Solicitors specialising in buying a property at auction
Buying property at auction is becoming increasingly popular. In fact the latest figures, dated December 2017, showed an increase in the amount of property sold annually at auction – up to almost £530 million of which most (over £340M) was residential property.
Why the increase in property sold by bid? The state of the economy, and the property market in particular is the biggest driver. But in the long term, amongst the factors affecting auction sales are a combination of an increase in social mobility coupled with much higher levels of home ownership have resulted in more and more people inheriting property from relatives living miles away. In such circumstances, it can prove very difficult for the owner to organise a local house sale and in particular to show any property to prospective purchasers – so selling the property swiftly in this way often fits the bill.
And buying a property at auction can not only prove be a great opportunityto pick up a bargain – but it also means that you don’t need to worry about the kind of delays you can end up with in conveyancing chains.
Looking to buy property at auction? Our specialist auction conveyancing solicitors can help.
Remember – the Conveyancing Process for Buying at Auction Is Very Different
If you aren’t familiar with auction sales, do be aware that the whole auction process, from preparation and viewing the property to the legal aspects of the sale itself, is quite different from the normal conveyancing transaction. And that’s why you need a solicitor with plenty of auction experience – and you need to instruct them well before the auction itself.
In particular, you really need to make sure you have properly viewed the property properly in advance of the auction, and have done all of your due diligence [including having gone through the legal pack with your solicitor] – because if yours is the highest bid at or above the stated reserve price, you actually exchange contracts on the fall of the auctioneer’s hammer. So you need to know exactly the kind of property you have bought.
Our property team have the experience you need. Our auction solicitors deal with buying properties at auction both locally throughout Wiltshire, Hampshire and Dorset, and nationally throughout England and Wales from our offices in Salisbury, Fordingbridge and Andover .
Preparing to buy a property at auction
However if you are looking to buy at auction, do make sure that you do your homework in advance. In particular you may want to follow the following steps:
1. Do your preparation
- Identify what sort of property and which area you are interested in. Talk to local estate agents and local people discover if the area has any problems. Check out the address on Google – what you find out may surprise you. Attend an auction or two. Get used to the unique bidding atmosphere. Make sure that you don’t overlook the property’s faults.
- Study the catalogue to see what the reserve prices are and compare with the eventual auctioned price
- Decide on the maximum price you are prepared to pay and do not deviate or be tempted to up your price because other bidder
- Get your auction solicitor to look at the legal pack in advance [ see below]
- Before you even consider bidding on a property you should familiarise yourself with the auction process and also attend an auction if possible.
2. View the property yourself
Once you have found a property that you are interested in buying, get in touch with the auctioneers to set up a viewing.
3. Have the property surveyed and valued
This is probably the main disadvantage of buying property at auction. Surprisingly not everyone does this, on the basis that if they don’t end up buying the property the price of the survey will be wasted – but it is always sensible to get a proper survey done, even if it means that you spend perhaps £1000 on a property which you will never own.
• Visit the property accompanied by a RICS surveyor who will provide you with an idea of any potential problems, the value of similar properties in the area and the cost of any renovation work
• You are arranging a mortgage through a bank, building society or other mainstream lender, you will probably have to pay for a “Valuation Report”. Do not rely on it. This kind of Valuation Report is not a full structural survey – it’s just a limited valuation for lending purposes to reassure your mortgage provider that they can recoup their moneyb if you default on the loan
You’ve found a property you like – what’s next?
• Study the auction catalogues to see what the reserve prices are and compare with the eventual auctioned price
• Decide on the maximum price you are prepared to pay and do not deviate or be tempted to up your price because other bidders do. Bear in mind that the guide price of auctioned properties are often set artificially low in order to ramp up interest. So do your own reswearch as to the real market value of the property – and base your bid on that price.
1. Sort out your finances in advance
- Amazingly many people simply fail to arrange their finances before turning up at auction.
- Make sure you get a mortgage agreed in advance – at least in principle.
- If you are considering purchasing a buy-to-let property at auction, be aware that most mortgage companies only lend on buy-to-let loan properties if they are ready to rent out to prospective tenants – which might be a problem if you are planning to buy a property that needs weeks of renovation.
- Many properties sold at auction will require modernisation or at least some redecoration – bear that cost in mind when deciding on your budget.
- Don’t forget to bear in mind both stamp duty and the auctioneers’ fees.
2. Set yourself a bidding limit
- Don’t let the excitement of the auction atmosphere tempt you to exceed any budget or bidding limit you set yourself prior to the auction itself!
You’ve won the bid – what’s next?
