When buying property at an auction, there is obviously a lot of money at stake and understanding your rights can help you avoid any extra fees and potentially losing your investment.
You are required to pay 10% upfront
As soon as your bid has been accepted and the gavel hits, you are obligated to pay a 10% deposit for the property there and then. This can be a banker’s draft, a building society cheque or a personal cheque, but it must be handed to the auctioneer on the day.
The remaining 90% of the property value agreed will need to be provided within the next 28 days either through your own savings and finances, mortgage or bridging loan. Failing to come up with the remaining balance may lead to you losing your deposit and effect the completion with the property being put back on the market or given to the next highest bidder.
The Standard Commercial Property Conditions state that if you do not have the 90% payment ready, not only can it delay or impact completion, there may be extra conditions such as paying the seller’s fees and auctioneer’s fees too – which can cost up to the £1,000 for the auctioneer and up to 3% in vendor’s fees of the property value. (Source: InBrief)
You are liable for any damages
As soon as the hammer falls, you are liable to pay for any damages to the building and the seller has no responsibility to pay for any defects to the property. For this reason, it is important that you have the property checked by your builder, surveyor and solicitor beforehand, and even on more than one occasion. It is it vital that you know about any defects to the building and the potential cost of fixing these before setting your bid price.
In an extreme case in Renfrewshire in 2011, investor Colin Todd paid £37,500 for a property which was knocked down by the council for having a wall that was disintegrating and deemed dangerous to the public. Todd was required to pay for the demolition of the site too and spent thousands of pounds in fees and for the property but had nothing to show for it but a lot of rumble. (Source: The Guardian)
So in addition to checking out the site with some building specialists, it is also important to double check the catalogue and addendum for any extra changes to the property that could lead to extra fees. Property buyers are encouraged to purchase buildings insurance immediately after buying a property at auction as this will cover any mishaps associated with a defective property or caused by fire, flood and vandalism.
Property sellers and auctioneers are required to advertise a property that matches its description, is considered satisfactory and fit for purpose. However, in the event that you feel misled or the property was not as described, you can follow the instructions provided by the Citizen’s Advice Bureau to claim a full or partial refund, replacements or repairs to the estate.
Get the finance you need to complete with BridgingLoanHub
To avoid losing your property and your deposit, we can help you get the finance you need to cover the remaining 90%. We work with award-winning bridging lenders who work with all different types of credit ratings and look at the value and potential of your property instead. With the ability to process applications in a matter of hours, we can transfer the entire amount you need in one lump sum within a 14 days of applying.
Customers can borrow between £50,000 and £25 million and repay in monthly instalments over 3 months to 2 years. Depending on your circumstances and if you are planning to refurbish the property and re-sell it for a profit, we can even roll up the interest to make it more affordable for you. Our team is based in the London and if you email us, we will get back to you within 24 hours.