Found a home to bid on at a local Property Auction?
Visit our Property Auctions page and order your Solicitors Pre-Auction Report (SPAR) today.
Your Fridaysmove's Property Auction-specialist Solicitor will guide you through the process of purchasing at auction and will guard against the legal pitfalls which regularly trap unwary homebuyers.
1. Do your homework
Many auctioneers hold monthly or quarterly auction sales with a catalogue printed some weeks in advance. You can also subscribe to catalogue mailing lists. It is worth asking why the property is on sale at an auction in the first place; does the owner want a quick sale or has the property been repossessed by a mortgage lender? It is generally safer to buy a property that is being repossessed or from a local authority as you have more comfort as to the reasoning behind the sale. Always be a little bit more sceptical if it is an individual selling it. Always instruct a conveyancing lawyer to review the legal/conveyancing documentation prior to auction. If there is a Home Information Pack pass it on to your conveyancing solicitor.
2. Conduct dress rehearsal
Attend one or two auctions and watch how things work before doing it for real. Auctions can be more complex than they look (especially on TV) . Having a taste of the experience will ensure you know what you are doing when it comes to the day you wish to bid.
3. Get the auction pack
Every auction property will have a corresponding auction conveyancing papers and Home Information Pack . This includes the title deeds, local authority and drainage searches and Property Information Questionnaire . In the case of a leasehold property the auction pack may include a copy of the lease, management information and a sellers leasehold information form and other conveyancing documentation specific to a leasehold property.
4. Inspect the property
Apart from the conveyancing checks, you also need to visit the property. As with any house purchase, remember the three most important non conveyancing advice about buying a property location, location, location. Websites such as www.upmystreet.co.uk can provide useful information on schools, crime and amenities. Check that the property is vacant. If you are intending to purchase the property being vacant then ensure that your conveyancing solicitor checks that the contract provides for vacant possession.
5. Understand how an auction works
In an auction a reserve price is usually placed upon every property. If bidding reaches the reserve price and the property auctioneer’s hammer falls with you being the highest bidder, then you are the successful buyer. This also means you are legally committed to paying the price you bid.
6. Have finance in place
If your bid is successful you will need to pay 10% of the cost of the property at the auction. It is not for your conveyancing solicitor to pay the deposit. The balance has to be paid in full - and the purchase completed – on the prescribed date set in the contract. Make sure you have the money you need for the deposit with you and the rest available by the completion date.
7. Get a survey done
Some auction properties require significant amounts of building work or have a history of structural problems that might be expensive to fix (which may be the very reason why they are being sold at auction). So get a survey done before you even think about bidding.
8. Factor in additional costs
When working out your budget, take into account the cost of surveys and conveyancing advice. You will need your solicitor to do the conveyancing and also pay for a survey. You will also have to pay stamp duty at the prevailing rate . Also, the auctioneer may demand a buyer’s premium equivalent to 1. 5% of the sale price and sometimes sellers ask for the auction fee and conveyancing work to be paid for by the buyer, so check the small print for extra conveyancing and other costs before you bid.
9. Keep to your budget
Before entering the auction room, decide on a budget and stick to it. Never get caught up in the emotion of the auction even if you competitive by nature, and never bid above your pre-set price. Keep a calm. If you think you might be unable to do this, get a conveyancing solicitor or auctioneer to do the bidding for you. A number of conveyancing lawyers at Fridaysmove attend auctions.
10. The day of the Property Auction
On the bid day, you will need a couple of pieces of identification ( the auctioneers are obliged to comply with Money Laundering ID Requirements in the same way as estate agents and conveyancing solicitors ) as well as a cheque to cover the 10% deposit – as stated above. Your hand or catalogue can be used as a signal a definite intention to bid and catch the auctioneer’s eye. If he or she receives a higher bid s/he will return to you in case you wish to better it. He will also warn you when the bid is about to be closed, usually three times "for the first time, for the second time, for the third time and final time - sold!"
One last Property Auction tip. . .
Prepare yourself with a Solicitors Pre-Auction Report. We cannot stress how important it is to collate as much information as possible about the home you wish to bid on. Don't attend a Property Auction without doing your homework!