• Expect to pay a deposit of 10% to secure the property to the Auctioneer or the Seller’s Representative. Take two forms of identification with you. You will be expected to provider your own Conveyancing Solicitor’s details
• Ensure that you have secured a mortgage and are ready to complete within 28 days.It often sensible to make sure you also have sufficient cash in reserve in case the lender insists on hanging on to part of the loan monies until specified work is carried out at the property
• Contact your mortgage company to ensure that you have secured funds in place and do not run the risk of forfeiting your deposit
• You are legally bound to purchase the property and you must exchange on the same day
• The date for completion will be set. The Auctioneer will usually give the completion date before bidding starts. Completion is often set for 28 days time – though can be sooner or later. Do listen to what the Auctioneer says before you start to bid
• Failure to complete on time will cost you interest on the completion monies thatare due to the seller
Your Auction Solicitor and the Conveyancing Process
Buying or selling a house at a property auction is quite different from the normal conveyancing transaction. So don’t forget that you need to make sure that your solicitor has plenty of experience in representing clients in auction sales and purchases. As a result, prior to the auction, you will need to make sure that your auction solicitor has time to have a good look at the legal pack.
In particular your solicitor will need to sure that you are aware of any particular sale conditions and any potential problem issues.
If you and your solicitor don’t your homework in advance, you risk ending up purchasing a property with major flaws – perhaps a house that never had planning permission in the 1st place, or a flat with really expensive ground rent and management charges, or other onerous conditions.
Our specialist property auction solicitors have the experience to enable you to make your winning bid with confidence.
What does a property auction legal pack contain?
The legal pack contains documents relating to the auctioned propertyand and will have been prepared by the vendor’s solicitors and often made available about 3 or 4 weeks before the actual auction. However there is no legal requirement for the seller to provide a comprehensive pack. The legal pack usually includes;
- the title deeds
- results of any searches
- special conditions of sale
- property information form
- the fixtures and fittings form
- a management information pack and the lease itself [if the property is leasehold]
- any existing tenancy agreements
- any existing or lapsed planning permission
Properties are often sold at auction because they will not struggle to sell on the open market – perhaps because of legal problems. The Legal Pack should reveal details of any legal problems affecting the property.
It is therefore vital that you check these documents and unless you are extremely confident in your ability to fully understand the whole conveyacing process, get your solicitor to review the pack before the auction.
Our strong advice is that unless you are 100% happy with the legal documentation pack – do NOT put in a bid.
A legal pack usually remains valid for 6 months.
Auction Conveyancing – Watch out for Additional Costs
Don’t forget that even if you have won the bid, that bid price is not the only cost you’re going to have to pay. Make sure you budget for the following additional fees and taxes, which can often add up to an additional 10% or more to the overall purchase price;
- Stamp Duty
- Purchaser’s Admin Charges
Most auction houses levy an additional administration fee on the buyer which is often due to be paid on exchange of contracts as a payment quite separate to the deposit. This fee is usually a fixed amount a fixed amount and not a percentage of the hammer price
- Purchaser’s Premium
While most auctioneers do not charge the successful bidder a buyer’s premium (a percentage of the bid price) as well, some auctioneers do take property on the basis that although the vendor will not have to pay a fee to the auctioneer, the successful purchaser will be charged a percentage premium fee instead.
This kind of fee should be clearly set out in the auctioneer’s catalogue.
- Special Conditions of Sale
Always make sure your auction solicitor has carefully explained to you any additional conditions in the legal pack. These may include;
- local authority search fees
- a contribution to the sellers own legal costs, which could be a fixed fee
- an overage or “claw back” clause – a sum that may be payable in addition to the original sale price following the completion of a specified condition e.g. and uplift on the original sale price where planning permission for residential homes is subsequently granted
Can I make an offer prior to auction?
Yes, you can – although it really depends on both the auction house and on the vendor as to whether or not they will accept any offer before the auction itself.
This strategy works best when you think that the guide price has been set too low and you sniff a bargain. Usually your offer will need to be at least at or above the guide price. Do bear in mind, if you do have an offer made prior to auction accepted, you will probably be under considerable pressure to exchange contacts very quickly – probably before the auction itself which may leave you very little time.
So if you are thinking of using this strategy to buy a property, you really need to have done all your legal and physical due diligence before making the offer.
Call our Auction Solicitors today for a FREE no obligation quote
Whether you are local to our our Salisbury, Fordingbridge, Andover or Amesbury offices, or you are based elsewhere in England and Wales, we can help you – we regularly help clients nationwide with auction conveyancing, taking instructions by phone, email and Skype video/FaceTime.
We also have a dedicated specialist team acting for property investors nationwide. Click here for more information