A Guide to Buying Property at Auction
Buying properties at auction might seem a daunting prospect but with the right guidance it can often prove to be one of the most satisfying methods of achieving results.
If you are thinking of buying at auction make sure that you are in a position to proceed with the sale within the specified timescales. If you are the successful bidder at the auction then you will be bound under the contract on the fall of the auctioneer’s hammer. You will usually need to pay a 10% deposit on the sale price, sign the Sale Memorandum and be in a position to complete the sale 20 working days from the date of the auction.
The first step to buying property at auction is obtain a copy of the catalogue from the auctioneers. The catalogue will contain details of all of the properties to be auctioned including descriptions, guide prices and viewing arrangements. The catalogues also contain important information for buyers and the Common Auction Conditions.
The seller’s solicitors will prepare a Legal Pack for the property which will contain any relevant legal information such as title documents, local authority and other searches, lease details, property information form, fittings and contents form and any other Special Conditions of sale.
Once you have obtained a copy of the Legal Pack this can be passed to your solicitor so that they can advise you on the legal issues relating to the property before you bid. Many people purchase property at auction without providing their solicitor with the legal pack and therefore not obtaining advice prior to auction. Sometimes this can cause problems for buyers if they are not fully aware of what they are buying from a legal perspective. If you are the winning bidder and the hammer has fallen, you are legally bound to complete the purchase of that property in the time specified in the contract. Failure to do so could mean that you not only lose your deposit but could be sued for damages and if the property was re-sold and sold for considerably less than you paid for it, you will be liable for the difference.
It is advisable to commission a full structural survey especially for properties in need of a lot of renovation work. Occasionally auctioneers will produce their own pack of information, including a survey, but it is still advisable to commission your own. You would need to contact the auctioneers to arrange a suitable appointment for the survey to be carried out. If you are obtaining mortgage finance, your mortgage lender will require a valuation or survey before the auction to verify its guide price.
Please also bear in mind that you may be asked to pay a Buyers Contract Fee which is payable to the auctioneers in addition to the price of the property. This needs to be paid at the time of signing the Sale Memorandum and in addition to the 10% deposit. You may also be required to reimburse the seller for the search fees incurred and possibly a contribution towards their solicitor’s costs for preparing the auction pack. It is important to take into account these additional costs when deciding how much to bid, including building work, solicitors fees, stamp duty and moving costs. Sometimes a bid can be accepted before an auction takes place. This happens when a property is listed as up for auction, “unless previously sold”.
If you are thinking of buying a property at auction and need legal advice please contact us and our conveyancing team will be able to help.