Gardner Leader

Stuart Durrant, Conveyancing Partner at Gardner Leader Solicitors, offers some advice to those interested in buying a property at auction.

Although the stated position of the Government is that the country is sailing into uncharted waters, so far as the recession is concerned, and that this recession is like no other, there are certain familiarities with previous recessions. Those who remember the last recession, when property prices fell dramatically, will also recall that there were many bargains to be had in the property market for those who had money.

Nothing has changed with the current recession. Indeed, there appears to be even more reason to buy property now, with:

• base rate at one per cent, rather than the fourteen per cent that was prevalent in the 1990s.
• interest rates and confidence in the banks at an all time low.
• the Government refusing to guarantee bank deposits above the £50,000 limit.
• agents confirming that the letting market is buoyant.

A good way of buying property and getting a potential bargain is to buy at auction. Approached in the right way, you can buy a reasonable property, at a good price, quickly. But it is also very easy to make a disastrous mistake. We have all seen the numerous auctions featured on television programmes like “Flog-it.” The basis of a property auction is the same as a furniture auction, just the numbers have a lot more zeros at the end!

If you decide to buy at auction, it is absolutely essential that you do your homework before the auction. Collect a catalogue from the auctioneers and decide which property you would like to buy. If you intend to let the property, speak with letting agents in the area to see what income you are likely to be able to generate from the property. Ideally, you should have a survey of the property before the auction, but at the very least, inspect the property with a trustworthy builder and establish its condition and the likely cost of getting it to a lettable state. Remember, once the hammer has fallen on your bid, you are committed to buy, so you do not want to find any expensive problems like subsidence or wood rot. Your surveyor should be able to give you some indication of the current market value of the property.

Get your solicitor to go through the auction pack and check the sale conditions, the local search, (which should be with the pack), the title to the property and any other relevant documents. Remember, selling a property at auction can also be a very good way of disposing of a problem property to the unwary.

Decide on the maximum amount you are prepared to pay for the property, and stick to it. No one has ever got into financial difficulty by not buying a property, but many have by allowing themselves to be carried away at auction and agreeing to pay too much. If you feel that you must have the property at any price, do not go to the auction!

Finally, make sure your finances are in place before the auction. When the hammer falls on your successful bid, you must pay a deposit of 10% of the agreed purchase price before you leave the auction room, with the balance being payable within 28 days of the auction.