Buying a Property at Auction
Buying a property at auction is very different to buying a property on the open market. You need to complete the legal work and surveys before the auction, and have your finances in place. This is because if the gavel falls and you are the highest bidder, you will be asked to sign a contract – and pay a deposit – straightaway.
What you need to know about buying a house at auction
The most important thing you need to know about buying a property at auction is that the highest bidder is required to sign a contract at the auction, provided the bid is over the reserve price.
If you are the highest bidder, then this is a very exciting prospect. You are exchanging contracts immediately, with the closing date likely to follow close behind. This means the conveyancing process is very fast and it won’t be long until you are officially the legal owner of the property.
However, it is also quite a terrifying prospect, because as the buyer, there is no backing out. Once the gavel falls, you are legally committed to the purchase. Along with signing the contract, you will also have to:
- Pay a 10% deposit at the auction
- Arrange buildings insurance
- Pay the remaining balance by the closing date, which is usually 28 days from the date of the auction
What you need to do before the auction
So, you need to be 100% certain that you want to purchase the property – and that you can afford to purchase the property – before putting in a bid. Considering this, there is actually a lot of work to do in advance of the auction.
Instruct a solicitor
Firstly, you obviously need to look round the property and check that it meets your requirements.
If you’re interested in buying, you need to instruct a solicitor who deals with auction conveyancing. A solicitor can request the legal pack from the auctioneer and complete a Solicitors Pre-Auction Report (SPAR). This will identify any potential issues with regard to the title, planning permissions and hidden covenants. It will also help you understand exactly what you are buying, particularly with regard to land boundaries and the conditions of sale.
Get a surveyor’s report
While your solicitor is working through the conveyancing process, you should ask a surveyor and/or structural engineer to assess the property. This is absolutely vital because the seller is not legally obliged to tell you about any defects. If you end up buying the property at auction, then you buy it ‘as is’. You have no legal recourse if you later discover that the roof is about to collapse or there is dry rot. The seller/auctioneer will simply say that you should have detected these issues before committing to the purchase.
Secure your finances
Finally, you need to put the necessary finances in place. If you are the highest bidder, then you will have to pay a 10% deposit straightaway. Unfortunately, you cannot calculate exactly how much this will be. After all, this is an auction, so you do not know what the final sale price will be. Auctioneers do provide a guide price, but if the bidding is competitive, the property could sell for far more. Therefore, you need to have a significant amount of cash ready to go.
You will then have to pay the remaining balance by the closing date, which will be specified in the contract. This is often between four and five weeks. This does not give you long to find the remaining money, be it cash, a mortgage or another type of loan. Because of this, you need to have your money/mortgage/loan in place before the auction occurs.
You must also factor in the other costs involved, such as Stamp Duty, buildings insurance and conveyancing fees.
If you cannot pay the remaining balance by the closing date, then the seller is entitled to withdraw from the sale. You will lose your 10% deposit. You could also liable for the seller’s losses going forward, such as the cost of re-selling the property. In light of this, you must not underestimate the need to have your finances in place, before you start bidding.
Contact our property auction solicitors
If you would like to buy a property at auction in Ireland, please contact us at Mullins & Treacy Solicitors. We are highly experienced at helping people buy property at auction, and have strong relationships with mortgage providers and auctioneers. We’ll help you navigate the process of buying a property at auction, working hard to ensure your position is protected.
Call us on 051 391 488 or email firstname.lastname@example.org for a free no obligation enquiry.We are client focused and results driven.