Buying at auction
Estate agents advise clients to sell properties at auction for many reasons.
Unusual properties likely to attract many buyers are difficult to value so that an auction is a true test of a property’s sale price. Alternatively properties that have been difficult to sell, due to a problem with the physical condition or with the legal title; sellers who are looking for a quick sale and those who have many similar properties to sell will opt for a sale by auction.
When the hammer falls for the successful bidder, they are contractually bound to buy the property, are obliged to sign the contract, pay a 10% deposit immediately and pay the balance on completing the transaction, usually 28 days thereafter.
It is essential, therefore, that before bidding at auction all the pre contract checks are made i.e. the property is surveyed, the legal documents are inspected by a property lawyer and the finance for the potential purchase is secured.
The legal implications of not completing a transaction, when having contracted to do so, are extensive and expensive, including:
- losing the deposit that was paid on exchange
- being charged interest on the balance, usually 4% above
bank base rate
- being liable for any losses incurred by the other party
For all these reasons and more buying at auction should not be
undertaken unless the checks outlined above have been carried out in conjunction with an experienced property lawyer.
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Mr & Mrs R Davies, Pickering