Purchasing a property is very large investment of time and money, so it is important to get this right the first time around. A conveyancing transaction can be a stressful event in your life so it is important to choose your solicitor carefully and also who will market your property for you. Now…. purchasing a property through an auction can attract a new level of stress which you may not have realised you were letting yourself in for. It is definitely worth speaking to people who have used this method before so you can truly understand what the position is and will be.
From 2022-2023, there were approximately 23,000 (just over) properties listed for sale at auction. That is on average a 9% increase on the previous year which saw just over 21,000 listed for sale by auction.
Selling your property through auction is becoming more and more popular and there are certain reasons why a potential seller may look to sell via the auction route. A seller may be looking to relocate and generally needs a quick sale and an auction can offer that, or there is something not quite right with the property and therefore the need to get rid of the property quickly, hoping that potential buyers do not notice or see the defects. Now, we are not saying that this is the most common reason, but it can happen and trust us when we say…. We have seen some real horrors!!
Typically, there are two types of sales by auction…. You have the modern auction or the traditional auction. Let us explain the difference in a little more depth.
Modern Auction
A modern auction is when you have a property listed for sale, and a buyer comes along with their offer which you accept, and the buyer will normally pay a £6,000 non refundable deposit (although this amount can change from auction house to auction house). The buyer will then have approximately 56 days to exchange and a further 14 days to complete. Again, these timescales can also vary from auction house to auction house. Essentially, the process is not too different from selling on the open market through an estate agent, however you have much stricter timescales to adhere to via auction. As mentioned, you would instruct solicitors in the same way and your solicitors would review the documents and raise their usual enquiries (if needed) very much as if the property was sold via an estate agent.
Traditional Auction
A traditional auction is what you see on “Homes under the Hammer” (alternative TV programmes are available to watch or stream). This is when the auction is generally live (nowadays the auctions are online) and prospective buyers bid on the property and the higher bidder wins. This is finalised with the gavel coming down and hitting the auctioneer’s desk. If you sell via this method, then there is usually an Auction Pack which has been prepared by the auction house or by your chosen solicitor. This auction pack contains the legal title, searches and anything else the seller may have that will help prospective buyers in choosing whether to bid or no. selling via the traditional method means that the buyer will have automatically exchanged and will be legally (contractually) bound to complete the purchase. Failure to comply will result in a breach of contract and the buyer will lose their deposit (usually 10%) and then liable for damages if the seller decided to peruse the breach of contract. Selling via this method will usually tie the buyer into completing the purchase within 28 days.
Depending on your reasons, you will be drawn to one of the two auction methods mentioned above. They both serve a purpose, and that purpose is to get the property sold.
The traditional method is sometime the more favourable as it is tying the buyers down there and then (when the gavel comes down) and as a result sellers have comfort that it will complete, and if it does not, then they will be compensated for non-compliance.
Using the modern method of auction can be favourable, and that is to get the largest exposure to your property as buyers can view the pack, ask their solicitors questions and then make a sensible decision as to whether or not they proceed. Auctions can attract attention to your property which you would not normally have had.
Either way… if you are purchasing a property through an auction, PLEASE GET THE LEGAL PACK CHECKED BY A SOLICITOR. There are often a lot of hidden issues with properties at auction whether this it is defect legal titles or sneaky contract provisions. If you seek legal expertise, then you cannot go too wrong when purchasing at auction.
There are a lot of hidden gems in auctions which are not to be sniffed at, however you need to ensure you know what you are doing so to not end up in a total mess!
If you need any guidance or support in manoeuvring through the auction process, give us a call and we would be happy to provide some guidance. You can reach us on 0191 567 7244 or via enquiries@cooklaw.co.uk.