Mon 29 Nov 2021
Auctions can be exciting and full of opportunity but they operate differently to standard residential purchases and knowledgeable buyers should understand the mechanics of an auction before they proceed to bid on properties at one.
Prior to submitting a bid, the client will have to identify themselves to the auctioneer and often provide details of the conveyancer/solicitor they will be using for the purchase if successful. This differs from a standard estate agency situation where this information is supplied to the agent after an offer has been accepted.
Auction Styles - The delivery method of auctions has rapidly mocernised, due to the global pandemic from traditional “in the room” auctions to online auctions using either ‘eBay’ style timed auctions or video live-stream. Some of the real tangible benefits , in particular, of online timed auctions is that auctions are ‘lot’ based on bespoke sales, as opposed to an auctioneer holding six or seven multi lot sales per year. Another significant benefit of online auctions is that they are far more convenient for buyers and sellers alike who no longer have to travel and or take time out of their working day to attend an auction as auctions can be followed by most internet enabled devices.
Standard Auction Terms (Unconditional Sale) - Generally with an auction property, once your bid is accepted you have exchanged contracts. For that reason we strongly recommend that you have a legal adviser review the contract pack before you bid at auction. If you discover legal or conveyancing issues with the property after your bid has been accepted, it’s tough luck! You are contracted to purchase the property from the date your bid is accepted and you will need to pay the deposit over to the auctioneer as soon as you win the property.
28 Days Later (Unconditional Sale) - Most auctions provide you with 28 days from the date of the auction to complete the purchase. We strongly recommend you have your conveyancer selected and your mortgage offer ready (if applicable) before you bid. As auction is such a ‘quick-fire’ process it is vital that auction sellers and buyers engage the services of a responsive, proactive solicitor to handle the conveyance in a timely fashion and meet the deadlines prescribed in the auction process.
Hidden Terms - Look out for hidden terms in the contract ‘Special Conditions’. It is quite common for the buyer to have to reimburse the seller a sum of a couple of hundred pounds or so for the legal pack which the seller purchased for the auction. Less common but still important to look out for are any other costs – some auction contracts require the buyer to reimburse the cost of the seller’s legal fees, or their auction commission, or to reimburse the seller for any rent arrears at the property if tenanted. Your legal adviser will point out any costs to you contained in the legal pack
Property Issues - Although it is becoming more common to auction “normal” properties, it is still common to find properties at auction that are there because they have some sort of issue that made auction a better place to market them than via a typical estate agent. This could be as benign as it being a probate sale, in which case look out for a grant of probate in the legal pack or a condition in the contract that delays completion until the sellers obtain the grant of probate. However, there could be other issues such as the property being amenity land that cannot be built on, or there being an ongoing dispute with neighbours over access. Inspecting the legal pack carefully and taking appropriate professional advice is the best thing you can do to prepare yourself prior to auction. With that in mind, some of the properties found at auction can be great bargains because of the timed nature of an auction, and minimal risk of gazumping (where the seller withdraws due to a higher offer) as contracts will already have been exchanged at the auction, which works both ways!
Find great bargains, take professional advice, and enjoy the world of auctions.
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