It may seem like there are a number of advantages to buying a property at auction. You may be able to find yourself a bargain and more importantly you know it will be a quick completion, usually 28 days from the date of the auction. The starting bid is often low to get the room involved and it is easy to get swept up in the excitement of potentially purchasing a property for what may start as a small sum. Due to the time limits involved it is generally cash buyers that purchase at auction. If you were to purchase at auction using mortgage finance there is a risk to you. The lender may not be happy to lend on the property for whatever reason or that the mortgage offer won’t be issued in time for completion.
Properties are sold at auction for a number of reasons. It could be that there are structural issues, legal issues, it is a distressed sale, a significant amount of modernisation is required or simply the seller wants to ensure a quick sale.
When buying a property at auction it is important to note that if you are the highest bidder at the fall of the hammer, i.e. exchange of contracts, you are legally committed to purchase the property regardless of whether you have physically inspected the property, reviewed the auction pack, obtained legal advice, carried out a survey or have funding available. It is therefore imperative that you instruct a solicitor to review the legal pack prior to the auction date, so you can be aware of any issues prior to bidding, in addition to obtaining a survey.
If an issue comes to light after the auction it would be extremely difficult to have the Contract rescinded, i.e. cancelled, unless it can be proved the seller has withheld vital information that would have affected your decision to proceed. However there would still be considerable cost in trying to prove this and you would still be at risk of losing the deposit that has been paid in addition to other costs. You would need to seek the advice of a litigation solicitor.
There are a host of legal issues that could affect a property, which could affect your use and enjoyment of the property as well as the value if they can’t be corrected. Even if a legal issue can be resolved it may be at considerable expense. There may also be restrictions on what you can and can’t do with the property, which could affect your decision as to whether it is a good and/or suitable investment.
In addition to title issues that your solicitor may identify following their review of the legal pack, it is also important to fully review the contract as there are often additional fees payable on completion. It is standard for the buyer to reimburse the seller with the cost of any searches that are included within the legal pack, however it is becoming more and more common place for the buyer to have to cover the cost of the sellers legal fees and any arrears of ground rent/service charge if you have purchased a leasehold property.
As you will see there are a number of reasons for to instruct a solicitor in plenty of time before the auction to ensure that either there are no issues or if they are issues that you are aware of them and know the risks involved before you decide to bid for the property.
To discuss conveyancing issues, please email us at info@ramsdens.co.uk, call us on 01484 821 500 or complete our online contact form, and we will be in touch at a time that is convenient for you.
The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.