Auctions have become a popular way to buy and sell property for individuals, investors, banks and receivers. The speed of the process is what is attractive.
Buying at auction is different to buying a property from an estate agent. Once the hammer falls and your bid is accepted on a property, you will be required to sign contracts at the auction and pay a non-refundable deposit to the auctioneer. This forms a binding contract between you and the seller of the property.
Auctions make people excited. Bidding can get intense and auctions have been known to turn the most sensible person into a complete fruit cake for the few seconds needed to commit them into binding contracts!
WHAT ARE THE STEPS TO BUYING A PROPERTY AT AUCTION?
When considering purchasing a property at auction there are a number of steps which you will need to complete. After you are successful at the auction is not the time to be completing the steps below as you will have entered into binding contracts and it is not after this that you want to discover that there are problems with the title to the property, structural defects with the property or that your bank will not give you a mortgage.
- Call the auctioneer/estate agent and arrange a viewing of the property. If you wish to purchase the property you should arrange to obtain the details of when and where the auction will be taking place and obtain copies of the contracts and title documents.
- It is also important that you budget and make provision for the various costs involved in purchasing a property, such as stamp duty for instance. You should work out the maximum that you are willing to pay for a property and stick with it.
- It will be necessary for you to have a solicitor ready to review the contacts and title documents as soon as they are received. Your solicitor will review the documents prior to the auction and raise any queries that are necessary with the seller’s solicitors prior to the auction.
- It is vital that you have the property surveyed before the auction. If a property is a bargain, there may be a reason. If a defect or major defects are discovered in a property after you have signed contracts you will have no recourse against the seller or the auctioneer. An engineer/surveyor will spot things that will not be obvious to you or me. This structural survey is very different to the survey carried out by your bank and is significantly more detailed. If there are any extensions to the property it is important that your engineer also checks the extensions and the relevant planning documents.
- Your engineer/surveyor should also check the map that you receive with the property to ensure that the property and area included in the auction corresponds with what is on the map included in the title and contract.
- Your engineer should also carry out a Planning Search in the Local Authority office to ensure that the property that you are purchasing is fully compliant with Planning Permission and Building Regulations.
- You should also attend the local authorities’ office yourself and investigate if there are any developments planned for the area etc.,(e.g. major roads, large housing estates, dumps, etc).
- Prior to the auction the financial arrangements will have to be in place before the auction begins. If you are successful at the auction you will be signing a binding contract to purchase the property and you will be paying a deposit immediately. The balance is then due at the closing date as set out in the contract. If you are obtaining a mortgage you will need to sort out your mortgage application in advance of the auction.
- On the day of the auction, it is not unusual for there to be amendments to the contract. Any amendments in relation to title, planning or maps it will be necessary for you to speak to your solicitor.
On the day of the auction you should arrive early and be in a position to pay a 10% deposit if you are successful at the auction.
Best of luck.
Download our Guide to Purchasing a Property at Auction