Commercial Property

Business property auctions | ABF

What to look out for

  • Red If you are purchasing vehicles or machinery, you are normally responsible for arranging the transport
  • Amber Specialist lenders can finance purchases of property, vehicles or machinery at auction
  • Green Buying a house through auction can be a good buy-to-let strategy, minimising the time it takes to get a property on the market

Discover all you need to know about buying business properties at auction. Explore the different options open to you and the risks of buying at auction.

Why would you use an auction?

Buying at auction can benefit many businesses. Nearly anything can be purchased at auction. Whether you’re buying property or attending an auction to buy vehicles or machinery, you might find a good deal.

Auctions can also be much faster than other means of making purchases, particularly when buying property. You are usually expected to pay the purchase price, plus fees and taxes, in full within 24 to 48 hours, and then take possession. For vehicles, you may be allowed up to a week to finalise, allowing you to sort out vehicle registration and MOT.

Auctions can also be much faster than other means of making purchases. For most, you are usually expected to pay the purchase price, plus fees and taxes, in full within 24 to 48 hours, and then take possession. For vehicles, you may be allowed up to a week to finalise, allowing you to sort out vehicle registration and MOT.

If you have or wish to start a property business, buying a house through auction can be a good buy-to-let strategy as it minimises the time it takes to get a property purchased and on the market. You can purchase and take ownership of multiple properties in the time it takes to close a single sale in the traditional house-buying chain approach.

How does an auction work?

There are many types of auction. Auctions can take place online, you can attend in person, bid by telephone or by post.

While some auctions are open to all-comers, many require buyers to register in advance. Registration may simply involve providing your details or it may require a deposit. If your bid is successful, your deposit will be used toward the purchase price and fees. If you do not win, the deposit is usually refunded. Check the details in advance.

The most common type of auction is the English or “ascending-bid” auction. This auction starts with a low opening price. Every successive bid must be higher. The bidding usually ends when there are no further bids increasing the price. The highest bidder pays the last price they bid for the item.

Another type of auction you may encounter is the sealed-bid auction. In this case, buyers submit written bids indicating the price they are willing to pay. At the end of the time allotted for bidding, the bids are opened and the highest bidder wins, paying the price they bid.

Other types of auctions include the “descending-bid” auction, the reverse auction, where multiple sellers offer items to a single buyer, and the Vickrey auction, similar to a sealed-bid auction but the successful bid is the second highest placed. You should be aware of these terms, though the English auction and the sealed-bid auction will likely be the majority of auctions you encounter.

What are the costs of using an auction?

Auctioneers receive a payment, whether a set fee or a percentage of the sale price, in exchange for conducting the sale. You should confirm what fees a winning buyer is to pay with the auction house.

In addition to fees from the auctioneer, there may be fees payable to the seller, as well as the actual purchase price. For example, when purchasing property, there may be provisions in the legal pack that the buyer agrees to pay a portion of the seller’s legal fees or even that the buyer is responsible for the seller’s auction fees! Read all documentation carefully before bidding.

If you are purchasing vehicles or machinery, you are normally responsible for arranging the transport of those items. Don’t forget to include that cost in your budget.

Can I finance my auction purchases?

When the hammer falls to close the bidding, or you win an online auction, you have a legal obligation to purchase the item. You are expected to pay the full price of the item soon after. If it is a smaller piece of machinery, you may be expected to pay for it and remove it from premises immediately following the auction. A vehicle auction may allow several days, to allow registration, insurance and MOT to be arranged. If it is a residential or commercial property, you may have 28 days to pay the full purchase price.

If you do not have all the cash needed to make your purchase, you will often have the option of finance.

Some auctioneers offer to finance items purchased at their auctions. It is advisable to discuss finance options with them beforehand and find out if you qualify and how much they are willing to finance. As lending is not their main business, interest rates and fees may be higher than with traditional lenders.

There are also specialist lenders who will finance property, vehicles or machinery purchased at auction. Contact these lenders, discuss what you would like to purchase and, assuming you qualify, they can pre-approve for finance.

In addition to specialist lenders, it may be possible to finance through a traditional lender. A business loan (either secured or unsecured), a personal loan, a mortgage on other property, asset finance on existing assets, or invoice financing can all provide you with funds you can use to make auction purchases.

What are the risks of buying at auction?

When you buy at auction you will have limited, if any, access to inspect the property. You will have the description in the catalogue and, in some cases, an inspection report prepared by the auctioneer. Some auctioneers charge an extra fee for access to inspection reports. Because you have only limited time to inspect and all sales are final, it is important to assume you will need to make some repairs to properties or items purchased at auction and you should set aside funds for that.

Reputable auctioneers will try to keep out false bidders (used to drive up the bid price) and try to ensure a fair auction. That said, fraudulent bidding is a problem. To ensure you don’t overpay, do your research in advance, set a spending limit and don’t let yourself be pressured into bidding beyond your limits.

Useful links:

Purchasing a buy-to-let property at auction

Selling a business property at auction

Buying at auction: Your questions answered

Getting on the business property ladder

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