Before you start visiting properties and looking through the windows of auctioneers’ displays in the high street, the first thing that should be considered is how to intend to pay for your dream home. You should set yourself a budget and understand what you can bid up to. Remember you will need 10% of the final selling price available to you at the moment the hammer falls. This is unavoidable, and something which you have to arrange prior to the auction.
In the case of the property fetching £70,000 for example, the down payment required on the spot will be £7,000. You can pay this in cash although more realistically it will be done by cheque as wandering around with large amounts of cash is not advisable. If you are paying by cheque you will of course have to ensure that sufficient funds are in your bank to cover this amount. A bounced cheque will result in severe problems and you will be liable for the selling expenses of putting the property at auction again.
For most the first step towards arranging finance to purchase a property at auction is to make an appointment with the local bank or building society manager. There are certain things that should be dealt with when you are doing this. Keep in mind that you are not asking for a normal run-of-the-mill private treaty sale mortgage. However, providing your financial status checks out and your ideas seem well-structured, most banks or building societies give the go-ahead to search for a suitable property.
These days, most will offer you a mortgage certificate which really doesn’t mean very much except that the bank or building society is prepared to give you a provisional mortgage facility of a certain amount. Most are usually valid for 28 days. A simple yes or no from the building society manager is just as good.
Find Your Property
The next step, which applies whether or not you are buying the property at auction or through a private treaty, is that you must find the property. To do this simply search the gauk Property auctions section. We list pretty much all property coming up for auction. If you are staying within the area in which you are presently living, viewing is a relatively simple matter. You will have access to estate agents, auctioneers’ etc through gauk Property and you probably already receive or can easily get local papers. However, if you are moving to a different part of the country it is a more difficult situation.
If you are looking for properties in a particular area, then the obvious solution is to use the area filters on gauk property, then contact estate agents and auctioneers in that district.
gauk Property covers the entire United Kingdom and this should be your first and only port of call. Estate agents will be only too happy to send you the particulars of the forthcoming auctions although in most cases the reserve price will not be given to you.
The easiest way to find out where the latest property auctions are being held across the country is by subscribing to one of our sites. Simply join, go to the search facility, type in ‘property’ and you will find a huge selection of contacts, links and catalogues.
Due to the very nature of auctions – in that they are primarily business ventures – many of them are situated in the country’s larger cities. London inevitably contains more than any other. These auctions are filled with properties of every shape, size and description and from all corners of the country, frequently including in excess of 100 lots per sale. In many cases, even homes advertised in local areas, such as Cornwall, will be sold here with interested parties commuting for the day.
Having found a potential property the first thing that you will have to do is check the date of the sale. If it is a final notice you may only have a few days left in which to act, effectively rendering it almost impossible to fulfil everything that you will need to do. Ideally, you will need a month but certainly not less than a fortnight to make all the necessary arrangements.
The first thing that you must do is to make an arrangement to view the property. This will normally be arranged through the estate agent or auctioneer who is dealing with the sale. If you are traveling a long distance to visit the property mention this fact to the estate agent or auctioneer when you are making the appointment. You will generally be accommodated at whatever time best suits you even if that turns out to be at a rather unsociable hour (sellers will want as many viewers as possible to see the property).
A good practice is to arrive a little early and get some time to yourself to get a feel for the local area. Calling at local shops, petrol stations or public houses and chatting to the staff there may often give you a good idea of why the property is being offered for sale and also give you a feeling for the condition of the general neighbourhood.
On arrival ask the owner or the agent for the reason behind the property sale. Look for obvious structural problems, for example, a sagging roof, cracks running down a wall, large damp patches etc, as well as the general state of repair. Be aware the very often vendors will have a house decorated prior to selling as this is an easy way of covering obvious problems like damp or cracks in internal walls.
Consider where the house is situated. In mining and coastal areas for example, subsidence and erosion can be potential problems. There is nothing to stop you asking what sort of price the vendor is looking for. In many cases, they will give you a guideline price. Often this is in excess of what they really want to get. In other cases, you will be told to mind your own business and wait for the auction like everyone else. You can but ask.
If the property has been previously offered for sale by Private Treaty then a working price would have been fixed. This may be been “offers above £60,000 invited”. In this instance, it is always worth trying your luck with an offer of around £50,000. You never know, if the seller is in dire financial straits they may very well accept it straightaway, saving themselves and yourself problems that may be associated with an auction. After all, from the vendor’s point of view, you may not turn up at the auction and the property may not sell.
