If you’ve got your heart set on moving into a new home before Christmas, then buying a property at auction might be the best way to achieve this. The conveyancing process is significantly shortened for auction sales; you must usually complete on the property sale (i.e. pay the full amount) within 28 days of the auctioneer declaring “sold!” or face a financial penalty for not meeting the conditions of the sale.
Given the quick nature of buying a property at auction, it’s important that you’re totally sure you want to commit to the property sale before you raise your bidding paddle. The later stage of the conveyancing process may whizz by, but it doesn’t mean the earlier stages of the conveyancing process should be overlooked.
In this blog we talk through the must-do’s if you’re looking to buy a property at auction. These steps are just as relevant for first-time buyers as they are for property investors and every family and individual in between.
Do your area and property research
It’s an incredible feeling to walk into a space that you want to call your home. It’s important that you can happily picture yourself in the property, but it’s also crucial that you carry out the right checks before getting swept away in the excitement. Take the following into account:
- Area: Look at the houses in the neighbourhood and whether people have pride in their home presentation; check for proximity to public transport and local facilities, including access to healthcare, education, sporting and entertainment. Does it suit your lifestyle? Will you be close to your work, family and friends?
- Liveability: Look at the condition of the property and think about how you intend to use each room. Is the property in a ready move-in condition? Does it need any restoration work? How will that factor into your budget? Do you have the time and skills to manage any building works yourself?
- Energy efficiency: When working out a budget for a property, it can be easy to forget the ongoing costs and carbon footprint once you’ve moved in. Something that will greatly influence this is the Energy Performance Certificate (EPC) rating of the property, which will give you an idea of how expensive the property will be to run in terms of your gas and electricity. Buildings are rated on a band scale from ‘A’ (highest efficiency rating) through to ‘G’ (lowest efficiency rating). If you’re planning on renting out your property straight away or further down the line, the EPC rating of the property by law must not be less than ‘E’. So, if there are building works needed to improve this rating, and in turn reduce your property running costs, then these will need to be factored into your budget.
- Building or surveyor inspection: It is always advisable to take a builder (who is listed on the Construction Industry Council Approved Inspectors Register - CICAIR) or surveyor (who is a member of the Royal Institute of Chartered Surveyors - RICS) along with you to a property inspection so you have an informed and professional insight into the actual state of the building. A basic condition report can cost anywhere from £400 to £900 and will cover any major issues, such as rot, damp, subsidence and uplift, but the report will be limited to what is in plain view. If you need a more detailed report that will include checks beyond plain view, you can expect to pay the higher price tag of something between £500 to £2,000. You might like to consider a more thorough building inspection if you’re wanting to do any major works or you’re looking to invest in a building that is listed, thatched, timber framed or very old.
Sort your finances
If you can afford the property, the dream of home ownership or property investment will very quickly fall flat. So, before you invest too much time searching for the right property fit, make sure your finances are in order first. Remember that you’ll be legally liable to complete on the sale at the final strike of the gavel If your offer is accepted, you’ll need to front up 10% of the purchase price straight away. You’ll then usually have 28 days to pay the remaining 90% of the purchase price.
If you’re not able to pay the remaining amount by the 28th day, you could potentially lose the 10% you’ve already paid, and the deal is at risk of falling through. More than that, though, the sellers could be within their rights to have you cover the re-selling costs and, in some cases, pay interest for late completion, pay the seller’s legal costs and any consequential damages/losses and/or expenses incurred by the seller due to the buyer’s delay and/or (in the worst case scenario) default and failure to complete. So, noting the high stakes of not completing within the 28 days, you need to be very sure about your financial position before making an offer.
If you’re planning on taking out a mortgage to pay for the property, then organise a valuation in advance of the auction. If you do not have the time to do this, then organise an agreement in principle with your chosen lender; this is a figure your lender will in principle be willing to allow you to borrow based on some basic information and your credit score.
Get legal advice early
We encourage you to speak to one of our experienced property solicitors in Cardiff or Bristol well before the auction date to give you complete peace of mind. The earlier you instruct our dedicated team at Insight Law, the earlier we can get the early part of the conveyancing process underway.
It is in this early stage that we can carry out a number of checks, such as title, local authority and water authority checks. By looking at these in advance, your solicitor can spot any potential issues early which otherwise might result in delays or hidden costs you hadn’t budgeted for. Engaging one of our property solicitors early means you’ll be ready to raise your bidding paddle with full confidence in what you’re committing to.
To speak to our team about your conveyancing needs, get in touch on 0117 925 6257 (Bristol) or 02920 093 600 (Cardiff). You can also get a quote online using our web calculator.
Posted by Insight Law on
19 November 2019