You might think that the only way you can buy a property is through an estate agent – but you would be wrong. There is another option, and it’s not used as often as it should be. It’s called a property auction, and essentially you are bidding on the chance to buy a property, against other people. It can be a bit risky, but it can also mean you land the house of your dreams for a bargain price (and a bit of fixing up too). But when buying in an auction, there are a unique set of challenges to consider. So, here’s what you need to know.
Understanding The Auction Process
In the UK there are generally 2 types of auctions:
Traditional Auctions: The property is sold to the highest bidder on the auction day, with contracts exchanged immediately and completion within 28 days.
Modern Conditional Auctions: A more modern approach allows a longer time frame for the exchange and completion to actually happen. This is to allow buyers to secure financing and conduct any due diligence, and usually lasts 56 days.
The type of auction you go to will depend exactly how the process goes, so make sure you do your research ahead of time with the auction house. You should also get your hands on the auction catalogue, which details all of the available properties, their guide prices and descriptions, and a legal pack.
In general, you will be invited to view the property before the auction and arrange a basic survey. This is so that you can make sure you actually like the property, and that there are no glaring issues. Then on bidding day you will be able to bid in person or online on the property.
Do Your Legal Due Diligence
Review the legal pack: The auction house will provide a legal pack to you when enter the auction (and beforehand) so that you know what you’re bidding on. This pack is full of important information like:
Title deeds: Verify that the seller owns the property and check for any responsibilities or restrictions on the property.
Search results: Check the local authority searches, drainage and water searches and environmental searches.
Property information: Look for details on planning permissions, building regulations and any existing tenancies.
Make sure you review this carefully with a conveyancer to make sure everything is up to scratch.
Get surveys and inspections: Most auction properties are ‘sold as seen’, which means you can’t pull out if you discover something about the property later. However, having the relevant inspections and surveys done can still reveal structural issues, boundary disputes and other defects so that you know what you’re dealing with. This is particularly important for older properties.
Financial Considerations
When you buy a property at auction, the timeframes you’re working to are pretty tight. So you should make sure you have your finances in order and ready to go before the auction date, regardless of it you’re buying in cash or through a mortgage. You should also be aware of additional costs that might be added onto the sale cost, including:
Auction fees: Including buyer’s premiums and administration fees.
Stamp Duty Land Tax: Calculated based on the purchase price and current SDLT rates.
Legal Fees: Solicitors, conveyancers and other professional fees.
Legal Implications of Bidding
The point at which a sale becomes legally binding is a bit different when you’re buying at auction. In a traditional sale it happens at the point contracts are exchanged, but in an auction the purchase is legal the second the hammer falls. You’ll be expected to pay a deposit (usually 10%) immediately and agree a timescale for completion. If you don’t make that deadline then you can face some significant penalties, including losing your deposit and even legal action from the seller.
On top of that, every auction house will have their own terms and conditions, and these can vary. So before you set foot inside you need to make sure you understand what these are, reviewing them with your solicitor if you need to.
Risks and Mitigation
If you’re buying a property at auction, then there are some extra risks that you will need to mitigate. Things like unregistered land, restrictive covenants or disputed boundaries can complicate ownership and potentially lead to costly disputes. So you will need to investigate the property’s legal title very thoroughly, and make sure your conveyancer knows you’re buying the property at auction.
If you’re buying a leasehold property, then you will need to review the lease terms carefully as well. Specifically, pay attention to the lease length, ground rent and service charges, as well as any restrictions or obligations it places on you as the leaseholder.
Finally, you’ll need to make sure the property is compliant with local planning regulations, and check for any environmental concerns like flood risks or contamination. All of these can affect the property’s usability and value, and your conveyancer will help you with this process.
Practical Tips for Auction Day
Register and prepare: Register yourself with the auction house in advance (this will make things much simpler on the day). Then take some time to make sure you understand the bidding process, so that you can participate fully. On the day, make sure you bring valid ID and proof of funds - you won’t be allowed to bid without either.
Set a limit (and stick to it!): Take some time to decide what your maximum bid is going to be. Do some research and some sound financial planning, so you go into the auction with a firm idea of what your soft and hard limits are. Once you’re in, avoid the temptation to go over your limit, no matter how amazing the property is! Going over your limit can lead to financial strain and a serious case of buyers remorse.
Be prepared for post-auction procedures: If you make a bid and it is successful, then that’s just the beginning. There are some things that need to happen pretty much immediately, which will include signing the contract, paying the deposit and communicating with your solicitor to make sure there’s a timely completion.
It’s important to note that this blog provides a comprehensive overview of the process and considerations for buying a property at auction in the UK. But we always recommend you seek out more personalised advice based on your unique situation. At Hudson Conveyancing,
Our team have combined backgrounds in conveyancing, banking and estate agency, which means we have all the skills and knowledge you need for any house purchase. Auctions can be a tricky business, but with the right people beside you, they can go smoothly. We’re on hand to make the process as straightforward as possible, so that you can enjoy your new home. To find out more, just get in touch with the team today.
Commentaires