If the property is simply out of the ordinary then an offer of even £80,000 may be turned down. A property such as a ‘chocolate box’ cottage rich in character in idyllic settings may attract the “simply must have it” brigade, at least that is what the sellers are banking on at auction. However, if the vendor is banking on this it can easily backfire and an unrealistic seller may end up with egg on their face, finding the auction to be attended with more spectators than bidders curious to find out what the final selling price will be. In this case, the fortunate party may win the bid with a low offer.
Remember, you can do no harm by asking the price if you are talking to the seller. He or she may turn out to be the talkative type, dropping hints left, right and centre. Your main objective though should be to find out everything you possibly can about the property. What are the local amenities? It is accessible during winter months? How much is the council tax?
What are the neighbours like? Is it big enough? Could you extend? This question could help you also to ascertain how stringent the local planning regulations are likely to be. Ask yourself, how you feel about the house, would you actually like to live here – does it have the right ‘feel’.
Before you return home, call in at the estate agents, if their office is still open, and arrange for a copy of the conditions of sale to be forwarded to your solicitor. If their office is closed, then telephone them straightaway the next day and ask them to do this. If, having seen the place, you still are enthusiastic, and then you must proceed promptly with all the appropriate arrangements, such as surveys. If not, you must continue your search. Know what you want, know what you are willing to pay and stick to these terms.
Confirm your finance
Now that you have found a property that you wish to bid on at auction, it is necessary to make another appointment with the bank or building society. You can of course telephone them but many people recommend the personal touch and a visit is in order at this stage.
Take along the particulars of the property in question. Describe the place, the reason for the sale, the reason for your interest, and a very rough estimate of what it is likely to cost. If the bank or building society manager thinks it will fall within your allowed mortgage package, then they will arrange for a valuation report to be undertaken (at your expense, of course).
This is not a full survey, but is an educated estimate of the property’s value based on its general condition, age, size and location, and taking into consideration current market trends. It does not include examination of floors and roofs and it is not a structural survey. However, for your own peace of mind, a structural survey is recommended. This will cost more than the valuation but should reveal evidence of subsidence or problems which have been covered up by recent redecoration.
Appoint a solicitor
If you have not already done so, now is the time to appoint a solicitor. They will be required to handle the conveyance and all other legal matters associated with the purchase of the property. If you do not know a solicitor or have not used one before, then the Yellow Pages are as good a starting place as any.
Shop around though, and get a firm price. The price must include a local land search. This is to establish, for example, that the property is not in fact under compulsory purchase order from the councilor such like, and that no one is intent on building a motorway through your back garden.
Although the building may not be a listed building or of particular historic value or typical of an area, there may very well be a preservation order on trees in you back garden. In this case, severe restrictions may have been imposed from possible uses and future alterations. In addition to this, your solicitor will send a list of standard enquiries to the local council, as not all restrictions appear on the proper search.
Your solicitor must also carry out a search of the public index map to ascertain if the property is under compulsory registration. This will mean that if the new method of conveyance was not applied to your prospective property he would have to register the property and include the expense of that process.
Your solicitor will then conduct a ‘common search’, to see if any part of the property is ‘common land’. This is land that an old act of parliament has deemed for use by the common people. This may include grave rights or public rights of way.
If the property is in a mining area, the solicitor will contact the now privatised coal companies to ascertain whether or not any claims have been made regarding damage to local properties due to subsidence. If the property adjoins railway lines or if there are power cables running over or under the land (these are known as servitudes), then this too will need looking into to establish the exact terms under which they were laid.
While this is by no means an exhaustive list, it is your solicitor’s responsibility and indeed your responsibility to double-check everything.
Land & Property – Explanation of General Conditions of Sale
Before going any further it must be stated that this is a particularly complicated area and professional advice must be taken from your solicitor. Legal jargon can be very difficult to decipher. Many conditions of sale detail special conditions and these should be discussed with your solicitor at the earliest possible opportunity. However, here is an explanation of the general conditions which you are likely to see in documents such as conditions of sale.
This simply means that everything is defined, given a name, so as to eliminate any possible misunderstanding. The borrower will be known as the “purchaser”, the seller will be known as the “vendor”, the property will be taken as that which is described in the brochure or catalogue, and the “purchaser” does not necessarily have to be one person, it could be a group of individuals or even a company.
There are three separate sets of conditions pertaining to a property; this is the case in many circumstances. First, the natural conditions are very broad and relate to auctions irrespective of what is being sold. Secondly, the general conditions are those which have been drawn up by the Law Society and are designed to protect both the purchaser and the vendor. Thirdly, there are special conditions which relate to the actual property being offered. In the event of any of the conditions contradicting one another, as often can be the case, then the special conditions will take precedence.
