With a housing market that is still trying to recover from the 2007 crash you could pick up a real bargain at Auction. According to a recent Savills report many properties are selling for 20% below market value. You will need to be aware of the many pitfalls when buying at Auction and, if you are new to it then it is recommended that you go and “sit” in on a few Auctions, with no intention of buying, just to get a “feel” for it. Although bargains are certainly to be had, it is also possible to get caught up in a “bidding” frenzy and pay way over the odds, or purchase a property which is a legal or structural nightmare. You need to keep in mind that if you are successful in your bid, then a contract to purchase is entered into on the day and a 10% deposit is payable. You will normally have one month from the date of the Auction in which to complete the purchase or lose your deposit. It is therefore vital that you do your homework well prior to attending an Auction at which you intend to bid.
If having attended an auction or two you decide that you’d like to have a go for real, then here’s our short guide to help you through the process :
- Obtain the Auction Brochure well in advance of the day.
- Short-list a couple of “Lots” that you are interested in and look promising.
- Obtain an Auction Pack in respect of all the Lots that you like – there may be a fee for copying the Auction Pack
- Get the Auction Pack reviewed by an experienced Property Lawyer to ensure that the property’s legal title is satisfactory and there are no onerous covenants, restrictions or third party rights over the land that would affect the future prospects that you have in mind for the property – the Lawyer will require a fee in respect of the review, but it will be money well spent to ensure that you do not buy a “nightmare” property from a legal aspect.
- Go and view the property. We would also recommend having a full survey carried out. There will be a fee for this payable to the Surveyor. Again, this will be money well spent to ensure that you are not buying a property with expensive structural defects or, if you decide to proceed anyway, that the price reflects the cost of the work required to rectify the defects.
- Having received reports from your Legal Adviser and Surveyor you should take advice from an independent Valuer and decide upon the maximum price you are prepared to pay for the property. Keep in mind any issues that may have been revealed by the legal review and survey. If you decide to bid on the day, stick to the maximum price you decided on and don’t let your heart, or a bidding frenzy, let you pay over the odds!
Happy Bidding!!
Newnham & Jordan can review your auction pack and provide you with a full title report on the legal matters affecting the title to the property. Why not contact us now for an informal chat over the phone or in person over coffee.
This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Comments: 2
Thanks for the article.
I read it’s recommended to have the Auction pack reviewed by a lawyer/solicitor, then a full survey and an independent valuer.
At the end of the article it’s mentioned that we shouldn’t pay over our maximum price.
Do you know what’s the average number of times those costs need to be incurred, ie, you’re interested in 3 properties, and you don’t win any, then you are interested in 2 more and there’s a problem somewhere, I was thinking that all those costs could increase the price of the final property quite considerably, couldn’t they?
Is there any alternative? Like a flat-fee until you buy a property or something like that?
Thank you,
Mickael
Dear Mickael
Thank you for your comments. Yes I would recommend that you not only have the legal/auction pack checked over by a lawyer but that you have the property surveyed. There are indeed costs for this as if you were looking at, for example 3 properties, you would need to pay these costs out for 3 properties. Hence my comments that although there are good deals to be had you need to bid with your head and have done your homework well so that you go to the auction fully prepared. The costs of having 3 properties fully checked legally and structurally are minimal compared to the loss of a 10% deposit at the auction should you bid on a property which you later discover to be a legal/structural nightmare.
We charge £100 + VAT per pack to check the title prior to an auction and if you are successful a further ££500 + VAT and disbursements (Land Registry SDLT etc) where you are successful with the bid and the transaction proceeds to completion.
Kind regards
Angie Newnham