Once you have identified a property (or properties) that you are interested in you should contact the Auctioneers to arrange a viewing prior to the auction date.
You should research the property thoroughly and compare the price and the condition of the property to others that are similar or that might be for sale by private treaty. You will often find that the guide price of auction properties are set relatively low in order to entice bidders so you will need to have in your mind what you think the true market value of the property is, and bid accordingly.
There is usually a legal pack available for inspection with the Auctioneers and/or the Sellers Solicitor. It is essential that you read through this thoroughly and, if you are not sure about anything, you should ask your Solicitor to check this for you. It could contain various covenants or certain legalities which could have potential implications on the value of the property and its mortgageability. It is quite common for the legal pack to contain a Local Authority Search, Water and Drainage Search and Environmental Search.
Purchase monies/Mortgage finance
It is also important, that before you bid for the property you have available to you the finance to buy the property. If you commit to buying the property and are not able to access the finance you need to buy the property, then this may have serious financial consequences for you. You may lose the deposit you have paid and be liable to compensate your Seller for any loss they suffer.
If you require a mortgage on the property you are buying, or you are raising finance on an existing property, you are advised not to bid for the property unless and until you are in receipt of a satisfactory and unconditional mortgage offer from which you can draw down funds, by giving not less than seven days notice.
You are also recommended when bidding for the property to set your maximum bid limit for the property and not to exceed this. It is not unknown for people to get carried away and bid more money than they want to spend or can afford!!!
Survey and Valuation
Before you bid for the property you should satisfy yourself as to its condition. If you are obtaining finance through a Building Society, Bank or Loan Company you will have arranged a Valuation Report. It should be noted that the Valuation Report is not a Structural Survey but a valuation limited to assessing the adequacy of the property for loan purposes. There may be defects in the Property that will not be revealed by your valuation report, there may be inaccuracies that your Lender disregards because they do not have a bearing on your Lender’s decision to lend money or not. Accordingly you are advised to commission an independent Report upon which you can rely on, should defects become apparent.
If you are not obtaining finance for the property you are still advised to commission a report on the property to satisfy yourself as to the condition. If you are successful in bidding for the property you are obliged to buy it, regardless of its condition.
The property is at your risk from exchange of Contracts. Accordingly you must make sure that the property is properly insured.
Please note that if you fail to insure the property from exchange of contracts and it is then damaged or destroyed before completion, you will still have to buy it. If you fail to do so then the Seller is entitled to claim compensation from you.
At the Auction
Often the Auctioneer will make announcements prior to the commencement of bidding. Listen carefully as there may be something important that affects the property. If there is something you do not understand, then there will be time for you to speak to the Auctioneer or the Seller’s Representative to ask any questions about things you are unsure about.
It is extremely important you realize that as soon as the Auctioneer knocks down the gavel then you are committed to buying the property for the Auction purchase price. There is no going back!!!
If you are successful in bidding for the property when you are at the Auction you are liable to pay a deposit equal to 10% of the auction sale price. This must be paid to the Auctioneer or the Seller’s Representative at the Auction. Whilst the deposit is held by the Sellers Solicitors any interest earned on it is payable on completion to the Seller.
You will be asked to sign the Contract and you will be asked for your Solicitor’s details. After you have given this information to the Auctioneer or to the Seller’s Representative, they will either hand you the Auction documents or agree to send them to your Solicitor. The Auction documents will contain the Contract signed by (or on behalf of) the Seller. The Contract signed by you and the separate Contract signed by the Seller will both be dated the same date and the completion date will be inserted. From this point, there will, to all intents and purposes, be no opportunity for you or the Seller to withdraw from the purchase and a failure to complete the purchase on the due date (completion date) will lead to extremely costly consequences, including being asked to compensate your Seller for any loss suffered.
The completion date, (the date when the transaction is concluded and the day on which you move home) is finally fixed at the Auction. The Auctioneer will announce the completion date before the bidding commences. This is usually 28 days after the Auction. It can however be less or more than this date. Make sure you listen to what the Auctioneer says before you start bidding for the property.
If you then delay completion beyond the agreed date this will necessitate the payment of a penalty. This is calculated by paying interest, (at the interest rate quoted in the contract), on the money that is owed to the Seller.
For further advice please contact any of our offices and speak to a member of our Residential Property Team.