A guide to buying property at auction including Modern Method of Auction

A traditional private purchase at auction is where contracts are exchanged “when the hammer falls”. Therefore, you are entering a legally binding contract to buy that property at that moment. You must have your finances in place, have had your surveys and inspections done BEFORE the auction and be ready to complete the purchase (usually 28 days from the auction date) on the required completion date. It is also essential to have the “legal pack” checked by a solicitor who specialises in property matters prior to attending the auction.

This restricts some buyers who cannot be sure that they have all funding in place within the very strict timescale required. You cannot find problems after and then look to get out of the deal and therefore you must be sure you are happy with the condition of the property and the legal title before bidding.

Also, it can be very easy to get carried away with the excitement of an auction and bid more than you planned to, so set a budget and stick to it! If you fail to complete, you will typically forfeit the deposit (often 10% of the purchase price) and you could be sued for breach of contract or the costs of re-auctioning the property and any other losses suffered by the seller.

A Modern Method of Auction is an online property auction that gives buyers 56 days to complete the purchase after paying anon-refundable reservation fee. Therefore, it is equally as important to have your finances in place, have had the “legal pack” checked by a solicitor who specialises in property matters and have had your surveys and inspections done BEFORE paying the reservation fee. Should issues arise post payment of the reservation fee, you will forfeit the non-refundable reservation fee. Stamp duty is payable on the purchase price and any reservation fees paid.

Auction properties often come with additional financial obligations that are not usually listed in the main brochure. The legal pack reveals:

• Special Conditions of Sale: Unique rules set by the seller’s solicitor.
• Buyer’s Premiums & Fees: Extra costs payable to the auctioneer upon winning, which can amount to thousands of pounds on top of the purchase price.
• Search Fees and Disbursements: Clauses stating whether the buyer must reimburse the seller for the cost of searches or the legal pack itself.

A thorough legal review uncovers structural or legal issues with the property title, such as:

• Covenants and Restrictions: Limitations on what the owner can do with the property (e.g., restrictions on extensions, running a business, or keeping pets).
• Rights of Way and Easements: Shared accessways, public footpaths crossing the land, or drainage rights belonging to neighbours.
• Defective Title: Missing documentation, unresolved probate issues, or boundary discrepancies that could make the property difficult to sell or mortgage later.

If the property is leasehold, the legal pack contains the lease agreement, management accounts, and service charge history. We would check for:

• Short Leases: Leases with fewer than 80 years remaining, which can be expensive to extend and hard to secure a mortgage on.
• Ground Rent Escalations: Clauses where ground rent doubles every few years or becomes excessively high.
• Unpaid Service Charges: Outstanding debts from the previous owner that the new buyer might inadvertently inherit responsibility for.

Properties sold at auction may have unauthorized alterations or extensions. We would check whether local authority consents, building regulations certificates, and planning permissions are fully in order to prevent future enforcement action or fines.

Surveys are absolutely critical to any purchase at auction as often, properties are sold at auction have issues which make any sale by the usual estate agent marketed route, difficult and therefore, it is vital to any purchase to have a full survey carried out which is appropriate for the age and condition of the property.

There are pros and cons to auctioning your property. Auctions can be a compromise, but they are an option! They do have their place for the right client with the right property.

Whether you are buying or selling we at G M Wilson Solicitors can give you all the advice and assistance you need. Please call us on 01924 291111 or visit the Enquiries page of our site.