Sarah is here to help house buyers and sellers get to grips with the conveyancing process. This month, she discusses buying a property at auction…
I’ve seen a property I like, but it is going to auction. Should I consider buying it?
Thousands of homes are sold each year at auctions. They were traditionally the preserve of investors looking for properties to renovate and sell on, but now attract mainstream buyers.
Auctions are planned months in advance and catalogues detailing the forthcoming lots are usually released between two and four weeks prior.
Each property will be listed with a guide price, which is what the auction house or seller thinks it is worth and a reserve – the minimum the seller will accept. This usually remains confidential. Both can change up to and including the day of the auction.
If you are interested in buying a house this way, you can see what is available using online portals. You will then need to physically view it prior to the auction. You might want to consider taking a builder or handyman with you if there is work to be done, to reduce the time it will take to obtain quotes after the purchase.
The next step is to request the legal pack. This is provided by the seller’s solicitors and will normally include documents, such as the conditions of sale (the contract), search results, in particular the local authority search and a copy of the legal title.
It is important to ask a solicitor to review the contents of the legal pack, so you can ensure there are no issues with the property before you put in a bid. Sometimes searches are delayed, so you can ask the auctioneer to keep you informed of any alterations to the contract, or additional documents that come to light and arrange to view these prior to the auction.
Unless you are buying a property that needs lots of work, it is always advisable to have a survey carried out. This will also give you an independent valuation, to make sure you pay a fair price.
How should I manage my finances when buying at auction?
When you find a property you are interested in, work out the maximum price you are prepared to pay.
Whilst auction properties may be cheaper than market value, renovations are normally needed and you must ensure this is factored into your budget. Being outbid means you will have incurred costs to no avail, but they will be relatively small compared to the thousands of pounds a property is worth.
You will need to make sure you have sufficient funds in place to complete the purchase of the property. If you are a cash buyer, the auctioneer will require a 10% deposit on the day, with the balance of funds falling due on completion, which is usually 28 days later. Failure to meet this deadline could mean you incur penalties.
If you are looking to buy a property with a mortgage, you will need the offer in place (at least in principle) prior to the auction, which will again incur you costs. The borrowing can then be finalised when the purchase price is fixed. You will only have approximately 28 days to complete the purchase and you need to allow your solicitor sufficient time to drawdown the mortgage. You also need to ensure you have a 10% deposit available on the day of the auction to secure the property.
Is it possible to buy a property prior to the auction?
You may wish to put an offer forward and see if the seller is willing to accept an early bid. This will obviously mean working extra fast to exchange contracts before the auction takes place. However, there is a risk your offer will be rejected and you have then revealed the price you are prepared to pay.
If your offer is not accepted and the property remains unsold after the auction, the auctioneer will generally have a word with any interested parties, to see if it is possible to broker a deal. There is still a chance, therefore, a sale could be agreed.
To find out more about buying a property at auction, don’t hesitate to contact me or my conveyancing colleagues on (0114) 218 4000 or email info@tayloremmet.co.uk
0 Comments