According to the Council of Mortgage Lenders, there were 22,700 repossessions last year, with figures expected to top 30,000 in 2009.
Many buy to let landlords and struggling businesses are experiencing difficulties keeping up with mortgage payments and facing repossession. A large number of these properties, both commercial and residential, will end up in auction houses and we are increasingly seeing buyers with finances in place who are looking to boost their property holdings by picking up a bargain at auction.
The advantages of buying at auction are clear; bids are transparent, you will own the property relatively quickly (commonly completion is 28 working days from the date of the auction), and properties are usually offered at a competitive reserve price. However, there are pitfalls and we would recommend that the following steps are taken if you are considering purchasing a property at auction:
1. BUYER BEWARE
This legal principle will apply and it is therefore not only advisable to view any property you are interested in, but to also arrange a valuation and a survey to gauge the likely cost of any necessary repairs.
The more information you have about the property and conditions of sale, the better equipped you will be to make an informed decision on how much you are prepared to pay. You should obtain details of the property from the auctioneers and pay special attention to the following:
2.1 General and Special Conditions of Sale
2.2 Important Notice to Bidders
2.3 Memorandum of Sale
2.4 Legal pack which will contain any Energy Performance Certificate, title information, searches and the Agreement for Sale. Ideally get your solicitor to cast their eye over this to avoid any nasty surprises as when the hammer falls you will be legally bound to comply with the terms of this contract.
2.5 Guide price (note this may change prior to the auction).
2.6 Any addendum which can be obtained on the day of the auction and sets out any additions or amendments to the catalogue.
It is highly advisable to have any finance required for the purchase arranged before the auction. As exchange of contracts will take place when the hammer falls, if your bid is successful you will be required to pay a 10% deposit on the day and the balance of the purchase price in 28 days.
Of course, there are also advantages to selling a property at auction and we are increasingly receiving instructions to act on property sales by auction, both by insolvency practitioners acting on distressed sales, and other sellers hoping to achieve the best possible market price. Again, it is the speed and certainty of auction sales which appeals to many discerning sellers.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.