This is the minimum figure that will have been set beyond which the property can be sold and allows you the right to bid up to this limit.
A deposit is usually payable and this clause in the conditions of sale will tell you the percentage of the final price that must be paid. In many instances it is a minimum figure; usually this clause will reserve the right of re-sale and legal action if your cheque bounces.
Sale by Private Treaty
This clause usually refers to the vendors’ right to sell prior to auction and to alter the details, for example, should a shed, garage or outhouse blow down during a storm it will have to be removed from the particulars.
This section basically states that you and your solicitor should have done your homework. When you sign the contract on the auction day you are agreeing to bind by any conditions, restrictions etc. which are attached to the property. Your solicitor should have gone through all of these and should have made you aware of them.
It also assumes that the seller’s claim of ownership has been checked out, and that your solicitor is satisfied with its validity. This clause will also state, in the case of registered land that the document should be forwarded to the land registry office. If you are buying into a block of flats or part of a divided house, then the seller reserves the right to grant new leases until you have paid in full.
Rights of Auctioneers
This is a disclaimer, should anyone connected with the sale turn out to be bogus and money is lost. In such circumstances, the auctioneers might be held at fault. They also claim the right to split or join together any item as a package, although this is more likely to apply to an area of land than to actual numbers of houses themselves. They also have a right to refuse a bid if they suspect foul play and do not have to give any reasons for this action. However, this normally applies more to car and furniture auctions than to property sales.
If you are buying a house on a lease as opposed to a freehold, then you will have to agree to supply the required references within a specific time and agree to comply with the conditions of the lease. It does not mean, however, that the seller has complied.
Rent and Rent Reviews
If you are purchasing a tenant’s property then you, as the purchaser, will have to pay the seller any debts accumulated by the tenants in respect of unpaid rent. If the rent is due for review before the full price has been paid, i.e. before completion, then the seller will expect a higher figure to be paid. If you have not arranged a review, then the seller will estimate what should be due and you will be expected to pay this sum. Once you have signed the contract you are legally obliged to pay in full.
This means that if the money for a property is handed over after 12 noon, then it is considered to have been paid the next working day. It also gives the seller full use of the property until they have paid the full amount. Should you be late in completing (usually 28 days from sale), then you will be liable for a charge (probably plus VAT). To avoid this as purchaser, you must pay in full before noon on the 28th day.
On the day of the sale the contract must be signed by the purchaser. Whoever signs that cheque will be personally responsible for completing the sale. It also states if the seller has not exchanged contracts within 15 working days, then the purchaser can ask for their deposit or contract to be returned.
Signing the contract and exchanging contracts are two completely different things. Signing contracts means that both parties, that is seller and purchaser, have agreed to sell and buy respectively. Exchanging contracts, however, means that the property is the purchasers if they pay for it in full within the time allowed. Completion is when it officially becomes the possession of the purchaser.
Fixtures and Fittings
This is seller’s disclaimer should the purchaser incorrectly assume that certain contents of the property come with the property. If you are buying then you must check everything you expect to get is included. The fixtures and fittings clause may also cover certain things which you did not expect it to.
For example, if a new septic tank has been installed and not paid for, then this liability will be passed on to you. This clause also says that if the property is tenanted, then you do not own the tenant’s belongings. Check that the sellers do actually own what they say they own and ask to see receipts that could well save embarrassment later on.
This means that if the property is offered as a dwelling place, this doesn’t necessarily mean that it has to be habitable. The headings are for convenience only and not to be taken literally.
Properties Outside England and Wales
The conditions of sale will be adapted to comply with the host country’s law.
This is essentially one huge disclaimer, should anything be misprinted or misquoted, or should the estate agent have been misled, or there are bad tenants with huge rent arrears, or if a main road is planned but not mentioned, or if the house is due to be demolished and this small matter has been overlooked. If anything whatsoever is misrepresented or omitted then the auctioneer and seller accept no responsibility at all. It is down to you and your solicitor to check everything and then double-check everything once again. After you sign the contract, there is no easy way out.
Transfer of Conveyance
If you form part of a group of people buying a property, then the seller only has to exchange one contract and not sign subcontracts with each and every party within your group. It also says that the seller has agreed a price with his solicitor and that if you require additional paperwork to be done then it will be up to you to pay for it.
Notice of Protection Purchasers
This states that you, as a purchaser, will have understood and accepted all the rules and regulations that the auctioneer has laid down.