03 May Auction Legal Pack Review and our Top 10 Preparation Checklist for a Property Auction
Are you looking to purchase a Residential or Commercial Property at Auction? Please visit our Auction Property Page for details on what you can expect and how we can assist with an Auction Legal Pack review (very important), prior to your auction.
An Auction Legal Pack review entails a qualified Conveyancing Solicitor or Property Lawyer, reviewing the Title Deeds your Auctioneers would have made available (this information is always made available albeit in a limited form) prior to the Auction date. You will be expected to part with a significant deposit upon a successful bid at Auction which contractually is the same as you exchanging Contracts on a conventional Property transaction; i.e. you are legally committed to purchasing the Property. If it later transpires that the property you have purchased has a non-mortgageable or non-marketable Title, you will either have to raise money from a Bridging Loan (at a significantly higher interest rate) or risk losing the deposit you have already paid plus further costs. A Pre Auction Legal Pack review will reveal any onerous clauses or conditions on the title and our expert Pre Auction Conveyancing Solicitors or Property Lawyers can quickly advise if the Property is worth bidding on (or more importantly safe to bid upon).
Our Top 10 Preparation Checklist for a Property Auction is:
Research is key
This goes without saying but research is always key! Though Auctioneers come in all shapes and sizes, they will always publish an Auction catalogue at least a few weeks in advance. This is naturally where a quick and savvy Conveyancing Solicitor comes into play. It will also be quite clear from the information supplied on the Auction Legal Pack or Pre Auction Conveyancing Pack as to the reasons for the sale. Most Repossession Properties and/or Sale by Probate etc end up in Auctions, but unfortunately, it is common for other, not so marketable properties to end up in the Auctions too.
Do you know what to expect at a Property Auction?
It is not a bad idea for you to visit at least a couple of Auction houses prior to going into bid without knowing what to expect. As you probably have seen on some popular Auction television programmes, when the Auctioneer starts the bidding, the actual Auction only lasts a few minutes at most. It is important for you to know how quickly you have to react and also to see what it is like and how most buyers get carried away with their bids to a point where the original lot which would have looked very lucrative on the basis of the guide price, no longer is.
Pre Auction Conveyancing Pack
As we have briefly mentioned above, prior to the date of the Auction, Auctioneers always make an Auction Conveyancing Pack available. It is imperative that you have this information reviewed either by a Conveyancing Solicitor or Property Lawyer even before considering if the property is suitable to bid on. Our Pre Auction Conveyancing Check service can act quickly by having a Conveyancing Solicitor review and prepare a report for you to advise in simple terms if the Property or Properties you are looking to bid on are worth considering.
Almost all Auctioneers hold at least a group viewing prior to the Auction, however since your Conveyancer never really has sight of the Property, it is virtually impossible for them to comment on the physical aspects. Ensure you view the Property at least once prior to the Auction. Remember, just as it is possible for the Property to look structurally sound but have a completely unmarketable title, it is also possible for the Property to have a perfectly marketable title (as per your Conveyancer) but have significant structural defects which will unfortunately and inevitably be your responsibility on completion.
Understand what the Guide Price is
As the name suggests, the Guide Price is mainly used to give potential bidders a feel for what the sellers are expecting and also what the Auctioneers feel the asset is worth. This does not necessarily mean that the Guide is a true reflection of the Reserve Price. It is very common for Properties to regularly be sold for significantly higher prices than the Guide. Keep your options open – shortlist a few Properties from any given Auction than concentrating both efforts and all your spending power on a single unit. This is a classic example where bidders regular over bid.
Do you have funding in place?
Upon a successful bid, you will be expected to pay your 10% deposit (unless otherwise stated) and completion will be fixed for 28 days from that point onwards. Since your successful Auction bid is classed a legally binding contract, you will be required to complete the transaction irrespective of what your circumstances are within the set time period. It is therefore imperative that you have a mortgage offer in principle (this is similar to a credit note) giving you an indication of how much your Lender is prepared to lend you, subject to a successful valuation on the Property. Failure to have this in place would result in instances where you will be required to seek short term lending options such as Bridging Finance (far more expensive at all stages, i.e. application fees, Solicitor costs and monthly interest rates). You can read more about Bridging Finance here.
Do you need a Property Survey?
The Author of this article has seen certain referencing documents on the internet advising potential bidders to commission property surveys as well. We do not see this being either necessary nor practical (not taking into account the cost element). This does not however mean that you cannot get a good understanding of what the current market conditions are in the vicinity of the property you are looking to bid on. Resources such as Zoopla or Rightmove can give a good indicative price of recently sold properties and their visual conditions.
Have you done your maths right?
Did you know that most Properties sold at Auction are riddled with additional costs such as Auctioneers, Sellers legal costs, further charges, Mortgage and Valuation costs? You will also have to account for your personal costs for Conveyancing and also the necessary evil – Stamp Duty. You can use our Conveyancing quote calculator to generate accurate costings (you as the buyer) so that you know what your maximum spending threshold is.
Be responsible with your bid
Carrying on from the point above, make sure you stick to your maximum spending threshold. It is better to lose out on a Property you like knowing you will be stretching your budget too thinly than to get carried away with a Property and committing 10% + costs to later find out that you are unable to bridge the gap between the two; inevitably losing your deposit. Though this might sound farfetched, unfortunately, it isn’t and happens regularly.
And the day is finally here
Assuming you have followed the steps outlined above, you should be more than ready and prepared for the Auction. The Auctioneers would usually run through the Properties in Lot order but tend to conclude bids quickly. Pay attention as it is easy to miss off the lot you are intending to bid on. Auction Houses are large/noisy places and you need to think quickly on your feet (without getting carried away). Your Auctioneers would have requested you bring along with you certain pieces of Identification, both photographic and proof of address. Upon your successful bid at the Auction, you will be required to pay your deposit there and then and pass your Solicitors details so that formalities can commence immediately.
Express Conveyancing has a panel of specialist Auction Property Conveyancing Solicitors based in Manchester, with a nationwide reach. Our experts can advise both pre and post Auction. Contact our team on 0203 375 2187 to discuss how we may assist you.