The convincing work for selling or buying an auction property is different from a traditional sale. Below we have put together a guide to help you understand those differences.
Auction Convincing Process
The main difference with auction property compared with traditional sales is that the contacts are binding once the bid has been accepted. With traditional house purchases the contacts are not binding until the contacts are finalized. This process can take a few weeks as the conveyancer will check the title and make enquires and searches on the property. Once all these are back on the mortgage offer has been received it will move to exchange of contacts. Only then is a traditional sale binding and the seller and buyer are committed to complete.
When purchasing an auction property the commitment to complete is as soon as a bidder has been successful. There are no enquires, searches or titles checks carried out at this point. These checks will need to be carried out prior to the sale.
The main reason why people buy action properties is because they think they are picking up a bargain. Most properties which are being sold though are generally in bad condition or have issues with the title. This is why you need to take extra care when buying an auction property as it may come back and haunt you.
If you are going to an auction you need to do your homework on the property you are interested first. It is so that you know exactly what you are getting yourself into. One of the best ways to safeguard you is to hire an auction conveyance before bidding. They can then check the title deeds and investigate it for you. A full structural building survey is something which you should carry out when bidding for auction property.
If you use an auction conveyancing company they can create a pre-auction report on the property. Auction property sales have conditions attached to them which are subject to the sale. The conditions will regulate the way the sale is conducted and will form the contact of the sale. A buyer has to follow these so it is important to ready and understand them.
The sales catalogue will generally have the terms and condition in it. This is not always the case though and they may be a separate document relating to the conditions for each property. If there are problems with the title these will be included in the details. They are likely to state that the purchaser is not allowed to raise objections once sold.
The best thing to do when buying an auction property is to instruct a solicitor first. This way they can check the terms and conditions and give expert advice on any issues. The solicitor will be able to get a legal pack from the auctioneer which will have details about the title. If searches have been carried out they will receive a copy of these which they can check. If not they can send off for searches and any other legal information which is of importance.
It can backfire on you if you do not get a survey or report on the title before you start bidding. They will cost you money to get them but it will be money well spent. The last thing you want to do is to spend your life savings on a property which has problems with the title. This could stop you from been able to get a mortgage and make the property impossible to sell on.
If your bid is successful at an auction you will generally have a 10% deposit to pay. It is due immediately to the auctioneer on the day of the bid. If you are unable to complete on the property due to unforeseen circumstances such as a bad title, the deposit money will be lost.
A property conveyancer can help you by producing a pre-action report. The cost of this is not very expensive and less than what it costs for the legal work for a full purchase. If you end up buying the auction property the costs of this report are deducted from the total cost.
Check List for Buying Auction Property
Finding out information about a property you are interested in at auction is difficult. It can be extremely hard to raise enquiries or searches before a property has been sold. This is down to the fact that most auction property are repossession or ones that are being sold due to a death. In these cases the sellers do not have much if any knowledge regarding the property.
Most properties will have had searches carried out but you will come across some which have not. A great number of buyers take a chance and do not carry out searches before bidding. They do not want to spend money on something they are not certain to buy. If you use a house conveyancing company they will be able to give advice on the best way forward. They may recommend that you use indemnity insurance as an alternative.
Purchasing Procedure for Auction Property
If your bid has been successful you will have to supply your details and pay the deposit to the auctioneer. The deposit paid will be the amount which is set out in the terms and conditions. A memorandum will be produced which will need to be signed by the buyer and the auctioneer. A copy of this will be sent to your conveyancing company so they can start the sales process.
A completion date will be set which the buyer must meet as part of the sale conditions. On the completion date the remaining balance of money will be transferred and the sale is complete.
The average time for completion is set at four weeks from when the bid is accepted. This is why it is important to have the finance in place before you make a bid. You could end up losing your deposit if you do not complete on the date set out in the conditions. Arranging finance can be problematic for auction property and many buyers make the mistaking of thinking an offer in principle is a guaranteed of finance. It is not and a full application will need to be made once the bid is accepted.
The most common problems which stop mortgage lenders providing a loan is a defect or problem with the title. If this happens alternative financing will need to be found or the contact renegotiated. If that is not possible the sale will fall through and the buyer will lose their deposit. Not only will the buyer lose money but they can be sued by the seller for any losses.
Until completion takes place the buyer is not allowed to take occupation. If the buyer is in a position to complete earlier than the set completion date most sellers will allow this. By instructing an auction conveyancing company before bidding they will be able to start the work start away to help aid an early completion date. When it is a cash purchase this will help the sale complete fast.
In order to make sure of a fast hassle free completion a conveyancer should be instructed before the purchase. By doing this is means the seller’s solicitor can send out details of the property straight away. By carrying out a pre-auction report through a conveyance will help the sale to progress quickly.
Pitfalls of Auction Property
You are taking a risk when buying an auction property as no guarantees are given. If you discover problems which the property has, it is unlikely that you will be able to do anything about them. Normally when you buy good and they are faulty you are protected by consumer legislation and you can get your money back. With auction property you cannot do this and will have to deal with the problems yourself.
It is possible to take action if the property has been miss-described in the catalogue for the auction. However, this will mean going to court and will entail a lengthy legal case which could cost thousands.
All this been said do not let it put you off purchasing a property at auction. If you are careful and carry out full due diligence, you could pick up a bargain. By speaking with and instructing an auction conveynacing company first you could safeguard yourself. Otherwise it could backfire and end up costing you your life savings.