Buying a property at auction can be a great alternative to the standard sale and purchase procedure. It is much quicker, it isn’t reliant on chains and, when done right, it can yield great results for both buyers and sellers. If you are looking to buy or sell at auction we’ve included some advice for first time buyers and sellers below.
Remember the one golden rule, it is always best to arm yourself with as much knowledge as possible before the day of the auction.
The most important difference with purchasing a property at auction is to remember that the moment that the gavel hits you have exchanged and become contractually bound to purchase the property, subject to all standard conditions and the special conditions in the legal pack.
The special conditions trump the standard conditions so if there is a set completion date (normally this is 28 days after exchange or 20 working days after exchange) but there is a special condition specifying a different date then this will the date you are required to complete.
If you don’t instruct a solicitor to report on the legal pack, then you leave yourself open to onerous clauses that could be contained within the special conditions. Remember that if you are successful in buying at auction then you will be bound by the special conditions so make sure if there are additional costs included in the special conditions then take these into account as they’ll need to be paid on completion.
For sellers, always consider if too many additional clauses costing the buyer money will deter bidders. Not everyone at an auction is acting on their own behalf, some have been sent there by bosses or acquaintances who will have studied the packs before. Most buyers will decide before attending which lots are attractive and if one comes with a lot of additional costs then most buyers will favour a similar lot without the same impediments.
It may seem like obvious advice but if you’re interested in buying a property at auction then visit it before. The contract will expect you to have done so and the seller may not be willing to answer enquiries before (or after) the auction so make sure you instruct a solicitor to examine the legal pack and provide a report and if you have any concerns then make sure they are raised before. Even if the seller doesn’t answer any questions then at least you’ll be aware of a potential issue and can factor this into your bid.
If you’re selling, then answering enquiries is a good way of encouraging potential buyers to bid by resolving any fears they may have.
Buyers should remember that normally the only information available before the auction will be the legal pack. If there are standard documents missing such as searches, property information forms or historic conveyances then buyers should be aware of the types of information these documents contain and what their absence could mean.
If you are selling, then instruct your solicitor to include as much information as possible if you want to make sure your lot is as attractive as possible to potential bidders.
If there is a property you really want but you are scared of losing a bidding war at auction, or if you made a successful bid but it was below the reserve price set by the seller then do not lose hope. Contact the auction house who can put you in touch with the seller before or after the auction. They may not agree to a compromise price or they may wish to sell the property at auction but nothing ventured nothing gained!
Our Residential Property Team are able to assist with the preparation of a legal pack for a sale at auction and for reporting on a sale pack if you are buying.
If your sale or purchase is successful they will handle all post completion matters following the sale as well.
If you are serious about bidding for a property, then timing is the key. Instruct an experienced solicitor to provide a report on the property.
Our Residential Property Team provide these reports and can advise what is and isn’t included in the legal pack. Make sure you do this as early as possible so if there are questions about the property your solicitor will have the chance to investigate and you can be fully informed going into the auction.
If you are selling, then make sure that when your solicitor prepares your legal pack they include as much information as possible. Instruct them ideally no later than two weeks before the auction and provide as much background documentation as possible. If the property benefits from any warranties include them in the pack. It could be the difference between one person bidding or three people bidding which in turn could make all the difference to the sale price.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.