Buying property at auction is a great way to buy property – you can get a great deal through an exciting and vibrant process. But, for some, buying property at auction can be an overwhelming and a confusing process.
Unlike usual conveyancing transactions whereby contracts are legally binding upon exchange, at auction the contract is effectively exchanged with a successful auction bid. So, raising that baton and a nod of the head in the frenzy and excitement of the moment has lasting consequences. Something can seem immediately more attractive when it is in demand but what can you do to ensure that you are cool, calm, collected and most importantly prepared for a property auction?
Below are some key factors to consider:
What can you afford?
If you are a cash buyer then this is straightforward, however, if a mortgage is required then matters can be more complex. When a successful auction bid is made a completion date is inserted into the contract. You must have sufficient funds to complete otherwise you will fail to complete and will be in breach of contract (this is another topic for another day!).
We recommend prior to the auction that you consider contacting a mortgage broker or the lender directly to ensure that mortgage finance is likely to be available based upon your circumstances – don’t forget the majority of lenders will require a valuation to be undertaken so that will need to be arranged ASAP.
Do you really want it?
This may seem a bizarre question – if you have made a bid, then of course you want it! But what background checks have you done? Have you seen the property (you would be surprised to note the amount of people who bid for a property without having even seen it)? Is it suitable for your intended purposes – if you are going to rent the property is there a demand? If you are going to live there have you visited the area at different times at different days for example to ensure the area is the one for you? Take a look at our blog here for more on this.
Have you had the legal title to the property checked?
This is where Barnes & Partners can assist. We understand that timescales can be tight when considering buying a property at auction. At Barnes & Partners we are able to consider the auction papers and advise if there are likely to be any problems to buy, finance the property or re-sell the property for example:
- To Buy
Auction contracts can and usually do contain additional clauses that are not normally found in conventional conveyancing contracts between a seller and a buyer. There may be a provision, for example, whereby the buyer is under a duty to pay 2% (this figure is variable and therefore may be higher!) of the purchase price upon completion as contribution towards the sellers legal fees. This can be costly if you are unaware beforehand and may have effected your bid had you known.
- To Finance
The Seller may have owned the property for less than six-months. This will immediately make the property less attractive should mortgage finance be required as most lenders will not lend in these circumstances.
- To Re-Sell
Some properties are offered at auction for a reason. It could well be that the property is only suitable for cash buyers only for example due to a short lease on a property or an incomplete title making the property harder to sell on the open market
Once you have bought a property at auction you will generally require the services of a solicitor to complete the transaction on your behalf. At Barnes & Partners we are able to offer a comprehensive service to complete the transaction, attend to payment of stamp duty on your behalf and register your title to the property.