Buying property at auction can be an exciting and potentially lucrative venture, but it's a process that differs significantly from traditional property purchases.
In this blog post, we will explore the key differences between a traditional property auction and an estate agent's in-house closed auction. We'll also delve into common auction requirements, exchange and completion deadlines, penalties for failing to complete the purchase on time, and the crucial role of a solicitor or conveyancer in reviewing the legal pack before bidding.
Traditional Property Auction vs. In-House Closed Auction:
Traditional property auctions are public events where multiple bidders compete to purchase a property. In contrast, estate agent in-house closed auctions are more private, typically involving a select group of potential buyers. The latter often occurs before a property is listed on the open market.
Common Auction Requirements:
When participating in an auction, it's essential to be prepared. Here are some common requirements to keep in mind:
Proof of Funds: You'll usually need to provide proof that you have the necessary funds to cover the deposit, typically 10% of the property's purchase price, on the day of the auction.
Identification: Bring proof of identification and address, such as a passport and utility bill, to register as a bidder.
Legal Pack Review: Obtain the legal pack for the property you're interested in and have a solicitor or conveyancer review it thoroughly prior to bidding. This pack contains essential information about the property's title, planning permissions, and any potential legal issues.
Exchange and Completion Deadlines:
In a traditional auction, if you win the bid, you'll typically be required to exchange contracts and pay the deposit immediately. Completion, when you gain legal ownership of the property, usually takes place within 28 days. For in-house closed auctions, the timelines may vary, but you'll still need to be prepared to exchange contracts and complete the purchase relatively quickly.
Penalties for Failing to Complete:
Failing to complete the purchase on time can have severe consequences. You may lose your deposit, and the seller can pursue legal action against you to recover any losses they incur from the sale not proceeding as planned.
The Role of a Surveyor in Property Auctions
In property auctions, the role of a surveyor is crucial, especially if you're planning to purchase a property with a mortgage. While a basic understanding of a property's condition is typically provided through auction catalogs and viewings, it's essential to recognise the limitations of these assessments. A surveyor's expertise can make all the difference in ensuring you make an informed decision.
Why a Full Structural Survey is Essential
Identifying Hidden Issues: A full structural survey, also known as a building survey, goes beyond a basic inspection. It delves deep into the property's condition, identifying any hidden defects or structural issues that may not be immediately visible. This comprehensive examination provides a thorough understanding of the property's state, helping you avoid unexpected and costly surprises post-purchase.
Compliance with Mortgage Lenders: When purchasing a property with a mortgage, many lenders require a survey. This requirement is in place to protect both you and the lender. It ensures that the property's value aligns with the loan amount and that there are no severe structural issues that could affect the property's long-term viability.
Negotiating Power: Armed with the surveyor's findings, you have valuable negotiating power at the auction. If the survey reveals significant issues, you can adjust your bid accordingly, factoring in the potential repair costs. This can help you avoid overpaying for a property that needs extensive work.
Peace of Mind: A full structural survey provides peace of mind. It gives you confidence in your purchase decision, knowing that you are well-informed about the property's condition. Whether you're planning to live in the property or invest, this knowledge is invaluable.
The Importance of a Solicitor/Conveyancer
In addition to a surveyor, having a solicitor or conveyancer review the legal pack of the property before bidding is equally essential. The legal pack contains vital documents such as the title deeds, searches, lease (if applicable), and any special conditions of sale. Your legal advisor ensures that there are no legal issues or hidden liabilities associated with the property.
Conclusion:
Buying property at auction with a mortgage can be a rewarding venture, but it comes with its unique challenges and requirements. Whether you're participating in a traditional auction or an in-house closed auction, careful preparation, understanding the process, and enlisting the help of a legal professional are essential steps to success. With the right approach, you can secure a property that aligns with your investment goals.
How Mortgage321 Can Help:
If you're considering purchasing a property at auction and need expert guidance on securing the right mortgage for your investment, Mortgage321 is here to help. Our experienced team specialises in tailored mortgage solutions, including those for auction purchases.
Contact us today to discuss your auction property ambitions and discover how we can assist you in making your dream property a reality. Don't miss out on the opportunities that property auctions offer – reach out to Mortgage321, and let's embark on this exciting journey together.
Your mortgage, your way, with Mortgage321.
Phone: 01255 440142
Email: info@mortgage321.co.uk
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