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Many people think buying at auction is a cheap and easy way to purchase a property. It can indeed be a good way to get a bargain, however it can also be a very expensive mistake. Once the Auctioneer’s hammer comes down you have entered into a legally binding contract. If the property has a defective title, needs extensive work inside, has huge hidden fees on it, and you have won the bid – there is nothing you can do. You have legally agreed to buy this property for better or worse.
The first thing that you should do is get a solicitor to check the legal pack. We have bought in excess of 400 houses, not many from auction for the above reasons but if we were to bid on a property, then, although we know our way around the legal process and what we are looking for, we would NOT purchase a property without our solicitor checking the legal pack.
The second thing you should do is get someone to check the property out. You should really visit the property yourself, if not get a survey done, or get someone independent to view the property.
Over the past 3 months we have been contacted by many people who thinking they have the bargain of a lifetime, have found they have entered a nightmare minefield. Case studies below....
Case Study 1
We were contacted by Miss S. She purchased a property for £77,000 in a well known auction on the basis she would be able to achieve a rental of £850 pcm. The auction company have an associated letting arm who had the property on the market at the rental of £850pcm for 3 months but had not managed to let it. Miss S contacted our rental agency and asked if we could let it for her. We said subject to checking the property to find out it was up to Selective Licence Standards, and was in a lettable condition we could certainly help.
Miss S knew nothing of Selective Licencing and did not know that this was a mandatory requirement for all rental properties in the County Durham area. She asked what rental we would expect and we explained the rental would be approximately £425 - £450 pcm. She was horrified with the rental we quoted – we explained that this was primarily an area where the tenants rely on benefits and the local LHA was £400 pcm. A very unhappy lady. To this day the property remains unlet.
Case Study 2
We were contacted by a lovely lady Mrs B. She asked if we would manage 2 properties she had won in Auction. We explained that we would need to check the property to ensure it was up to Selective Licence Standards and was in a lettable condition. She explained that this was no problem as it was let for £750pcm. She was paying £21,000 for the property. The second property was slightly more at £25,000 and was empty. We advised her to have the legal packs checked by her solicitor. Unfortunately she did not. She actually bought another 2 properties. On each property she paid the auction company £11,000 (made up of auction house fees and buyers premium and 10% deposit). Our Operations Director went to view the 2 properties. When he went to view the property, he met the tenant who had been in the property for some 4 years. She did not know what she paying in rental because her benefits were paid directly to the landlord. The house itself needed extensive work in region of £8000 to make it habitable. We advised Mrs B of this who decided to take legal advice. Her solicitors sent her completion statements and she found that the completion statement also included £20,000 of arrears that she had agreed to pay the seller in the contract. Each contract was the same.
Mrs B walked away from £33,000 and did not proceed.
As an aside we were contacted by the local Selective Licence team who said they had grave concerns about the state of the house and were in the process of doing a formal HSSR inspection which would be enforced within 28 days.
Case Study 3
We were contacted by Mr M, an existing client of ours who had been offered 2 flats in a single house via facebook. Our Operations Director went to view the properties and found them to be in good condition. However as 2 flats in a single house they did not meet the requirements for a conversion. There were no fire doors, emergency lighting or additional boarding to the staircase in the case of fire. Mr W did not purchase the property. Three weeks later we were contacted by Mr A who had bought these flats in auction. He had paid £15000 more than Mr W was offered. We explained the requirements of Selective Licencing and the fact that the properties shared an electric supply, a gas supply and had these issues. Once again Mr A had not had the legal pack checked by a solicitor. He is currently deciding what to do.
He has paid £8000 deposit and is concerned about walking away.
Please be aware that if you purchase a property in Auction there is generally a reason as to why that property is in Auction. It may be that the owner wants a quick sale, it may be that there is something not quite right with the property, or it may be someone is trying to offload their problems onto you. The term BUYER BEWARE is certainly relevant.
Also, location is a key factor, the wrong street can be a disaster!
After 20 years experience buying, selling and managing property in Country Durham we have the necessary experience, time and skills to investigate every appropriate property for sale before selecting the most appropriate properties and we also refurbish the properties for our buyers all inluded in the price of the properties. So, when you purchase a property with us, the benefits include -
This means you have a totally hands off investment providing you a steady income for now and in the future.
Please call us on 01483 663001 to find out more.