Tips For Buying A Property At Auction

Many people now look to buy property at auction especially when they are looking to acquire an investment property or a property that can be done up and is competitively priced.  Auctions can be an excellent way to secure a competitively priced property but there is more to it than simply holding up your hand to bid for it at a figure that you feel happy with.  

Auction houses will carry out auctions in person and may often carry out online auctions.  It would be sensible to contact the auction houses that are specialists in the area you are looking to have a look at their catalogues and viewing schedules.  

The auction houses’ catalogues will provide you with a guide price and the conditions of sale.  Not all auction houses follow the same conditions of sale and there are quite often hidden additional costs that you need to check.  For example some online auctions will have the buyer stand the costs of being placed in auction and often the sellers themselves will ask for certain costs to be reimbursed to them that they have incurred in putting the property in the auction.

The auction houses should also put up online the legal packs for viewing.  If you sign up to the alerts on the properties you are interested in you will be notified when these packs are available.  It is important that these legal documents are read and it is strongly recommended that you take advice from a solicitor.  There can often be hidden issues in properties that are being placed in the auction precisely because these hidden issues can prevent them from being sold in the open market in the normal way. 

It is important to prevent an expensive mistake by bidding on property at auction without ensuring that the property is surveyed by your surveyor prior to auction and that your solicitor gives you a report on the legal paperwork available so that you are aware of any hidden issues either with the stability and structure of the property or in the legal paperwork. 

Once you bid for a property at auction and your bid is accepted you are legally bound to buy the property at the price that has been accepted.  You cannot back out because you then find that there is a problem with the property either structurally or legally.  It is therefore vitally important that you have all of this information with you before deciding to bid on any particular property. 

If you have bid on a property and are successful you will be required to pay the deposit straight away which is normally 10% of the price you have agreed together with potentially the auction fee.  You will also need to insure the property from that point as it will be your responsibility.  It is important you read the auction terms and conditions to be sure that you will be in a position to carry out those requirements if you are successful. 

Completion i.e. the property legally becoming yours and the keys will normally take place within a four week period of the auction.  You need to be sure before you bid that you will be able to therefore pay within four weeks the sum of money that you have agreed to pay for the property.  If you are intending to use a mortgage it is imperative that you have the offer from your lender up to a maximum price before you bid otherwise you may find that your offer of mortgage is not forthcoming but you will be legally obliged to buy the property with no funds or means to do so. 

If you fail to complete within the time period once your bid has been accepted you are likely to lose your deposit and the seller can sue for further costs and expenses that they have incurred in relying on your offer. 

It is therefore important that all the work is done “up front” before your bid is made to ensure there will be no difficulties in you proceeding to complete once your bid on your property has been accepted and is successful. 

Good luck with all of your auction hunting!

The Clough & Willis Property team are well versed in dealing with auction packs and are able to assist in advising and providing written reports on the legal packs.