Property auctions are proving a popular alternative method for buying and selling property
Buying property through an auction is attractive as it is typically cheaper and quicker than purchasing through an estate agent. There are also likely to be fewer parties involved, and the legal process is simple: a binding contract is created between the vendor and the purchaser when bidding finishes and the hammer falls.
Are property auctions very different?
Many attend property auctions forgetting that the process of acquiring property at auction is actually very little different from the traditional process. There is unlikely to be a chain, but apart from that you still have to run legal checks, have a survey, arrange finance, and you are still subject to a legal contract.
Instead of the more lengthy, traditional, ‘exchange-then-complete’ property contract that many of us are used to, the contract is ‘signed’ by the highest bidder when the hammer falls.
The property particulars are all in the Auction Pack
Another difference is that instead of estate agents’ particulars, you have to study an ‘Auction Pack’ provided by the auction house. The information in your Auction Pack is all about the property for sale, and includes:
• the Register of Title and title plan, or copy deeds to the property, to show ownership, as well as the boundaries;
• any applicable leases;
• Local Authority and Environmental searches;
• Property Information Form;
• any special conditions of sale;
• planning permission documentation, if applicable;
• any management information;
• any tenancy agreements.
Understanding the Auction Pack
This is a lot of information to digest, and given the speed of the property auction process it is strongly recommended that you speak to a conveyancing solicitor before you even visit the auction.
Standard practice is for buyers to pay a 10% deposit once they have won a bid. If you have contracted your conveyancing solicitor early in the process, they will be ready to negotiate alterations in the auction house’s standard contract if required.
As experienced property solicitors, conveyancers will be ready to check key issues such as the title, the tenure, leases, and searches. You only have to read the comments on our Property Auction Issues article.
Process of bidding for auction property
1 Find a property auction
Search for property auctions in the area you are targeting. Once you’ve found some, download their catalogue and see if there’s anything you are interested in bidding on. You have to move fast, as there’s typically around a month between publishing the catalogue and the auction itself.
2 Research properties in the catalogue
Go through the catalogue thoroughly, and mark out any properties you are interested in.
3 Visit any auction property that interests you
You should arrange to view properties before you go any further, with a surveyor or builder if you are serious. The Auction Legal Pack will also be made available to you, this is where you find all the paperwork related to the property. This includes auction terms, property titles, searches, floor plans, energy performance certificates, and other information which is specific to a property.
4 Contact a conveyancing solicitor
As soon as you’ve started to read the auction legal pack you will realise why going through it with a property solicitor is a good idea. They’ll also warn you about any non-standard terms, especially if they specialist conveyancing solicitors.
5 Make sure the money is ready if your bid wins
When a property auction ends, the highest bidder usually has to pay 10% of their winning bid. And if a mortgage is needed to provide the remainder, there will usually be one month’s grace to pay. This is why you should have a mortgage agreed in principle before the auction starts.
6 Buildings insurance from when the hammer falls
You should arrange buildings insurance to be in place from the moment the hammer falls. Once the property is yours, you are liable for any issues whether or not you are aware of them.
7 Be prepared for the auction
When you attend an auction in person, make sure you have identification with you. Passport, driving licence, utility bills as proof of address are standard, and you need to show you have access to the 10% of bid price too.
If you use an online auction, the requirements are broadly the same, though an online property auction is typically open for bids 24 hours a day, 7 days a week, until the auction closes.
Key points to remember about property auctions
It’s worth remembering that property is sold through auction for a reason.
The most common reasons for selling property in this way are, in our experience:
- it’s often the fastest way of completing a sale;
- in an auction it is more difficult for the buyer to pull out;
- the quality of the property may not be as good as property sold by an estate agent;
- there’s more likely to be difficult legal issues involved, or problems with the title;
- auction properties are more likely to have sitting tenants.
Contact specialist property solicitors
If you are interested in acquiring a property at auction, and want to avoid the legal issues that we encounter as property solicitors, contact Cunningtons LLP early on in the process.