Buying a property at auction can be an exciting and fast paced way to secure a great deal. Whether you’re purchasing a residential home or a commercial investment, preparation is everything. Shilpa Unarkat, Partner in our Commercial Property team, provides valuable information to consider when buying at auction.
Buying at auction can be a great way of acquiring a Property at a great price but careful due diligence before you bid and win the Property is crucial – once that hammer falls, you are committed to proceed with your purchase.
This information is important for both commercial and residential properties.
Here are a few things to consider:
- The guide price is only a guide. Do not get carried away when bidding! Fix your budget.
- Read the particulars provided in the auction catalogue carefully.
- Review the legal pack – sometimes things may be changed or added to the legal pack at the last minute. You must review this to ascertain any legal and financial implications of purchasing the Property. You may have to do some extra research as not all information may be provided in the legal pack. You may wish to liaise with a solicitor before you attend at the auction (as you will buy subject to this if you do win the Property at the auction).
- If you can, inspect the Property before the auction. Once your bid is accepted, you must proceed with your purchase – even if it is a dilapidated wreck which you would not have purchased had you known. You should check for any defects and check rights of occupation against the information within the legal pack. The Property could be one that you cannot secure mortgage funding for because it is not acceptable to a Lender.
- Check the Special Conditions – you may be liable for the Seller’s legal costs, auctioneer’s fees, search fees etc. so you will need to factor these in. You may also be liable for any unpaid rents which the Seller has not received as at the date of the auction. Also, you may be required to insure the Property from the date of the auction (rather than from the date of completion of your purchase).
- Warranties – you will not usually be given any so you must rely on your own inspections and surveys.
- Once you commit to the purchase, you will have a limited period within which to complete your purchase (usually 20 working days). You should have your 10% deposit for the auction date and must have your funds in place to complete your purchase (and meet any additional costs, fees and expenses). Note that mortgage lenders often struggle to provide lending within this strict timescale. If you are unable to complete on the scheduled completion date, you are at risk of losing your deposit or incurring interest on the unpaid balance until actual completion is agreed.
Buying at auction offers a lot of opportunity, but it also carries risk. If you’re considering a property at auction, seeking legal advice early can help you bid with confidence and prevent unexpected complications. Our experienced Commercial Property team can highlight the potential risks and ensure you are fully prepared for auction day.
Contact our Commercial Property team today to discuss your auction purchase and make sure you are protected from the moment the hammer falls.
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