By Caroline Browne, Partner
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 you are thinking about buying at auction there are a number of steps which you will need to complete:-
1. Call the auctioneer and arrange a viewing of the property.
2. It is very important that you budget and make provision for the various costs involved in purchasing a property such as stamp duty and solicitor’s fees. You should work out the maximum that you are willing to pay for a property and stick with it.
3. It will be necessary for you to have a solicitor request and review the contracts and title documents as soon as possible. Your solicitor will review the documents prior to the auction and raise any queries that are necessary with the seller’s solicitors.
4. It is vital that you have the property surveyed by an engineer before the auction. If a property seems like a bargain, there may be a reason. If a defect or major defects are discovered in a property after you have signed contracts at the auction you will have no recourse against the seller or the auctioneer.
An engineer will spot things that will not be obvious to you or me. Your engineer will check any alterations or extensions and all the relevant planning documents.
5. Your engineer should also check the map that you receive relating to the property to ensure that the property and area included in the auction corresponds with what is on the map.
6. Your engineer should also carry out a planning search in the Local Authority office to ensure that the property that you intend to purchase is fully compliant with planning permission and building regulations.
7. You should also attend the Local Authorities’ office yourself and investigate if there are any developments planned for the area such as major roads, large housing estates, dumps, etc.
8. Prior to auction, you will need to have your financial arrangements in place. If you are successful at the auction you will be required to:
- sign a binding contract to purchase the property
- pay the deposit
- pay the balance on 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. IT IS IMPORTANT TO NOTE that properties at auction are not sold ‘subject to finance’ or ‘subject to survey’. The property is sold ‘as is’. If you are the successful bidder, you are legally obliged to complete the sale. Do your homework, set a budget for yourself and make sure you have everything prepared in advance. You do not want to find out after you are successful at auction that no lender will give you a mortgage.
9. You should arrange to obtain the details of when and where the auction will be taking place. I would advise that you would attend one or two auctions just to see how auctions work before doing it for real. You will learn how people bid at auction and how they react to price increases.
10. On the day of the auction, it is not unusual for there to be amendments to the contract. If there are any amendments in relation to title, planning or maps, it will be necessary for you to speak to your solicitor.
