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Purchasing at Auction Sales

At the end of February, the Council of Mortgage Lenders reported that the number of repossessions already seen in England in 2009 would be almost double the total for the whole of 2008.

Auction sales are often viewed as a good way of purchasing a property cheaply, and as reported in The Times on 20 March, 2009 guide prices are presently 20-30% below estate agents’ prices.

Nevertheless, there are some pitfalls and we set out basic points for those considering auction purchases.

We set out some basic points for all those who are considering auction purchases.

•Title: Do not purchase a property unless the title has first been approved. Sometimes sellers will put properties on sale at an auction because there are problems with the title e.g. not all leases meet the minimum requirements of the Council of Mortgage Lenders which would result in buyers being unable to raise a mortgage on the property unless the lease is changed. Once a property is purchased at auction, the buyer is committed to purchase on a particular date and this could result at the very least in the deposit being forfeited if the borrower is unable to raise finance in time for completion. We can peruse auction packs which will include details of the title prior to purchasers bidding at the auction.

•The Building: Do not buy a property unless you have seen the property itself. You should ideally take either an architect or surveyor with you. Often only a trained eye can spot problems with the structure of a building. Sellers of properties which have inherent defects often put the properties on sale at an auction, knowing that a survey on a conventional sale would reveal these issues.

•Decorations/Repairs: Virtually every property sold at auction is in need, at the very least, of decoration. You should obtain at least one – preferably two – quotes for necessary basic repairs/decoration before you attend the auction so that you can factor in the additional cost.

•Deposit: A successful bidder will normally be required normally to pay a deposit of 10% by cheque on the day of the auction. You must make sure that you have sufficient cleared funds when you attend the auction. In today’s economic climate it would be prudent to ensure that finance was available for the purchase prior to submitting any bids.

•Prior to Auction: Although the vast majority of sales will proceed on the auction date, some sellers may be open to an offer prior to auction. Do not be afraid to ask the auctioneers whether any offer prior to auction might be accepted.

If you or your clients have any concerns or queries about these issues, please do not hesitate to contact us

OUR PROPERTY TEAM:

STEPHEN ALTER
PATRICIA NEGUS-FANCEY
TONY PLATMAN
JAMES BUNKER
JONATHAN WIESE
JOHN ROCHMAN
LIZA POOLE
DERRICK SILVER
ERRYN WOOD