Buying Property at Auction
With the right guidance, buying a property at auction 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 which are shorter than typical property purchases. 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 and will need to;
- pay a 10% deposit on the sale price
- sign the Sale Memorandum
- be in a position to complete the sale 20 working days from the date of the auction.
There are steps you can take before the auction to ensure you are prepared for your purchase;
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.
Our property lawyers can provide legal advice on the Legal Pack once you have it and advise you on the legal issues relating to the property before you bid. Many people purchase property at auction without providing their lawyer 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.
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 these additional costs into account 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 need early legal advice on buying a property at auction, please contact us on 01803 403403 or complete a contact form and one of our property lawyers will get in touch.