What Happens After Making a Purchase?
Purchasing a property at auction is a quick process and, once the hammer falls, the winning bidder is legally committed to buying the property. You will have to pay a 10% deposit immediately (and potentially auction fees as well) with completion usually taking place 28 days later. Julie Edmondson-Jones from our Residential Conveyancing departmentexplains what you can expect after you commit to purchase.
To protect your investment, it is crucial that you have your solicitor look over the legal pack in good time before the auction. They will ensure there are no surprises that may affect your decision to purchase and explore the following on your behalf:
Are there any adverse search results that need to be addressed? In particular, are there any mine entries present which may restrict future saleability as not all mortgage companies will lend on properties where mine entries are revealed. If there is no mining report in the legal pack, there is no way of knowing unless a report is obtained on your behalf in advance.
Are there any hidden costs contained in the contract that may be payable in addition to the purchase price you bid for the property? These may include the seller's legal fees, auctioneer's fees, administrative fees and refunds to the seller of their search fees. If additional costs are referred to in the contract (even if you are not aware of them prior to bidding) you are under an obligation to pay these on completion.
Is the property structurally sound? In order to confirm this, you should instruct a surveyor to inspect the property prior to the auction to establish the condition of the property.
Is the property leasehold? If so, how many years remain on the lease, what is the estimated annual service charge/ground rent, and is there any planned expenditure that could increase this in the future? These are just a few of the issues that could come to light but are not apparent from the legal pack.
Are there any defective title issues, restrictive covenants or disputes which may affect you obtaining good marketable title on completion?
Is your finance in place? Will you have enough time between the auction and the completion date to ensure funds are available? If a mortgage is required, seek advice prior to the auction as to the availability and the terms and conditions of the mortgage lender.
Watch your budget and stick to it!
The key to success at auction (and to avoid disappointment) is to be prepared, consider the points aboveand ensure you instruct a solicitor to check the legal pack in advance of the auction - don't leave it until after the hammer has fallen; it could be too late and you will have made a costly mistake.
Finally, do not get carried away!We have recently been asked to advise a buyer who attended an auction to buy a property. They were not successful on the property they wanted so, on impulse, successfully bid on another property which they had not even viewed, nor had they seen the legal pack.It transpired that the contract contained substantial additional costs payable by the buyer.The legal pack did not contain a mining report so, on our advice, a report was obtained - this report revealed two mine entries. By instructing a solicitor and doing your homework, you can avoid any similar issues.