Buying a property at auction explained

 

 

A house I like is going to be auctioned. How do I go about making a bid and what should I look out for?

Buying property at auction is becoming increasingly popular, due to the shortage of homes for sale. If you are new to the process, you should do your research before placing a bid to ensure you understand the commitment you are making.

You will need to instruct a solicitor in advance of the auction who can review the sale pack, which includes the property’s title deeds and usually, up to date searches. This means you are potentially incurring costs on a house you do not buy. Your solicitor will give you a report and details of any queries or questions you should raise at the start of the auction, before bidding begins.

If you are successful, you are legally committed to the purchase, so it is worth the initial expense to ensure there are no nasty surprises awaiting you. Contracts will be exchanged at the auction and a completion date set, normally 28 days later.

You will need to contact your solicitor again after the auction, so they can deal with the completion procedure and the necessary documentation to transfer legal ownership of the property to you. They will also arrange for any stamp duty to be paid to the Inland Revenue.

How do I fund an auction property?

You must make sure you have funding in place before attending the auction, as you are legally bound to proceed with the purchase if your bid is successful.

As you will be expected to complete so quickly, there isn’t time to put a regular mortgage in place, so if you don’t have cash in the bank, you will require alternative borrowing.

You will be asked to pay a 10% deposit on the day of the auction, which means you need to have cleared funds ready to draw down.

Should I consider selling a property at auction? 

You may find an auction is a suitable option for selling a property, if speed is of the essence. For example, a quick turnaround is often advantageous when disposing of a deceased estate.

As before, you will need to instruct a solicitor before the auction to prepare the legal pack. You may have to pay for searches up front, but it is normal practice for these costs to be recovered from the buyer on completion.

As the buyer cannot raise enquiries after the sale has been agreed and contracts are exchanged, there should be no delays in the transaction. However, the downside is you could end up with a lower offer for the property than you would have achieved on the open market.