The main attraction of a property auction is that the process is quicker than the usual conveyancing process. Unlike a usual conveyancing transaction, there is no formal exchange of contracts and the binding contract of sale is formed once the ‘hammers falls’.
With close to 40 years of experience, Bishop & Sewell has a wealth of knowledge to assist in both the buying and selling of property at auction.
Buying at auction
Buying at auction offers the potential for you to obtain a property at a good price. However, there are risks that you must be aware of; auctions are often a way to sell difficult or otherwise unsellable properties. Before you attend the auction it is of paramount importance that you do your homework.
You will always be offered an auction pack for the properties that you are interested in bidding on. These are often available for download from the auction house’s website for free, as well as from the auction house in hard copy.
It is crucial that you acquire this pack before you attend the auction. This is so you may approach a solicitor to inspect the documentation and provide you with professional advice.
This level of due diligence may seem cumbersome when you may not even obtain the property, but it is crucial in discovering costly problems before you put in a bid. A prime example is that the property, upon closer inspection, is impossible to obtain financing for, unable to get planning for, lacking rights of way, is subject to hidden costs or has other troublesome property title issues.
Price & stamp duty land tax
As with all property purchases, an auction buyer is liable to pay Stamp Duty Land Tax (SDLT), based on the price paid for the property. Always make sure you take this into account when making your bid. You should also remember that any second properties purchased will have a higher rate of SDLT paid on them. If you, your spouse or any of your co-buyers own a property inside or outside the UK, the purchase may be subject to an additional 3% in SDLT.
With some auctions there is a ‘guide price’ indicated in the auction pack. This is an indication of what the property is expected to sell for. A ‘reserve price’ is the lowest price that the seller will accept from a buyer. While it is common for the auction pack to state if there is a ‘reserve price’, it is unusual to list the actual amount.
The contract of sale
It is important that you understand what is being offered and any special conditions or other provisions that may be included in the proposed lease or transfer of the property. Some common things to look out for are:
- A transfer containing an ‘overage clause’ whereby if you develop the property or make a planning application, you have to pay the seller a premium, based on the increase in the value of the property;
- Finding yourself contractually responsible to pay an additional premium, over and above the purchase price, to the sellers, upon completion of the sale;
- Being responsible for the fees of the seller’s solicitors, and search costs;
- Very quick completion dates at short notice.
Once the property has been sold at auction, completion is usually required 18 to 25 days later, but this can differ. This is one of the main reasons it is vital that you have your financing in place before you put in a potentially winning bid (such as an agreement in principal from a lender or sufficient savings).
Selling at auction
Selling property at auction can create a wave of interest from a number of potential buyers. This can have the pleasing effect of driving up the price. Provided that you are realistic with your reserve price, you can expect a quick sale.
Auction selling often lends itself to a particular sort of property. If you have an unusual or dilapidated property, you may find it difficult to advertise to buyers using the traditional sales route. Auctions tend to attract disparate selections of property buyers, such as developers and experienced landlords, who aren’t put off with problematic properties that need a bit of work.
If you’re looking to sell your property quickly, auctions could be an option for you to consider. When acting on the sale of a property at auction, Bishop & Sewell can draft all the necessary documents to go into a full auction pack. With the wealth of experience that Bishop & Sewell brings to any property matter, we endeavour to anticipate what a prudent buyer and his solicitor would expect to see in the pack, so as to ensure you a secure and speedy sale.
Don’t let any of this put you off using the auction process. There are always going to be risks and you must be prepared to take these on board, but it can be an excellent way to get bargain.
With nearly 40 years of experience, Bishop & Sewell can help ensure that you make the right decision before you put your bid in. We are dedicated to offering a full, bespoke service to our clients, so you can be confident you know what to expect every step of the way.
We offer a fixed fee to review and draft any auction packs and, should the auction be successful, this fee is discounted against any subsequent conveyancing work we undertake for you. We have a national reputation and hold the Law Society’s conveyancing quality scheme accreditation.
For initial advice, a quotation or to arrange a meeting with one of our conveyancing solicitors, please contact us on 020 7631 4141 and ask for a member of the residential team. Alternatively, please use our enquiry form above or email us at firstname.lastname@example.org.