LEGAL MATTERS
Auction Properties
What happens when the hammer falls?
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urchasing property at auction is increasingly popular as it provides reasonably priced property either for renovation and/or buy to let. It can be fraught with difficulties if you are not prepared for when the hammer falls. If your bid is successful you are legally bound to buy the property and will need to prove your ID and pay a 10% deposit to the sellers solicitors. Not all auctioneers have card machines so you should go armed with your cheque book. You will be asked to sign the auction contract or memorandum in the sale room. Both the Seller and the Buyer become legally bound to complete 28 days later where you will be expected to provide the remaining 90% of the purchase price. If you don’t, interest will be charged and you could lose the 10% deposit paid at the auction. The secret of buying a property at auction is the preparation prior to the auction. At least 7 days before the auction a legal package should be deposited at the agents by the sellers solicitors. This includes the contract which will specify the terms on which the property is to be sold, local search and possibly a mining and drainage search. You should read all of these documents carefully, or instruct your solicitor to inspect the contract package. The contract will probably include a clause for you to pay for the cost of the searches provided in addition to the purchase price, although occasionally it will also include a clause making the buyer pay a proportion of the purchase price as a contribution towards the sellers costs of sale. The contract will also specify if any restrictions and/or rights of way are to be imposed on the property. If the property is in a
mining area, but no mining search is provided, you can instruct your solicitor to submit a mining search for you which may affect your decision to proceed. If you are lending on the property have it surveyed by your lender and obtain an agreement in principal prior to going to the auction. If you can’t lend on the property once you have bought