In England and Wales, the vast majority of property is bought using the traditional process of viewings with an estate agent, making an offer and then going through the conveyancing procedure with a solicitor. However, approximately 2.3% of all property sold in Great Britain is sold through auction.
So how does the auction conveyancing process differ from buying through an estate agent? One of our conveyancing team will now explain the difference.
How to Buy a House at Auction
Buying at auction can provide buyers with the opportunity to find a potential bargain. However, for the uninitiated, the process can be hazardous. Therefore, it is important to understand the auction process, including the potential costs and pitfalls that may await the unwary. We’ve summarised it all for you, here:
Request an Auction Pack
Prior to attending the auction or logging onto the auction website to bid, it is always advisable that you request a copy of the legal pack from the auctioneer. These can usually be obtained by registering your interest in a particular property on the auctioneer’s website and requesting a copy of the auction pack. These are generally available approximately two weeks prior to the auction.
Amongst other documents, auction packs will contain in-depth information relating to the property, such as:
- The General Auction Conditions
- The solicitors’ Special Conditions
- Copies of the title documents
- Search results
- Standard property enquiries
This information is usually sufficient for a solicitor to give you a summary of any significant issues that may be worthy of consideration, and as will be seen below, it is important that the auction pack is reviewed by a solicitor before you bid for a property, as they can highlight these points and any other important points contained within the pack.
Some things that you may need to look out for are restrictive covenants which prohibit any development or require a previous landowner’s consent to develop, which could affect any plans that you may have to develop. Alternatively, there may be positive covenants such as the requirement to maintain a septic tank that is shared by more than one property.
There may also be additional costs referred to in the Special Conditions, which are invariably passed on to the buyer, such as search fees (these can be between £200.00 and £450.00), fees for the title documents, the seller’s legal fees, fees payable to the auctioneers such as the buyer’s entry fee and/or the seller's commission that is payable to the auctioneer.
Furthermore, auctioneers charge a Buyer’s Premium which is a sum that is payable to the auctioneer at the time of a successful bid. This sum will vary from auctioneer to auctioneer.
Make a Liability Enquiry
In the case of leasehold properties, it is important to establish that there are no outstanding liabilities which could be transferred to you on completion. This could include, for example, a liability to pay outstanding service charge arrears.
Arrange a Property Survey
With a traditional conveyancing transaction, once an offer has been accepted there is still no legal obligation to complete the purchase until contracts have been exchanged. However, when you attend an auction, either in a hotel conference room or online, your obligations to a seller are somewhat different.
Please also bear in mind that when you acquire a property at auction, you do so based on the condition of the property at that time. Therefore, should you have any concerns regarding the condition, structural integrity, suitability for conversion or for the purposes that you want to acquire it, it is your responsibility to consider having a survey carried out prior to bidding. You cannot withdraw after making a successful auction bid due to a subsequent adverse survey.
Ensure Finances Are in Place Before Bidding
If you are the successful bidder, you will, immediately, be required to either pay a deposit of 10% of the purchase price, or if the property is below £30,000.00 or £50,000.00 (depending upon the auctioneer’s provisions), a minimum deposit of £3,000.00 or £5000.00, to the auctioneer.
If you are intending to finance the purchase with a mortgage or bridging loan, it is imperative that you let a solicitor review the auction pack before bidding and advise the solicitor that you are planning to acquire the property using finance. Please remember that what is acceptable to you as a purchaser may not be acceptable to a mortgage lender or a bridging loan company.
Any solicitor that you instruct has a duty to inform the lender of any adverse issue with the title, prejudicial search results or any other matters which may be considered detrimental to the lender’s security.
If you are the successful bidder and are subsequently unable to complete the matter on the contractual completion date (which is 20 working days after exchange of contracts or such other date as may be agreed with the seller) due to finance issues, then you may not only lose the opportunity to purchase the property, but you will also forfeit the deposit that you have paid. Furthermore, there are legal avenues open to the seller to recover any losses that they may incur on a subsequent sale.
What Happens After You Buy a House at Auction?
If you are the successful bidder, you will then be required to sign the contract, or the auctioneer will obtain your consent to sign it on your behalf, and commit yourself to the contract. The auctioneer will require you to provide them with the required deposit and two forms of identification, such as your Passport or Driving Licence, as well as your address. Alternatively, they may request you to complete an online biometric anti-money laundering check.
You will also be required to provide your solicitor’s details to enable the auctioneers to send the pack and contract to them and notify the seller’s solicitors of who is acting for you. Once the seller’s solicitors are notified of the exchange, they will provide your solicitor with the necessary post-exchange documentation. As completion is generally 20 working days after exchange, it is imperative that there are no delays in providing all of the necessary details.
Need Help with Your Conveyancing?
If you are looking to purchase at auction our friendly and knowledgeable auction team are happy to help. Learn more about what we do here or contact the team on 02920 404022.
