09 November 2015
A Legal Guide To Buying A Property At Auction
We have a number of clients who have purchased homes and investment properties at auction recently.
It can be a way to purchase a bargain but there are risks involved. We hope the following guidelines will assist potential purchasers:
Get a solicitor to review the title documentation and contracts.
Auctions are often used to sell properties which have title or documentation problems. Where the vendor is a receiver or the house is repossessed much of the standard certification is missing or absent. You should engage a solicitor to review the contracts well in advance of the auction to identify flaws in the documentation so you can take these into account when planning to bid.
Get a survey
Auctions are often used to sell properties with structural problems as the property is sold as seen. Prior to bidding you should have the property surveyed by a registered and insured architect or engineer so that issues like pyrite, subsidence, non- compliance with planning permission and building regulations can be identified.
Visit our property and conveyancing page for more information.
If you need a mortgage to purchase, you will need to have the letter of loan offer issued by your bank prior to attending the auction. You will need your solicitor to confirm there are no conditions in the contract which will prevent him from certifying the title as good and marketable to the bank. The bank will need a valuation of the property by their own valuer before agreeing to lend money on the property.
Some auction houses require registration prior to the auction and may require lodgement of 10% of your maximum bid prior to the auction. You should check the terms of the auction house well in advance of the auction.
Stand in clear view of the auctioneer and make sure you make clear gestures or else you could be missed. When the auctioneer suggests a bidding price, clearly raise your hand with the auction catalogue to increase visibility, to signal that you are bidding at that price. Bidders often like to take up a position at the rear of the room where they can be seen by the auctioneer and also see the other bidders.
Work out your price limit in advance so that you don’t get carried away. Some purchasers feel uncomfortable with the bidding process and have a trusted friend or even a solicitor bid for them at the auction If you are not able to make the auction you can if you have registered in advance bid by phone or over the internet.
Once the property is purchased you will have to pay 10 per cent of the purchase price on the day of the auction when you sign the contracts. In addition, you will also have to pay the remaining 90 per cent of the purchase price normally within 28 days of the auction date. If you do not comply with these requirements, you will lose your 10 per cent deposit and be sued for specific performance of the contract.
Does not make the reserve
If the property does not meet the reserve, your bid may be accepted after the event. Leave all your details with the auction house so the agent can get in touch if they wish.