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, writes Darren Blackburn.
The auction room is full to overflowing. There is a general murmur of anticipation. The people who want to keep their own counsel stand at the back, arms folded. The auctioneer, smooth as they always are, calls the room to order and begins with a glowing description of the property. The tension mounts as the bidding begins and finally comes the climax with the fall of the hammer as the deal is struck and the property is sold. It is all over in a matter of minutes.
Five main reasons for a property to be sold at auction:
- Sale by the 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 painful process (for all concerned) 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; quite a number of properties are sold at the one auction in this way.
- Properties which are difficult to sell. Unusual, dilapidated and/or 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?
- As with any property, consider very carefully whether it is the property which you really wish to buy. Do you really want a dilapidated cottage with a rambling rose over the front door and thatch that needs attention or would you be more suited to a more modern property which requires less work?
- 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. My advice would always be to 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 which would make the purchase unattractive or impossible. The lender will in most cases require a valuation before it makes a formal offer.
- Have you had a survey carried out? Under English Law the principle “buyer beware” applies. You take the property as you find it. The dry rot, the cracking foundations and the leaking roof which you discover after the auction will not allow you to withdraw from the deal.
- 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. It would be foolish to proceed to buy without having this looked at by your solicitor. Once again if you buy and there are problems, you are responsible for those problems.
- Have you decided upon the maximum price you will pay? Set a limit and stick to it. It is all too easy to let the excitement of the moment overcome you whilst in the auction and to bid beyond your means.
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.
Buying at auction is an exciting way to acquire property. Make your preparations well, good luck, but be wary.
For more information contact Darren Blackburn or the Residential conveyancing team