Q: I’m interested in buying a property through auction, what should I consider?
A: There are advantages to buying at action; a lower risk of the other party changing their mind on the sale, not being part of a long chain and potentially getting a bargain.
Remember though that when the hammer falls in an auction it is the start of a legally binding contract which cannot be broken and you should therefore that you have completed your due diligence in advance.
It is highly recommended that you take professional advice on a detailed inspection and survey of the property. Often auction properties need substantial repair or have tenant’s that could owe rent. A legal pack will be available pre-auction and you need to present this to your solicitor to review and investigate before you submit a bid. This will give information on right of ways, refusal of planning permission for building work and any covenants on the property.
On auction day, check if any changes have been made to the information; searches are often not available until the last minute and these will advise you, amongst other things, of any building regulation approvals, charges or contamination notices.
Keep an eye on your costs; house price, solicitor’s costs, searches and an additional 3% Stamp Duty Land Tax if you already own a property. In addition there will be an auctioneer fee, property insurance (check if needed from date of purchase) and if you are successful in your bid you may have to pay a deposit on the day. Some auction contracts will also require you to pay the seller’s legal fees.
Completion can be within 20 days (check contract terms in case it is sooner) and therefore it is imperative that you have funds available, or agreed in advance, as if you fail to complete the purchase you could lose the deposit and be subject to a breach of contract which carries hefty financial penalties over and above the 10% deposit.