Don't Slip Up When Buying Property at an Auction
We understand that buying property at an auction is very appealing indeed. The main attraction being that you avoid the long-winded process of buying a house and it’s all condensed into a matter of minutes rather than several months. Hammer falls – you own the property.
However, you have to be extremely careful when buying property at an auction.
If you successfully purchase a property at auction, but later change your mind or find that there is a serious fault with the property or the conditions in which it was sold in, it is extremely difficult to back out of the purchase, and you’ll often face significant financial difficulty in this process.
Here are some crucial tips on buying property at auctions for you:
- Firstly, contact the relevant auction house and ask for their catalogue. Most auction houses hold regular auction sales with a catalogue which is printed several weeks in advance.
- Go through the catalogue properly and read the details thoroughly, identifying the properties you are interested in.
- Definitely arrange a viewing of the properties you’re interested in before the auction day.
- Thoroughly research the property and ask neighbours and local estate agents for their thoughts.
- Make sure that the description of the property in the catalogue is accurate.
- Read the conditions printed in the catalogue carefully. Always get professional or legal advice from a solicitor and also a chartered surveyor (in appropriate cases).
- Don’t forget to carry out the usual property/land searches.
- Make sure that you have a 10% deposit ready for payment on auction day and access to the remaining 90% within 28 days.
- If you need mortgage assistance, plan ahead! Before buying property at an auction, it’s always a good idea to arrange a mortgage in principal with a bank or building society.
- You could lose your 10% deposit if you fail to complete within the time given.
- REMEMBER: buying at an auction is a binding contact and involves the same legal commitments as a signed contract by private treaty.
- Most often, auction offices have copies of legal documentation provided by the seller’s solicitors which can be sent to you.
Major danger to look out for:
If you do decide that you no longer want to purchase the property after buying at auction, the financial burden may be greater than you think. Not only do you lose the 10% deposit, you may also be liable for legal costs involved and if the property sells for a lower price after that, you may have to pay the difference. So this just really emphasises the risk involved, so please be extremely careful when buying at an auction.
A sickening case of such an event occurring is that of Colin Todd, who successfully purchased an unmodernised flat at an auction, which was located in the Renfrewshire town of Gourock. However, the building had vanished a week later. The local council had been alerted to alleged structural problems by a tip-off, before it was demolished when council inspectors deemed it unsafe.
Todd is now faced with the daunting bill for the demolition because a premonitory clause in his contract exempts the seller from costs associated with the destruction of the building as soon as the hammer fell.
Todd said: “the auction catalogue stated it needed extensive modernising, not that it was falling down. Somebody should have picked up any major structural defects” he added.
So not only does Todd owe the demolitions costs, he also must pay £37,500 for a property that doesn’t exist anymore, on top of the 10% deposit he paid on the day of the auction.
Whilst SVA Property Auctions (who dealt with the sale) insisted that there were no visible dangers when its surveyor visited, the council’s surveyors identified a partially collapsed gable and in their conclusion, stated that a disintegrating wall at the top of the building could have resulted in it falling down. Under Section 29 of the Building (Scotland) Act 2003, the council had every right to demolish the property after deeming it as an immediate danger.
This is just one of many examples of how dangerous it can be to buy property at auction without thoroughly checking everything.
Always get proper legal advice and professional help before and during the process of buying at auction, and ensure that the building is deemed safe by professional surveyors.