With house prices booming, many buyers have looked to purchase properties at auction in order to find a bargain and avoid the traditional and often lengthy buying process.
Once a bid at auction is accepted, the purchaser is bound into a contract with the seller without the option of retracting, which is why it is important to be well informed before the hammer hits! If you are thinking of buying a property at auction, we have prepared the following list of considerations.
Before the auction
- Decide on the location you would like to buy in and look out for auctions in local papers and by contacting local estate agents.
- Once you have found an auction you are interested in, carefully review the auction catalogue. Be sure to read any conditions set out.
- After shortlisting the properties, ensure you make arrangements to view them with a builder, architect or surveyor in order to gauge how much work needs to be done to the property and factor those costs into your budget. It is important to do this relatively quickly as the auction catalogue is normally available just 4 weeks before the auction date.
- When deciding on your budget and bidding limit, it is a good idea to research similar properties in the area to find out their selling price and to have an idea of the true market value of the property.
- Costs to consider include administration fee to the auction house, Stamp Duty Land Tax, building insurance, and legal fees and other expenses, such as Land Registry fees.
- Obtain a legal pack from the auctioneers – this will contain documents including the title deeds, local authority search, and Law Society protocol forms (property information form and fixtures and contents form) completed by the seller.
- It is important to seek legal advice in order to check if the property is subject to any covenants (positive or restrictive) or benefits from any easements/rights, or contains any other legal issues that may prevent or impede any future sale or mortgage. It may also be advisable to carry out further searches if the documents reveal any issues. However, this may be an additional cost, which may become redundant if you chose not to proceed or are out-bid.
- Ensure you have made financial arrangements before the auction date. You will need to have a deposit of 10% ready on the day and the remainder of the purchase monies within 28 days. It is vital that you have the funds readily available as you will lose your deposit if you are unable to pay within this time-frame and may also be required to pay the costs associated with reselling the property. If you are going to need a mortgage then it would be highly advisable to have agreed a mortgage with the lender beforehand to avoid unnecessary delay. Bear in mind that a mortgage application can take anything from a matter of weeks up to months to process so give yourself plenty of time.
On the day of the auction
- Take two forms of identification with you, along with a form of payment and your bank account details.
- Ensure you are in sight of the auctioneer so that your bids are acknowledged.
- Keep your budget in mind at all times to avoid committing to something under pressure that you will not be able to honour.
- If your bid does not meet the reserve price, you may still be able to agree a price with the sellers via the auctioneers acting as agents.
The Residential Property team at Blaser Mills is experienced in auction purchases. We can help to ensure that you are well informed about the process and any issues affecting the property before you commit yourself to buy.
If you are considering buying a property at auction and would like our assistance, please contact Partner and Head of the Residential Property team, Alexandra Kirk, on 01494 738 064 or email firstname.lastname@example.org