at the auction itself.

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