Sales by auction take a different route to the usual sale or purchase by private treaty. They are potentially dangerous beasts as the point of contract between seller and buyer is the moment the hammer is brought down on the buyer’s bid – the point of no return.
For Sellers – remember that although a sale by auction is in some ways an easier route, there are pitfalls and costs can prove higher than on a conventional sale, especially if the property fails to sell first time round. Before the auction is advertised, special auction conditions have to be drawn up by the sellers solicitors who will also prepare a Legal Pack for potential buyers to inspect prior to auction.
For Buyers – as auctions can be used to sell a property because it is unusual and difficult to value or otherwise tricky, it is vital that a buyer asks his or her solicitor to check the Legal Pack well before the auction date and investigate any unusual elements well before the actual auction. For example, there could be issues relating to title (the seller’s right to sell), rights of way, an apparently defective title, unusual covenants etc. If a property is ‘knocked down’ to a buyer, that buyer has to accept the position as is and cannot later complain of any problem unless it is a legal issue undisclosed at the auction.
It is also highly advisable to have finance in place by the auction date. The moment the hammer is dropped, 10% of the purchase price is payable immediately (the deposit) and the purchase must be completed on the day stipulated in the auction particulars – usually, but not necessarily, 28 days later.
The property is purchased in its physical state which is why buyers should have a survey carried out before the auction. This may be regarded as money wasted if the property isn’t secured at auction, but better that than risk purchasing a defective property.
We are very experienced at dealing with sales and purchases by auction and can assist sellers and buyers. Feel free to contact Daniel Hewitt at our Halesworth office to discuss.