Buying property at auction is not always as exciting or profitable as is often portrayed on television! It can be fraught with risk and it is therefore very important that legal advice is obtained before considering making a bid.
Auctioneers will require sellers to provide a legal pack to make available to prospective buyers in advance of the auction catalogue being prepared.
The pack will include Title documents such as an Official Copy of the Register of the Title to the property as well as any Lease or other documents referred to in the Title and also special conditions of sale. Generally, searches and property questionnaires would also be included. Assuming any reserve is met, the property will then be sold to the highest bidder at the auction. An auction Contract is signed immediately and a 10% deposit paid. The Contract is then immediately legally binding.
The key point to bear in mind is that there is no opportunity to negotiate any of the terms set out in the special conditions and these terms will be binding upon the successful bidder no matter how onerous they may be! Typically legal completion would be 28 days following the date of the auction unless otherwise stipulated in the special conditions. Any survey or specialist inspections which are required would have to be dealt with prior to the auction.
We shall arrange for you to complete the necessary questionnaire forms and along with these we shall collate all necessary Title documents and prepare special conditions in order to compile the legal pack required by the auctioneers. It would be advisable for searches to be obtained to include within the pack. Whilst this would involve you incurring the additional search fees initially, it is usual for the special conditions to provide for the buyer to reimburse the cost on completion.
Similarly, if the property is Leasehold, a usual Leasehold Pack will need to be obtained from the Landlord/Freeholder or any Managing Agents involved so that the legal pack for the auctioneers can be as comprehensive as possible. The Leasehold Pack would include service charges, buildings insurance and other information. As with searches there will be a fee payable to the Landlord/Managing Agent initially with this then being reimbursed by the buyer on completion.
Similarly, with regards to our legal fees for dealing with the sale, it is usual for the Special Conditions of sale to provide that these will be payable by the Buyer. You would appreciate that to allow sufficient time for searches and the Leasehold Pack to be obtained it is important to contact us as soon as possible if intending to sell at auction.
Remember there may be a good reason why a seller chooses to sell at auction rather than on the open market. This may be due to issues relating to the Title or other matters affecting the property. It is therefore essential that legal advice be obtained before attending at the auction.
As you will have seen from comments above, the auctioneers will have an auction pack available for inspection prior to the auction. This will more than likely be available online or through a link within the auctioneer’s website. Upon payment of an initial fee we shall be happy to inspect the pack and all associated documents and provide you with a report upon the terms of the special conditions and upon the Title etc for the property.
As mentioned above it is usual for the Special Conditions to provide that the Buyer is to be responsible for payment of the Sellers legal fees, which may well be a percentage of the purchase price agreed at auction, but this would be confirmed in the Special Conditions.
Once you have received our report you will then be in an informed position to consider bidding for the property at auction. In the event that you do proceed and are the successful bidder then we would be able to then progress the matter to legal completion on your behalf as well as dealing with all post completion formalities including registration at HM Land Registry. The overall legal fee for acting in connection with the purchase would be reduced by the amount of the initial fee already paid previously for the inspection of the auction pack.
Due to the risks involved in buying at auction, which include the risk that the Title to the property may not be acceptable to a mortgage lender, we would strongly recommend that purchasing property at auction should only be considered by experienced property investors/developers who are able to proceed without requiring mortgage finance.