Buying property at auction
Based on the increase in sellers listing their properties for auction it is becoming more and more likely that you may find that your perfect property is listed for sale by auction. Don’t let this deter you. With our expertise the process for purchasing property at auction can be just as easy and much more efficient than non-auction methods of purchase.
How can you assist me at auction?
Here at Stephensons we can take you through the whole auction process from start to finish, including:
Pre-auction due diligence
As with a transaction on the open market it is a case of “caveat emptor” or “buyer beware”. In fact, it is even more important that buyers carry out their due diligence on auction properties as, at auction, on the fall of the auction hammer exchange of contracts takes place and so that is when the buyer becomes committed to buying the property. Although the content may vary, all properties placed in auction will have an “auction pack”. This is a set of documents that the seller will make available to the buyer for them to consider before attending the auction. It is very important that buyers both consider auction packs and take legal advice on the pack. By instructing us to review the auction pack and carry out due diligence on your behalf you will minimise the risks of encountering any unforeseen issues upon completion of your purchase and will be able to make a fully informed decision as to (a) whether you still wish to purchase the property and (b) what your maximum bid will be on the day of the auction.
Once the hammer has dropped, provided that you are the winning bidder we can attend to the completion and post-completion formalities to ensure that your purchase of the property progresses in accordance with the time limits set down in the auction contract without stress and to ensure that the property is registered into your name at HM Land Registry once completion has taken place.
When should I reach out to you?
As soon as possible! The sooner you reach out to us prior to the auction date the more information we can review and the more detail we can go into giving you the best possible chance of minimising the risks associated with buying at auction.
Are there any other things that I need to consider when buying at auction?
Without doubt! By contacting us as soon as possible we can provide you with full assistance in respect of all pre-auction legal considerations that need to be had. As an example, here are a few additional factors that may need to be considered:
Pretty much all auction contracts state that a deposit is payable on exchange of contracts. You will need to ensure that you have cash available to pay this. In addition, most auction contracts also state that completion must take place within a set amount of days (generally around 20 working days).
If you need to arrange mortgage funding, you should liaise with your mortgage broker or lender before the auction to make sure they can comply with the timescale.
In addition to the purchase price, most sellers, at the very least, include conditions in the auction contract that will require you to pay all or part of their legal fees. In addition, you may be required to pay other sums including refunding the cost of searches within the auction pack. It is important you understand, before the auction, what sums you will be required to pay on completion.
3. Buildings insurance
Most auction contracts state that the “risk” (i.e. the responsibility for the property) passes on exchange of contracts (i.e. the fall of the auction hammer) to the buyer. It is very important that you ensure you are able to arrange buildings insurance before the auction and indeed that you put it in place as soon as the hammer falls
What are your fees?
Our fees vary depending upon the level of work that we are asked to undertake. Whether you wish for us to take you all the way through the auction process or whether you just wish for us to provide input on one aspect of the process i.e. due diligence or completion, here at Stephensons we will provide competitive fees that balance the quality of work with paying the best price.
Note also that, it is becoming more frequent that seller’s legal fees and the costs of any searches/other due diligence are passed onto the buyer in full through the auction conditions of sale, so it is important to review the relevant documentation before the auction date to fully assess the potential costs involved on top of the bid amount.
Get in touch with us for more information on our fixed fee packages and a full quotation.
Selling property at auction
Once you have decided upon which auction method you wish to use to sell your property, we are here to help you from auction set-up all the way through to completion (and everything or anything in between).
Auction pack set-up
Prior to the auction date an auction pack must be compiled in order to provide buyers with sufficient details to enable them to undertake due diligence before deciding whether to lodge a bid. Whilst the auction pack is generally provided to aide the buyer, a quality auction pack is a must for sellers as it can go some way to making the Property more attractive to buyers by ensuring that no stones are left unturned and enabling buyers to bid with less risk having had the chance to undertake full due diligence – a good auction pack will increase the chances of more bidders and higher bids.
Another benefit of instructing us to compile your auction pack is to minimise the risks of inadvertently providing warranties or false/inadequate information to the potential Buyer which may ultimately give rise to issues later down the line (post-completion). Our expert solicitors will review all documentation and provide potential buyers with the full picture ensuring that there can be no repercussions for you once you have sold the Property, giving you full peace of mind.
