Yes, in most cases, you can buy a property before it goes to auction, but it depends on the seller, the type of auction, and what price you offer.
Buying property at auction can be exciting. It’s a great way to find properties that are priced lower than market rates and have a lot of potential. Not to mention, bidding against other buyers is a thrilling experience!
But what if you see something you like the look of and don’t want to wait until auction day? The good news is that many sellers are open to receiving pre-auction offers, especially if they’re looking for a quick sale.
In fact, many sellers might be happy to sell before an auction as it locks in the sale for them, without having to go through the auction process.
That said, not every property can be sold before it goes under the hammer. Here, we tell you everything you need to know before making a pre-auction offer.
Is It A Good Idea To Make A Pre-Auction Offer?
Truthfully, it depends. If you’ve found a property that you don’t want to lose, then it’s definitely worth trying to put in an offer. However, if you want to buy a property for the lowest price, then a pre-auction offer might not be the best idea.
This is because the seller doesn’t know what price they will get at auction, so they are unlikely to accept a low pre-auction offer. Because of this, bidding at auction might actually get you a better price, though it’s definitely a riskier tactic.
Ultimately however, there’s no harm in trying! And worst ways, you can still bid on the day.
Why Some Sellers Won’t Accept Pre-Auction Offers
Well, to start with, not every seller is allowed to sell their property pre-auction.
Some reasons for this include:
Probate: If the property has been inherited and is going through probate, the seller might need to prove that it was marketed fairly and is being sold for market value. If they accept an offer before auction, it could raise some questions in the legal process such as: Could they have got more for it? Is it being undersold? In many cases, the risk isn’t worth it and sellers will simply reject pre-auction bids.
Auction houses: Some auction houses will ask the seller to sign a contract that prevents them from accepting offers before auction day. This is largely because they will want to protect their reputation (and their fees!) by taking the properties they advertise to auction themselves. In these cases, you may have to simply bid like everyone else.
But beyond not being allowed, some sellers may just want to see how much they can get at auction. Whilst it is a slightly riskier tactic (as the property may not sell), it can also help drive up the sales price, especially if multiple parties are bidding against each other.
How Much Should You Offer Pre-Auction?
Your pre-auction offer should be at the higher end of the guide price, if not, above it.
Sellers usually go to auction hoping that their properties will be bid on by multiple parties, driving the price up on the day. If you want to incentivise them not to list, your offer needs to be compelling.
Not only that, but you’ll want to show the seller that you’re serious about moving forward. If the sale can happen quickly at a good price, the seller is much more likely to accept your offer.
How To Buy A Property Before Auction
If you decide that you do want to buy a property before auction, there are a few steps you will need to follow.
1. Get Your Documents In Order
Before making an offer, it’s important to get everything in order. You will need to:
- View the property (ideally with a surveyor or builder to alert you to any issues).
- Review the legal pack to make sure you understand the sale and negotiate any unusual clauses.
- Make sure you have the money ready. This can be through cash, a bridging loan or auction finance.
It’s important to know that even if you agree on a sale before auction day, you’ll still need to provide a deposit (usually 10%) on agreement and the full funds within 28 days. If you fail to do this or pull out, you’ll have to pay financial penalties.
2. Submit Your Offer Through The Auction House
This bit is important: you must go through the auction house. Sellers are under contract and can’t sell directly whilst the property is being marketed to go to auction.
Contact the auction team and make a formal offer in writing that clearly lays out:
- Your price (make sure it is at least the same as the guide price, if not higher)
- Proof of funds
- A statement confirming that you are ready to exchange and complete quickly
It’s very important that you do not go to the seller directly. Not only is it frowned upon, but it may also be against the seller’s contract.
3. Negotiate
Just like in any property sale, there’s usually a bit of back-and-forth. The idea here is to convince the seller away from taking their property to auction, so you’ll need to communicate just how quickly (and at what price) you’d be willing to complete.
When it comes to negotiation, we recommend:
1. Putting in your offer as quickly as possible, with a confirmation that you are willing to complete fast.
2. Having all financials ready to go, so the seller can see that you are serious about the offer.
3. Offer slightly below your maximum price, giving yourself wiggle room to come up if needed.
And finally: Don’t be afraid to walk away if the price climbs too high. Remember, the backup option is bidding at auction, which might get you a better price anyway!
Buying A Property Before It Goes To Auction
Buying a property before it goes to auction is absolutely possible, and sometimes, it’s the best move.
But make sure you’re prepared: get your documents in order, line up your funds, and put in a strong, compelling offer. If the seller bites, you could save yourself the stress of auction day altogether.
If they don’t? Don’t worry, you can still head to the auction and place your bid there!
If you are looking to sell a property at auction but want to explore other routes, contact Swift Capital at enquiries@swiftcapital.co.uk to discuss your options today.