Whilst this has long been a preferred strategy by some residential developers and landlords building a property portfolio, TV programmes such as the BBC’s ‘Homes Under the Hammer’ have generated a lot more interest in this way of buying a home for regular homeowners too, in the pursuit of getting a property at a discount price.
Buying at auction comes with some risks and there are many terms and considerations that should be met before taking this route. We have compiled some of the questions that we are frequently asked about the process of buying a residential property at auction, to help you decide if it’s something you want to pursue. For specific information about a potential property purchase, at auction please contact our conveyancing team for tailored advice.
If you are considering buying a property at auction, there are several risks or pitfalls that it can be easy to be caught out by if you’re not properly prepared for the differences to conventional house buying.
The legal pack for an auction property should be available (often to download) from the auction house before the day of the auction. This will contain the documentation gathered by the seller’s solicitor and will include:
It’s always recommended to ask your solicitor to look over the legal pack in advance of the auction so that you know of any legal issues that could devalue the property or scupper the plans that you might have for it. Once the hammer falls on your winning bid, you are legally committed to buy the property and can’t back out if you later find something in the legal pack that should have been spotted before the auction.
Before arriving at the auction, it’s advisable to do your homework on the property or properties that you intend to bid on. This includes a viewing, a survey and having a solicitor look over the legal pack. This ensures you can make an informed decision on whether or not to bid and the maximum you should spend if you do.
You will also need your finances in place for purchasing the property. On the day, you will be required to pay a 10% deposit before leaving the auction, and must complete on the property within 28 days. Most traditional mortgage routes will take longer than this time frame, so special measures will need to have been set up before you bid to ensure you’ll be able to fulfill this part of the transaction within the deadline. Obviously, this measure isn’t required if you are a cash buyer with the money for the purchase already available in full.
Paying for a survey on a property that you are not sure that you’ll even win can seem like a bit of a risk, but the risks associated with not getting a survey done and buying a property with serious structural issues mean that it’s strongly advised to pay for one to be done, although it isn’t compulsory.
Whilst not true in all cases, many properties are sold at auction because they have proven difficult to sell on the open market, perhaps through defects, an issue with the title or conditions attached to the sale. A structural survey should highlight any major issues, so that you know what you’re dealing with before you bid.
When buying an auction property, a solicitor should be instructed before the auction happens, so that they can check the legal pack and any sale conditions before you bid. Unlike conventional property purchases, where there are usually a few weeks before contracts are exchanged, to allow time for the conveyancing process, with an auction, the contract is exchanged when the gavel falls. This means that any legal checks will need to have been done before the sale of the property, as you’re legally obliged to complete the purchase once your winning bid is accepted.
Many auctions include homes that have been repossessed or have come from the estate of a deceased owner, so the vendors may have little or no knowledge of the property or its history and any issues it has. Having a solicitor do as much of the conveyancing work as possible before the auction will help to reduce the chances of hidden problems being found when you’ve already committed to buy.
As soon as the gavel falls on the property with your winning bid, under UK law you are committed to completing the purchase. If you change your mind and do not wish to proceed, or if you fail to complete before the deadline for any reason, you will lose the house and the 10% deposit that you paid on the day of the auction.
There are some rare circumstances in which misleading information may have been given about the property, which could potentially give you grounds to refute that it is as described, but this is a complex area of the law, with no guarantees of a successful outcome. The onus is very much on the buyer to make all necessary checks and view the property themselves before bidding in the first place.
One of the benefits of buying a property at auction is that the entire process is very quick. Usually, the completion date is set no more than 28 days after the auction, and is often even faster if all the recommended pre-sale work was done by the buyer and their solicitor and the necessary finances are already in place. You will get the keys to the property upon completion, so for most auction-bought houses, this will be no longer than a month after the sale day.
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