When compiling auction packs we work with you, ensuring that the right blend of efficiency and disclosure is found. If time is of the essence, then it may be that a less detailed auction pack may be suitable, whereas when time is less important, it may be that a more detailed auction pack with a focus on minimising buyer risk and maximising interest and bids will be more pertinent. Here at Stephensons we can deal with both in the way that you see fit.
What do our auction packs consist of?
Generally auction packs can take a number of different forms in terms of the amount of information that is contained within them. The extent of this information depends upon a number of factors including the complexity of the title being sold and the instructions that we receive in respect of costs and time limitations.
As an example, a detailed auction pack should include:
- Auction pack contents list
- Land Registry title register
- Land Registry title plan
- Auction conditions for sale
- Documents referred to on the Land Registry title register
- Replies to standard property enquiries (residential: PIF / Commercial: CPSE)
- Searches (including: local authority search, water and drainage search, environmental search, chancel repair search, SIM search, coal mining search if required)
- Planning information (including planning permission and building regulations information)
When should I get in touch?
As soon as possible! The sooner you instruct us prior to the auction date the more information we can compile giving you the best possible chance of selling your Property for the best possible price. Delaying will only lead to less interest and less profit.
Maximise your chances today by getting in touch with us without delay.
What happens once the auction pack is finalised?
The Property will go to auction and in the event that the Property sells the contracts will be exchanged with the buyer as soon as the hammer falls. From this point onwards the clock will start to run on completion. In most auction contracts it is generally stated that completion must take place within a set number of days (generally around 20 working days), so it is essential that formalities are dealt with and completion achieved in this period.
It is recommended that legal advice is sought to attend to completion and we would be more than happy to help you through the process and take the stress out of the situation for you.
What are your fees?
It is becoming more frequent that seller’s legal fees and the costs of any searches/other due diligence are passed onto the Buyer in full through the auction conditions of sale (note: that if the Property does not sell you will be liable to pay for any costs incurred). Passing costs onto the buyer maximises the seller’s profits however can be off-putting for buyers who will have to factor in such costs as part of their bidding. Here at Stephensons we will provide competitive fees that balance the quality of work with paying the best price which will enable you to make a decision as to whether to incur such costs yourself or pass such costs onto the potential buyer.
Get in touch with us for more information on our fixed fee packages and a full quotation.
What else do I need to know when selling property at auction?
We’ve set out a few handy tips below to get you started on your journey to listing your property at auction:
1. Collate your title information
Most properties are now registered at the Land Registry. We will usually be able to download the necessary information from the Land Registry, but there may be some documents that are unavailable. For example, if your property is occupied by tenants on short term leases or tenancy agreements, these will not be held by the Land Registry. You should start to collate your title documents as early as possible. If your property is unregistered then the focus on getting in touch with us as early as possible is intensified as further works will be required to compile your auction pack. Here at Stephensons we will be happy to talk to you about the property and what documents you will need.
Auction packs are usually made available to prospective buyers online. You will want as many people as possible to see the pack. Be prepared to instruct the auctioneers and your solicitors as early as possible to prepare the auction pack to ensure it is available for viewing by interested parties as early as possible. We at Stephensons recognise this and will strive to prepare the pack for you as quickly as possible.
3. Title defects
If your property has a title defect that is easily resolvable then you may wish to consider taking steps to resolve it before the auction to increase the saleability of the property. You can also choose not to resolve defects. We will be happy to assist you with this and provide you with advice on the available options.
4. Consider your options
Take steps to consider as early as possible whether or not you wish to impose any covenants or restrictions on the property after it has been sold. This could include overage or a covenant not to do something on the property (such as not to use it as a public house).
5. Will the buyer meet your costs?
A seller does have the option of asking to buyer to pay a contribution towards some or all of the seller’s legal and other costs (such as searches). This is increasingly common.
You should consider carefully what searches are included in the auction pack. As a seller you should try and provide the buyer with as much information about the property as possible. Do remember, the cost of searches, will be an “up front” fee. If the property does not sell at auction you will be responsible for this cost. Here at Stephensons we will be happy to discuss with you the searches to be included in the auction pack.
7. Replies to standard enquiries
It is important to provide the buyer with as much information about the property as you can, provided that it does not reveal any problems. Whilst for sellers replies to commercial property standard enquiries can be cumbersome to complete they should always be included in an auction pack where possible.
For a free conveyancing quote without obligation for buying or selling a property at auction please call us on 0161 696 6187.