Buying at Auction
When it comes to property transactions there is nothing quite like the excitement of auction sales. If you are tempted to become a main player in this theatrical event preparation is the key.
What are the main reasons for a property being sold at auction?
Sale by executors of a will – quite often this is the preferable way of determining the best price achievable on the open market.
Lots of interest in the property – Rather than go through a process of offers and counter offers some people prefer to have the action concentrated in a sale by auction.
Repossession – Lenders who repossess properties often prefer to sell them at auction.
Properties which are difficult to sell – Unusual, dilapidated and damaged properties or those with a sitting tenant or which are blighted by proposed developments in the vicinity are often found in auction sales.
Legal problems – Properties which have defects in the title or which are subject to certain problems which are only apparent from a careful inspection of the searches and the enquiries are sometimes sold at auction and are a trap for the unwary.
So what preparatory steps should you take before attending an auction intending to buy:
1. As with any property consider very carefully whether it is the property which you really wish to buy.
2. Is the finance in place? When the hammer falls you are bound to buy. If difficulties are experienced in arranging, for example, mortgage finance you run the risk of losing your deposit and more. Always have the mortgage finance in place prior to the auction so that you can not only be sure that the finance is available but also that there are no conditions in the mortgage offer which would make the purchase unattractive or impossible. The lender will in most cases require a valuation before it makes a formal offer.
3. Have you had a survey carried out? Under English Law the principle “buyer beware” applies. You take the property as you find it. Any issues you discover after the auction will not allow you to withdraw from the deal.
4. Are there any legal problems? An auction pack (including a copy of the contract, the title documentation, the searches and replies to general enquiries) should be available before the auction. Ensure this is looked at by a Solicitor before buying at auction. Once again if you buy and there are problems, you take subject to those problems.
5. Have you decided upon the maximum price you will pay? Set a limit and stick to it.
If the property is desirable there is a good chance that you will not be successful. You may consider that the costs incurred in arranging the mortgage, having a survey carried out and having a preliminary meeting with your solicitor are wasted. You need to weigh this up against the possibility of being successful at auction and buying a property with defects which could have been discovered.