One of the indicators which suggests a recovery in the Property Market is the competition between first time buyers and investors for entry level properties. Vendors, (including Banks and Building Societies selling repossessed houses) very often favour sale by auction. This avoids a long drawn out bidding process but purchasers should proceed with caution. They must do their homework in advance and should instruct their solicitors of their intentions at the earliest opportunity.
Before attending an auction and purchasing a property it is important to be as well informed about your prospective purchase as possible. If you successfully bid for a property at auction you will be immediately required to sign an unconditional contract and to pay over a 10% non-refundable deposit. The vendor does not have to deal with any title queries we might wish to raise, nor any survey/structural issues which come to your attention after the contract has been signed. It is crucial that you we inspect the title deeds and that you carry out a survey (which you will have to carry out at your own expense) before the auction. This may seem unnecessary when you do not own the property, but it is money well spent as it can prove crucial in helping you to avoid a costly problem after you buy the property.
After a 10% deposit is paid at the auction it is important to be aware of the necessity to complete by the fixed completion date. The remaining 90% of the value of the property is usually payable within 28 days. If you intend to buy the property with a Bank or Building Society Loan you will therefore need to have begun your mortgage application at the earliest opportunity, and preferably before the auction takes place. Your mortgage can be approved in principle and your financial details provided to your mortgage advisor beforehand.
Imagine buying a property at auction that you plan to renovate only to find you are limited in what you can do to the property because it is, for example, in a conservation area or is subject to restrictions which prevent you turning it into your dream home. Once that hammer goes down, attempting to back out because subsequent investigations reveal the property is not what you expected is likely to cost you your deposit and you could be liable for any losses the seller incurs as a result of having to re-sell. Having a solicitor carry out an inspection of the title deeds before the auction will give you the information and comfort you need in advance to make an informed decision.
