Conveyancing solicitor Steph Cleak summarises the pros and cons of buying and selling property at auction
Properties sold at auction account for just 2.2% of the total number of properties sold in the UK, with the majority of sellers choosing to sell privately or through an estate agent. Nevertheless our lawyers do frequently deal with buying and selling property at auction.
The main benefit of an auction is the speed of the process. A property at auction will be chain-free and is legally binding from the moment the auctioneer’s gavel falls. The contracts will be signed and ‘exchanged’ that day and then a deadline to complete will be set, usually within 28 days. This removes the risks of a seller withdrawing a property from the market or a buyer pulling out before exchange.
However, auctions are not without their disadvantages. A seller might not receive as much as they would have got had they put the property up for sale on the open market. Furthermore, buyers are only able to bid if they have finances available, and it is very hard to get a mortgage for an auction property.
Another significant drawback for buyers is that they do not have as long to carry out due diligence over the property, including raising enquiries of the seller.
There is a new type of auction, dubbed a ‘Modern Auction’, where instead of the winning bidder exchanging contracts with completion in 28 days, a non refundable deposit or fee is paid that allows the buyer a certain period of time to exchange. This is similar to a tender process in effect, but does not give the seller certainty. The buyer is also faced with larger fees in this type of auction.
If you do decide to sell or purchase a property at auction our experienced lawyers will be able to assist you with preparing or reviewing the Auction Pack, and carrying out the necessary legal work to get the transaction completed.
For further guidance on buying and selling property at auction contact our helpline on 0333 888 0404 or send an email to us at [email protected]