With house prices booming, many buyers have looked to
purchase properties at auction in order to find a bargain and
avoid the traditional and often lengthy buying process.
Once a bid at auction is accepted, the purchaser is bound into a
contract with the seller without the option of retracting, which is
why it is important to be well informed before the hammer hits! If
you are thinking of buying a property at auction, we have
prepared the following list of considerations.
Before the auction
Decide on the location you would like
to buy in and look out for auctions in local papers and
by contacting local estate agents.
Once you have found an auction you
are interested in, carefully review the auction catalogue. Be sure
to read any conditions set out.
After shortlisting the properties,
ensure you make arrangements to view them with a builder,
architect or surveyor in order to gauge how much work needs to be
done to the property and factor those costs into your budget. It is
important to do this relatively quickly as the auction catalogue is
normally available just 4 weeks before the auction date.
When deciding on your budget and
bidding limit, it is a good idea to research similar properties in
the area to find out their selling price and to have an idea of the
true market value of the property.
Costs to consider include
administration fee to the auction house, Stamp Duty Land Tax,
building insurance, and legal fees and other expenses, such as Land
Obtain a legal pack from the
auctioneers – this will contain documents including the title
deeds, local authority search, and Law Society protocol forms
(property information form and fixtures and contents form)
completed by the seller.
It is important to seek legal advice
in order to check if the property is subject to any covenants
(positive or restrictive) or benefits from any easements/rights, or
contains any other legal issues that may prevent or impede any
future sale or mortgage. It may also be advisable to carry out
further searches if the documents reveal any issues. However, this
may be an additional cost, which may become redundant if you chose
not to proceed or are out-bid.
Ensure you have made financial
arrangements before the auction date. You will need to have a
deposit of 10% ready on the day and the remainder of the purchase
monies within 28 days. It is vital that you have the funds readily
available as you will lose your deposit if you are unable to pay
within this time-frame and may also be required to pay the costs
associated with reselling the property. If you are going to need a
mortgage then it would be highly advisable to have agreed a
mortgage with the lender beforehand to avoid unnecessary delay.
Bear in mind that a mortgage application can take anything from a
matter of weeks up to months to process so give yourself plenty of
On the day of the auction
Take two forms of identification with
you, along with a form of payment and your bank account
Ensure you are in sight of the
auctioneer so that your bids are acknowledged.
Keep your budget in mind at all times
to avoid committing to something under pressure that you will
not be able to honour.
If your bid does not meet the reserve
price, you may still be able to agree a price with the sellers via
the auctioneers acting as agents.
The Residential Property team at Blaser Mills is experienced in
auction purchases. We can help to ensure that you are well
informed about the process and any issues affecting the property
before you commit yourself to buy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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