In recent weeks there has been an increasing number of clients interested in purchasing both residential and commercial property at auction.
With the market still suffering the effects of an unstable economy, this is to be expected and doubtless there will be properties on offer many may deem a bargain or to offer excellent investment prospects. Bidders would be wise to remember that the potential advantage of buying a property at a reduced rate should be weighed up against the areas an auction can prove problematic.
Firstly, it is essential to inspect the property prior to the auction to satisfy yourself in relation to its state and condition (and its immediate surroundings) plus establish if a tenant is in occupation. We would advise a survey/valuation is carried out in order that, for example, any major structural works required can be identified. Contacting a Solicitor at this stage to carry out due diligence on the legal pack and title to the property could prove invaluable. Properties are often sold at auction with defective or “problem’ titles and it is therefore advisable to investigate as much as possible prior to making a bid.
At the auction itself check the addendum sheet to see if any amendments or alterations have been made to the legal pack and what impact this may have on the property. If you are the successful bidder, you will be expected to exchange contracts immediately and pay a 10% deposit with completion in 4 weeks. It is therefore crucial that sufficient funds are in place for this timescale and bear in mind any Stamp Duty Land Tax the purchase may attract along with associated purchasing costs and disbursements. Once exchange has taken place, you are contractually obliged to purchase the property regardless of what happens in the period between exchange and completion. Insurance following exchange should also be arranged by the buyer.
Given the delays occasionally caused by agents, solicitors, buyers, sellers, search results, mortgage applications and the other usual suspects in purchasing a property, an auction is often seen as quick and easy. It is important to establish however the reason why the property is being sold in this manner and involve a solicitor at the outset in order that risks are minimised and any title issues can be examined as quickly as possible. The old adage that to be “forewarned is forearmed’ is especially true to the auction bidder; exchanging contracts prior to completing the usual checks could lead to the apparent ‘bargain’ proving more costly than at first glance.