Buying a property at auction – what you need to know

On behalf of Attwaters Jameson Hill posted on Friday, June 29th, 2018

Selling property by auction is growing in popularity and becoming much more mainstream, due in part to TV shows such as Homes under the Hammer. It can certainly be a cost-effective way of acquiring a property; if you’re a first-time buyer looking for a home you can do up, or a buy-to-let landlord adding to your portfolio, then buying at auction can provide the opportunities you’re looking for.

Selling property by auction is growing in popularity and becoming much more mainstream, due in part to TV shows such as Homes under the Hammer. It can certainly be a cost-effective way of acquiring a property; if you’re a first-time buyer looking for a home you can do up, or a buy-to-let landlord adding to your portfolio, then buying at auction can provide the opportunities you’re looking for.
 

Do your homework

If you’ve never attended an auction, it makes sense to do so prior to attempting to purchase a property at one. This will give you a feel for the bidding process, the type of property on offer and the prices they sell for.
 

How to approach buying at auction

It’s important to be aware how the auction process differs from a normal residential purchase. For one thing, it’s much faster. If yours is the winning bid, you’ll be asked to sign the auction contract then and there. This is the same as exchange of contracts for any property purchase, and means that you are legally committed from that point, so you’ll need to ensure you have money available to pay the deposit and have the funds ready so that you can complete on time.

If you need a mortgage, then you should speak to a mortgage adviser in plenty of time in order to find the most appropriate lender and mortgage deal for your needs.

You’ll be required to pay a deposit of 10% on the day of the auction, and completion will normally be set to take place four weeks later. If you are unable to complete within the timeframe set out in the auction contract, then you could lose your deposit, so you need to be well prepared.

When viewing a property you want to bid for, it makes sense to arrange for a surveyor to visit with you to check it over for structural faults.

As with any property purchase, you’ll need to instruct a solicitor or conveyancer to carry out the legal work, including checking out the information provided beforehand by the seller. If a buyer doesn’t instruct a solicitor until after the auction, then the seller’s lawyers won’t be able to send out the title deeds until they know who is acting for the purchaser, and this can seriously reduce the time available for completion and cause delays.
 

The legal pack

A few weeks before the auction, the auctioneer will be able to provide legal information covering the property. This pack, which is often available online, is compiled by the seller’s solicitor and contains copies of documentation such as the title deeds, special conditions of sale, Land Registry and local searches, leases if applicable, and other relevant documents such as details of fixtures and fittings.
The buyer should instruct their solicitor to review the legal pack before they attend the auction. That way, they will be fully aware of the property’s legal title before they put in a bid. This is vitally important as the legal title can often contain information which will affect the value of the property, and in some cases, defects in title could mean that lenders wouldn’t be prepared to grant a mortgage on it. Your solicitor will also review the conditions of sale and advise you of anything they believe to be significant.

If you and your solicitor aren’t entirely happy with the information provided, find errors or unusual clauses, or have unanswered questions, then the best advice would be not to bid for the property. If you were to go ahead and your bid was successful, you’d be committed and might find you’d bought a property with more problems than you’d bargained for.

If you have any questions, or would like to discuss your residential property purchase, please contact Sheri-Anne Mizon, Partner and Head of Residential Property (Loughton) by calling 0203 871 0007, or by emailing her, sheri-anne.mizon

 

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