How Commercial Auctions Work

How commercial auctions work

Our guide to understanding the auction process.

If you’re new to property investment, chances are you haven’t been to a commercial auction before. And, even if you’ve bought at residential auction, it can be overwhelming to be in a room amidst professional agents and large-scale investors who are all well-versed in the runnings of commercial property auctions in London. And, like many investments, the auction process can often be thought of as risky – not to mention stressful.

But, that doesn’t mean you should bypass them all together. In fact, on the contrary, there are many reasons why it can be beneficial to buy at auction like the guaranteed short transaction turnaround (usually a month or less). Our team are seasoned auction attendants, with over 30 years experience in the industry, so needless to say, we understand how commercial property auctions in London work. Here, we explain the process so that you can gain a better understanding before you enter the auction world.

Pre Auction:
This is the time for preparation and research – and first up is finding a property you’re interested in. Obviously, there are now many ways you can search for properties, including our own portfolio of commercial properties for sale in London. But, for commercial properties 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. Of course, 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 an 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 (either downloaded or via 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 across all the costs associated with the purchase between you and the auction house, and that all your finances are in order. Remember, if you’re successful you’ll need to pay a deposit (usually 10 per cent 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 accepted, contracts will be drawn immediately and exchanged.

And, finally there’s the all-important viewing – arranged through the auction house prior to the day. This is where you should be checking that the property meets all your needs.

On the day
Auction day can be both exhilarating and nerve-wracking, which is why, again, preparation is essential.

First, make sure the property you’re interested in hasn’t been sold prior to auction. Next, ensure all your information and paperwork (mortgage, ID etc.) is in order, including your deposit, should you be successful. 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 – and on – the day. It is absolutely imperative you check this, and also 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, and then bids will be raised accordingly until the reserve has been met, finishing with the final bid and the infamous “going, going, gone – SOLD” If 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! One thing that is essential to know is that once the hammer goes down, the property is sold, and you’re legally and contractually liable to purchase, or else you can lose your deposit or worse – 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 performed prior.

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 in London. If you’re ready to find your perfect property, get in touch today and our highly experienced team will help make the process easy and stress-free.

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