Buying a property at auction is not for the faint-hearted or the under prepared – once the hammer is down, you are contractually liable to purchase the property. You need to know what you are doing (and be aware not to scratch your nose or move your arm at the wrong time in a bidding process).
This guide explains the different steps involved, and summarises some of the common pitfalls to try to avoid when purchasing through auction.
- Auctions are fast-paced. Attend a few auctions before you are ready to bid to learn about how the process works.
- Find a solicitor who is experienced in property auctions who can guide you through the process and ensure the property is suitable for your needs.
- Review the online and printed auction catalogues in advance. Pick out your favourite properties and establish which (if any) meet your needs.
- If possible, visit the properties before the auction and take a builder, architect or engineer with you to identify potential issues or costly works and repairs.
- Gather as much information as possible about the property and notify your solicitor. A solicitor will:
- perform due diligence checks, look at planning and identify any concerns by carrying out a number of searches.
- check whether you will need planning permission for the commercial use of the property. Changing the use of a property can be complex. For example, changing an office to a restaurant requires a planning application to be submitted to the local authority.
Organise your money and budget
- Guide prices will vary before the auction and bids may shoot up during auction. Set a realistic budget for yourself and ensure you have a “decision in principle” from a lender to make sure you can fund the bid.
- If you bid and win the property at auction, you will have to put down a deposit immediately after the auction ends (usually 10%). You may also be required to pay a fee to the auctioneer. Remember, after the auctioneer shouts “Sold!” there is no going back.
Get in there before anyone else
- If you have your heart set on a particular property, it's sometimes possible to place an offer before the auction has started. To do this, you should make an offer to the auctioneer in writing, who then consults with the seller to see if they are willing to accept your offer. If the seller accepts, contracts will be exchanged and you will pay the deposit. The remaining balance is due on the completion date, often around 20 working days after the exchange of contracts.
- If the remaining balance isn’t paid on the completion date, the seller has the right to keep your deposit and re-auction the property.
Attend the auction with a set plan
- Before you attend, check the property you are interested in is still for sale and has not been withdrawn.
- Bids can be made in person / online / by phone. You can also send someone on your behalf to bid, such as a solicitor or agent, but, regardless of who attends they need to keep a cool head and avoid competitive instincts.
- Have all the information to hand regarding the property and be sure to know what you want to bid.
- Ensure you know the lot number for the property on which you wish to bid.
- Check the Addendum to the sale for any changes that may have occurred with regard to the property and its sale.
- If the property does not meet the reserve price, it will not be auctioned, but you could always contact the seller after the auction to make a private offer.
It's sold ......
- After you have paid your deposit, the remaining balance is due on the contractual completion date. Because all the surrveys and title checks were done prior to the auction, the purchase normally completes within four weeks or less.
- Property law is an extremely complex area. Taking the time to find and invest in a good legal partner at an early stage is important to any business or individual. A solicitor can guide you through the process of an auction help you avoid making a very expensive mistake.
This article was written and contributed by :WSP Solicitors
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to WSP Solicitors directly.
Published on 24th July 2019
(Last updated 13th November 2019)