The 5% Mortgage Guarantee Scheme
Conveyancing Executive Connor Walker takes a look at the new government backed guarantee scheme and how it will work in practice.Read more
Despite this, it is important to think carefully before buying at auction and to proceed with some caution or the result could be that you are contractually committed to buying a property that, in hindsight, you do not really want.
It is essential to be prepared before the auction and to have done your homework well in advance. If the property appears at an unrealistically low price, there could well be a good reason for this.
From a legal point of view, it is advisable to employ a solicitor or other legal representative to check the auction pack.
This will usually include the draft contract, title documents and search results, which can be checked by your legal representative to ensure that there are no adverse matters that affect the property.
For example, there could be restrictive covenants that prohibit your proposed barn conversion works or your intention to turn a disused shop into a dwelling.
It may sound obvious, but it is important to view the property in advance to make sure that there are no issues in the vicinity.
The sales brochure is not likely to mention, for example, the sewerage plant located next door.
There could be a physical reason why the price is low, for example, structural problems.
With this in mind, it would be advisable to have a survey undertaken well before the auction.
If the property is advertised as ‘in need of renovation’, it is important to check that the relevant planning permission can be obtained. For example, there is nothing to be gained from buying a derelict church for conversion when planning does not allow for this.
You should make sure that you have your finance in place. As strange as it may sound, it is not always realised that the fall of the hammer at the auction signals exchange of contracts.
From that point, a bidder is committed to buying and must pay a 10% deposit before then having to pay the balance before the contractual completion date.
Usually, there will only be 28 days until the completion date and if you need mortgage finance, it typically takes much longer than this to organise.
Make sure that, at the auction itself, any last minute announcements are taken into account. These can sometimes be far-reaching and should not be dismissed as irrelevant.
Always work to a budget and keep to it. Beware of fake bids to up the price!
It is not uncommon for people to attend an auction and buy a property before then contacting their legal representative. By that time it is really too late to change your mind as contracts will have been exchanged and a 10% deposit paid. If there are issues at that point then there will be a choice of either proceeding despite the issues or to pull out and lose your deposit plus any other costs/damages that the seller has incurred along the way, not to mention your own professional fees. This can all prove very expensive.
It is not all bad news and by being cautious and not too impulsive, an auction can be a great way of buying a property hopefully at a good price.
For more information about buying a property at auction, please contact us on 01332 226 129 or complete the form below.
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