Buying a property at auction - key points
There are various steps to consider if you are interested in buying a property at auction. It is very different from the usual conveyancing process.
Step 1: Finding a property
Browse auction house catalogues and read the details thoroughly. Identify the property you are interested in and check for open houses/viewings, this is to ensure the property is as accurate as described. It may also be useful to compare with similar properties, if applicable.
The ‘Auction Guide Price’ that you will find in the catalogue, is simply an approximation of the reserve / minimum price set by the seller. Check to ensure that this is the same on the day of the auction - depending on the interest generated, this may have increased.
Do your research on the property; speak with local estate agents and neighbours (where possible) for their opinions of the property/area and seek professional advice of either a chartered surveyor/ builder/architect to ensure you have a thorough understanding of what is included.
Once you register interest in a property, you will receive an auction pack containing local searches, title deeds, property information and fittings and contents of the property. It is advisable to instruct a solicitor to review and report on these to you, so that you are fully aware of any associated rights, covenants or issues before you decide whether to bid. You will also need to check the ‘special conditions’ related to the property, as this will contain the completion date and any other additional fees that you may be liable to pay ie a contribution to the sellers legal or search fees.
Properties are often sold at auction when they are either difficult to obtain a mortgage on or have something out of the ordinary about them, that’s why it is so important to find out as much information as possible before you buy.
Top tip: If you are new to this, it may be useful to sit in on your first auction to be aware of how the day works - it is a quick paced process, so it may help to get one step ahead!
Step 2: Preparing for auction day
Ensure you have at least the mandatory 10% deposit of the sale price, available on auction day, as this will be paid when contracts are signed. Check the method of payments that are accepted at your auction house, so that you can arrange funds to be available before you begin bidding.
If you require mortgage support, speak to a mortgage broker for advice and arrange a mortgage agreement in principal from either a bank or building society before auction day. If you fail to have the correct funding in place, there is a risk that you may not be able to obtain the funds and you could be liable and fail to complete on the stated completion date.
It is essential that you understand the term ‘buyer beware’ as you will have no protection under the Consumer Contract Regulations ie you will not be able to receive a refund if you are not satisfied with your purchase.
Step 3: Auction day
If applicable, speak to your auction house to see if they can facilitate the option to attend via telephone by proxy ie where an agent bids on your behalf with a limit set by you.
Arrive early with enough time to pre-register; you will most likely need to provide two forms of your identification and proof that you are able to pay the minimum 10% deposit.
Keep your maximum budget in mind and have a strategy to ensure that you maintain this; stick to what you know you can afford, as it can be easy to get carried away when people around you are bidding on the same property.
Some auction houses provide paddles, others will allow bidders to call out loud - whichever way, auctioneers are trained to spot people looking to bid and once you have made a bid, they will continue to return to you until you indicate that you are no longer interested.
Once you have successfully bid on a property and the auctioneer slams the hammer, contracts are exchanged. Your deposit will be paid over and you will sign the memorandum of sale. You are now legally bound to buy the property on the stated completion date and will be subject to the terms and conditions contained within the auction pack.
Top tip: The property is your responsibility if you have made the successful bid, so make sure you set up buildings insurance from the date of the auction, to protect against things such as flooding, fire damage etc.
Step 4: After auction day
The remaining 90% balance of the property, plus any additional fees that may be required, must usually be paid within 28 days ie 20 working days (check your ‘special conditions’ contained in the auction pack). If you are yet to instruct a solicitor to advise you, you will need to instruct one now to arrange completion and register your purchase with the Land Registry. Auctions can be a great place to grab yourself a bargain property, so attend and enjoy, but ensure you are as prepared as you can be!
If you would like advice about buying a property at auction, please contact our residential property department on 01603 625231 or you can email me at ancox@cozens-hardy.com.