Buying a property at auction may appear to be an attractive prospect as prices for auctioned properties may appear to be low and the deal can be completed quickly. However, buying a property at auction is fraught with danger, and prospective purchasers should be aware of the following:
- When you buy a property at auction you are expected to sign the contract on the day of purchase and pay a 10% deposit. The closing of the transaction and payment of the remaining 90% of the purchase price is often very soon thereafter – typically two to four weeks. It is therefore essential that your funding is available and that you are not reliant on obtaining a mortgage. If you are unable to pay the 90% on time, you risk losing your 10% deposit.
- Auctioneers often sell properties at auction when there are flaws with the property in the hope that purchasers will not discover the flaws before their solicitor has had an opportunity to examine the title, and before an engineer has conducted an inspection. There may be title flaws, for example problems with leasehold titles. There may be boundary/mapping issues or issues with rights of way.
- Planning is an important area and it is important to ensure that the house was built according to planning permission and that an architect has certified compliance with planning permission and building regulations.
- With apartments and other managed properties, it is important to ascertain that the management company is being run correctly, that the service charge is not excessive, that there are no issues with the company’s accounts, that the company is currently registered, and that the insurance policy is in place.
If you are considering purchasing property at auction, you should discuss it with your solicitor at an early stage. Any problems that are discovered after the hammer falls are no concern of the vendor and rule of caveat emptor or “let the buyer beware” applies.