The modern world is continually striving for services to be provided at greater speed and with less hassle; and buying a property is no exception.
On the face of it, buying a property at auction appears to meet these requirements. Whether it be first-time buyers, property developers or investors, buying a property at auction can be a great way of picking up a quick bargain and removes the possibility of unexpected delays which can occur in chain transactions. However, the importance of prior investigation on a property before auction must not be underestimated.
The fast-moving world of auctions makes it easy for buyers to make hasty decisions without being fully aware of the potential pit-falls which may come with buying a particular property. It may be that a property is uninsurable, unmortgageable, unregistrable or has a defective title. This will clearly create difficulties when selling the property in the future. It is therefore essential that potential buyers do their homework before the auction day to ensure that they are fully informed, organised and prepared before bidding!
The typical property auction procedure requires the seller to provide potential bidders with an “Auction Pack”. This is usually available approximately 3-4 weeks prior to the auction and contains copies of the property’s title deeds together with other relevant documentation. The amount of information provided in these packs can vary and may sometimes include Property Searches such as a Local Authority Search, a Drainage Search and/or an Environmental Search. The results of these searches will help determine any potential issues with the property. If these are not contained within the pack, it may be beneficial for a potential buyer to obtain these prior to the auction day. However, there is a degree of risk in paying for these searches prior to auction, as there is no guarantee of success at auction and these search fees are non-refundable.
Usually, on the auction day, the successful bidder will become legally bound to purchase the property as soon as the hammer falls. They will normally be required to pay a 10% deposit on auction day and then to complete the purchase in full within 28 days.
The overriding principle of any property purchase is “Buyer Beware.” This is a key phase to remember when buying a property at auction, and it is therefore vital to consider two factors before bidding; finance and investigation.
Funds must be readily available and sufficient to pay the required 10% deposit on auction day and the remaining balance within 28 days. If the purchase is dependant on a mortgage, it is important that a “mortgage offer” is obtained before the auction day to avoid any problems. It will necessary to consider whether you have sufficient reserve funds in case the Mortgage Provider retains part of the mortgage loan until certain works are completed at the property. The situation that needs to be avoided is where you are committed to buy the property but unable to obtain a mortgage to finance it! Your deposit is at risk in this situation if you cannot complete with the seller.
Potential buyers should consider physically viewing the property before auction day and arranging a survey. Additionally, the Auction Pack should be considered by a legal professional who will advise on any particular sale conditions and any potential issues. This allows potential buyers to make an informed decision on whether to bid for a particular property or whether, in certain situations, it is best to steer clear of bidding for particular properties.
Emsleys offer a service which includes a review and investigation of a property’s auction pack, providing clients with a Pre-Auction Property Report and, following a successful auction bid, dealing with the post-auction procedures necessary to complete the purchase.
Emsleys’ services also include preparing auction packs for property sellers in readiness for a sale at auction.
For further information, please contact Adam Dawson at Emsleys on 0113 286 8746.