What You Need to Know Before Buying a Property at Auction

In Scotland, the vast majority of properties are sold on the open market, but there are a number of cases where a seller may opt to sell their property at auction. As a buyer, this can seem like an attractive option. It’s often possible to secure a property for less than you would have had to pay if it was sold on the open market, you avoid lengthy negotiations, and transactions are usually very quick, with the timeline from the point where your offer is accepted to completion usually being around four weeks.

There are a number of drawbacks and potential pitfalls to buying a property at an auction however, so if you are thinking of going down this route then it’s important that you are aware of these and go into the process with your eyes open to avoid making a costly mistake.

Immediate Deposit Requirement

In most cases, you will have to pay a large deposit – usually around 10% of the purchase price – on the day of purchase. You will need to have this money readily available to be transferred if your offer is accepted, and any delay in doing so could result in financial penalties.

Binding Contract on Offer Acceptance

Unlike buying a property on the open market, when you buy a property at auction then you are usually entered into a legally binding contract to purchase the property as soon as your offer is accepted. Failure to complete the purchase by the agreed entry date could result in you losing your deposit or being subject to other financial penalties.

It is incredibly important before submitting an offer that you fully review the auctioneer’s terms and speak to your solicitor well before the auction date to give them an opportunity to review the property so that you go into the process with your eyes wide open.

Sold as Seen

When you buy a property at auction you are typically going to be buying it ‘as seen’. There will be no guarantee on the condition of the property, heating, electrics, appliances or other aspects. This is particularly significant because properties that are sold at auction often need significant renovation.

You won’t be able to access the property again once your offer is accepted, so it’s vital that you thoroughly view and inspect the property, and take along any relevant specialists to get their input, so that you know what you are getting into.

Lack of Documentation

Auction sellers are not required to provide documentation for alterations or works carried out on the property. If proper permissions or building warrants have not been obtained, you may need to address these issues at your own cost in the future or it could affect significantly affect the saleability of the property in future.

Potential Title Issues
Auctioned properties are sold with whatever title the seller has. If the title has legal defects or issues, you inherit these. A thorough title check by a solicitor is essential before you bid.

Additional Fees

If you’re buying a property at auction, there will sometimes be a fee payable to the auctioneer, and it may be that this fee is non-negotiable. Again, it’s incredibly important to fully read the auctioneer’s terms.

Your legal fees may also be higher because the type of properties that are sold at auction often require additional legal work, and the transaction needs to be expedited to facilitate a tight deadline.

How to Approach Buying a Property at Auction

There are three key takeaways here if you are thinking of buying a property at auction. Firstly, read the auctioneers terms thoroughly so you know exactly what you are signing up for and what all of the fees and potential penalties are if your bid is successful.

Speak to your solicitor well before offering to give them an opportunity to review the title of the property and advise you properly.

Finally, make sure that you thoroughly inspect the property prior to offering. Depending on the condition of the property, you might want to take along specialists such as an architect or an electrician so that they can advise you on any renovations that you are considering.

If you’re thinking of buying a property at auction, Warners’ dedicated purchasing team is here to help. Get in touch today on 0131 662 4747 or by email at property@warnersllp.com