Hammering Down the Price - How to Buy Off-Plan Property at Auction
photo credit: Sugar Pond
We all know a lower price to pay is one of the big draws of buying property off-plan, but what if you could get the same type of off-plan development even cheaper - perhaps by as much as around 20 or 30 per cent less?
Buying property by auction has been around for ages. The skill of selling under the hammer has evolved in the UK since the 14th century when regular weekly markets started to be chartered by the monarchy. Today, houses, stately homes, hotels and even whole development projects are up for bidding, but what are the off-plan opportunities and can anyone expect to dive in and get themselves a big bargain by bidding for an off-plan development?
Starting with the basics, the main advantages of property auctions are they are quick and simple, meaning if you have cash and want to spend it quick in an effort to get a fast return, they are a good potential starting point. It is important to remember at most auctions, you will need to have the cash up front - a deposit will probably be required on the day, and you will often have to stump up the rest as little as 30 days after the auction.
In the current UK climate, the rise in property repossessions as a result of the credit squeeze is keeping auction houses very busy. In some auction houses 40 per cent of the properties up for biding are repossessions, compared with a figure of around 20 per cent this time last year.
To find a property auction, all you need do is either call an auctioneers’ firm and ask if they have one coming up, keep your eyes peeled while reading local and national papers, try searching the internet, or call an estate agent and ask if they know of any in the local area. Typical venues include hotels, town halls, civic centres, sports clubs and stadiums.
View, check and refer as normal
Once you register your interest with an auctioneer’s or agent’s office or similar, they will typically send you information about what properties are going to be on sale - often documents or portfolios with pictures, guide prices, information on how to set up a viewing, contracts and data about wiring, plumbing, and so on.
If you are buying off-plan you are likely to get plans of the site, the intended design in detail and history of property ownership, intended construction materials and contractor’s details. As with property that has already been built, you should always view the surrounding area, examine the site carefully, check whether or not it has planning permission from the local authority and get your solicitor to check any contractual details. Essentially do everything you would usually do when buying a conventional off-plan build before you even walk in the door of the auction house.
Off-plan properties at auction at home and abroad
So what kind of off-plan properties exactly can we expect to see out there ready to go under the hammer?
Residential builds are common, perhaps because land acquisition firms have got the planning permission and a builder for the site, but not found anyone willing to take on the build and market it for sale when it’s ready to go. Big projects that require a lot of work, such as factory conversions, are also regular, as are commercial developments like hotels on the look-out for an owner.
Typical examples of sites with planning permission in search of a buyer can be found at propertyauctiozone.com, under searches for site/land. Possible candidates up for bidding soon include a site in Bebington, Cheshire, in the desirable Wirral area. The site extends to around 2945 sq metres and has permission for a residential development of 12 apartments in three two storey units. £400,000 is the guide price here.
Also found on this website is a planned development near Gainsborough, Lincolnshire of two single-storey homes, with a guide price of £150,000. Further north, in Radcliffe, near Manchester, a plot with permission for three self-contained flats will set you back something in the region of £100,000.
Travelling abroad, a development at Cabanas Beach, Portugal, is soon due for completion featuring two or three bedroomed apartments with communal pool and sea views. All are up for auction at direct-auctions.com for a price of around €180,000. Also due to go up for bidding through this auctioneer are two developments at Royal Tavira Beach, Portugal, one due for completion this year, one in 2009. Both are apartments and, one at €163,000 the other at €323,000.
Yet to go fully live is specialist off-plan auction site www.offplanpropertyauction.com,
which promises to be a ‘very cost effective worldwide on-line sales and marketing platform’.
Going, going, gone!
Before you start nodding your head, scratching your nose or waving your little finger, remember once the hammer goes down you are effectively into a contract immediately. You are obliged to pay up just as much as the seller is obliged to sell.
Hopefully though, you would have done your homework beforehand and there will be no need to worry. It goes without saying that all bidders should decide the maximum amount they are ready to pay, or rather, the maximum amount it makes personal sense for them to pay, for each lot before the auction starts. Do not get carried away and do not exceed this amount - you could end up making little or no profit on your investment.
Take along your bank account details, a cheque book, at least two forms of ID and ensure you will be able to put up a deposit of around 10 per cent of the total price of what you want to buy. Sellers may well expect to see the rest within a month of the auction date too.
When you walk in you may have to register before being able to bid. Ask around first or you may scratch or nod to no effect.
Bid with brains and bottle and you may just land yourself an off-plan bargain. Good luck!
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