Auctions can be an exciting and cost-effective way to access the property market – however, with these opportunities also come risks and complexities. In this article, we will take a look at some of the key things that you should be thinking about if you are considering buying a property at auction, from pre-auction inspections to financing your purchase.
Of course, this article is no substitute for specialist legal advice. At Elite Law Solicitors we are experts in all elements of buying (and selling) at auction. If you’re interested in buying at auction, read on to see how we can help with your auction purchase.
Alternatively, if you would like to discuss your circumstances or requirements with one of our experienced auction property solicitors, please call us on 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form to arrange a free, no-obligation discussion.
What are you buying?
The first thing to do is work out what you are looking to buy at auction. One of the advantages of auctions is the range of properties available – you can almost certainly find whatever type of property you are looking for at auction. Most auction houses provide catalogues that you can look through to find your ideal property. Remember to check the details carefully and make sure you know what you are buying and that it fits your needs. For example, is the property residential or commercial? Is it a freehold or a leasehold? Is it vacant or is it sold subject to a tenancy? Keeping things like this in mind early on can help avoid any surprises later. It may also be a good idea to ask the seller why they have chosen to auction the property, instead of going down a more traditional estate agent route.
As part of this, you should arrange to visit the property if possible. This can usually be arranged via the auction house. Documents related to the property will also be provided as part of the Legal Pack, which can also be obtained from the auction house. The Legal Pack contains a lot of important information about the property, so it is important that you have a solicitor review the Legal Pack so that they can flag any issues to you before you place a bid. Sometimes a seller may be selling at auction because there is a fundamental issue with a legal aspect of the property such as a lack of right of way to the property, for example, and you could end up with legal problems when trying to obtain finance for the property or when you come to sell. You should therefore provide your solicitor with the Legal Pack for review as early as possible and before the auction date
Are you ready to bid on a property at auction?
You’ve gone through the catalogues, you’ve had an auction specialist review the Legal Pack, and now you’re ready to bid. Before the day of the auction comes, there are a few things to consider.
There are different types of auction, so familiarise yourself with how your chosen auction house works; for example, livestreamed auctions are becoming more popular amid the pandemic. It is also worth deciding how you want to bid – as well as live bidding, some auctioneers allow you to bid by phone or by proxy (where you set a maximum price you are willing to pay and the auctioneer bids on your behalf). Different auctioneers may have slightly different arrangements, and it is important to be familiar with the process at your chosen auction house. Some auction houses use the “Modern Method of Auction”, which is more flexible and has longer timeframes for completion, while others use a more traditional short-turnaround method.
Remember that as soon as the auctioneer’s hammer falls, the successful bidder is bound to purchase the property. If you are the winning bidder for a property, the auctioneer may want the deposit paid on the day (usually 10% of the purchase price) and you will need to complete the purchase within the specified timeframe. The penalties for failing to do this can be severe, so it is really important to think carefully and bear your budget in mind while bidding. You should also insure any properties that you win from the date of the auction.
What are the Terms and Conditions?
There are two important sets of terms and conditions governing an auction purchase. The General Conditions are the conditions that apply to every property being auctioned – these are available on request. The Special Conditions are the different conditions that apply to each individual property, which are set by the seller before the auction. These can dictate anything from the date of completion to the penalties for not completing, so it is very important that you read them carefully. If you have a solicitor reviewing the auction pack for a property, they will be able to review the Special Conditions for you as well.
While each set of Special Conditions are different, it is becoming increasingly common for Special Conditions to require that the buyer of the property pays a contribution towards the seller’s auction costs and legal costs. This can mean several thousand pounds of extra expenditure in some cases, so it’s important to bear this in mind when budgeting.
How are you funding the purchase?
As mentioned previously, the timeframe to complete auction purchases can be short – often as little as 2-4 weeks. This rapid turnaround time means that traditional mortgages often cannot complete in time.
Depending on your situation it may be possible to complete the purchase with cash, especially if the asking price is low. Alternatively, specialist finance such as bridging loans may be an appropriate option. A bridging loan will often be available for drawdown within weeks, which makes it ideal for auction purchases with short deadlines. If you are considering this option, it is always worth speaking to a specialist bridging loan broker for advice – bridging loans can be expensive, and may not be right for you.
How Elite Law Solicitors can help you with buying a property at auction
At Elite Law Solicitors, we deal with a significant volume of auction purchases. We are experts in all elements of the transaction, and have the skills and expertise to meet tight auction deadlines while still providing a top-quality service for clients. We are also bridging loan specialists with significant experience dealing with many of the most prominent lenders, so we can assist regardless of how you are funding your purchase.
We offer the following services:
- Legal pack review pre-auction
- Auction conveyancing
- Bridging loans and specialist finance
Call 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form to arrange a free, no-obligation discussion and let one of our experienced auction property solicitors explain your legal rights and options.
