Buying A Property At Auction
In her latest blog, Conveyancing Solicitor Michelle Rock discusses the process of buying a property at auction…
Buying a property at auction is great for people looking for unusual properties that estate agents would not necesarily know how to sell (this could include derelict houses, investment properties and properties with structural defects). If no one else has noticed its potential, you could find a bargain!
Auctions aren’t just for the experts with insider knowledge. Over the past few years, they’ve become increasingly popular with buyers who want to avoid the traditional house buying chain.
Tips For Buying At Auction…
Before that hand goes up on auction day, I would advise you to consider these points carefully before you get too carried away.
1) Inspect the property before the auction to check the condition. Properties purchased at auction may be a bargain but buyer beware! There may be a reason the property has been auctioned, rather than marketed on the open market via an estate agent. Reasons may be due to a defective title, lack of right of way, a defective lease or an issue with the structure.
2) Ensure you obtain the auction legal pack and ask your solicitor to give you advice before you attend the auction. Your solicitor will advise you on any searches that may be required and any title defects. If the title is defective you may have difficulties with registration or when you resell or re-mortgage.
3) After a recent High Court decision, sellers of auction properties are required to bring to any potential purchaser’s attention any title defects and not just refer to them in the auction legal pack. Any defects must be highlighted to prospective buyers.
4) Watch out for hidden costs in the small print! The Contract will usually set out any additional costs the buyer will be contracted to pay for. These can be the auctioneer costs, seller’s solicitors’ costs and costs for searches carried out by the seller’s solicitors.
5) You will need to action your Building Insurance for the property from exchange of contracts, which is as soon as the hammer falls at the auction. It is advisable to get a quotation for building insurance before attending the auction.
6) On the auction day if you are successful at bidding, contracts will be exchanged and you will have to pay the 10% deposit. The auctioneers will also check identification.
7) If you intend to use mortgage finance you need to be aware that the time between exchange of contracts at the auction and the completion date will be short e.g. 28 or 14 days. High Street lenders are slower at arranging funds for this kind of transaction. At the auction there are often specialist auction finance brokers who can assist with short term lending. Once the hammer falls you have formed a binding contract and you will need to ensure you have financial funds in place for the completion date.
How Can We Help?
I am happy to provide auction legal pack advice, prepare auction packs if you are selling through auction and advise you generally throughout the whole process. Please feel free to give me a call on 01530 564498 or email me at m.rock@timms-law.com.
February 2023