Homes un­der the ham­mer

Belfast Telegraph - Business Telegraph - - Front Page - By Ja­neen Mckay, So­lic­i­tor, Prop­erty De­part­ment Ja­neen Mckay is a so­lic­i­tor in the prop­erty de­part­ment of the New­tow­nards of­fice of Wor­thing­tons So­lic­i­tors and can be con­tacted on 028 9181 1538

Auc­tion prop­er­ties can be a great in­vest­ment but there can be pit falls, says Ja­neen Mckay

Buy­ing a prop­erty at auc­tion can be ex­cit­ing and po­ten­tially prof­itable and appeals to a wide spec­trum of pur­chasers hop­ing to bag a bar­gain and cut out the tra­di­tional and some­times lengthy con­veyanc­ing process.

It is con­ceived as a faster way to dis­pose of prop­erty and is a rel­a­tively sim­ple process.

How­ever, it is not risk-free, as once your bid is ac­cepted and the ham­mer falls, you are con­trac­tu­ally bound to com­plete the pur­chase, no mat­ter what.

Many prop­er­ties at auc­tion are un­usual and have ti­tle de­fects that pre­vent them be­ing sold on the open mar­ket. There­fore, on the fall of the ham­mer, you may end up with a prop­erty with ti­tle is­sues which could af­fect its value, for ex­am­ple, no rights of ac­cess to the prop­erty, and which could af­fect your abil­ity to mort­gage it or pre­vent or re­strict fu­ture re­sale.

It is un­wise to bid for a prop­erty with­out know­ing what you are let­ting your­self in for.

The key is to be pre­pared, “buyer be­ware” and do your due dili­gence be­fore­hand on the prop­erty that you are in­ter­ested in.

It is es­sen­tial that you phys­i­cally in­spect the prop­erty and it is ad­vis­able to have a builder or sur­veyor as­sess the prop­erty to give you an idea of the cost of any nec­es­sary re­pairs which you should fac­tor into your bud­get.

You must also have your fi­nance in place prior to the auc­tion. A 10% de­posit is usu­ally paid at the auc­tion, with the re­main­ing 90% be­ing paid within 28 days of the auc­tion or as stip­u­lated on the con­tract.

If you are ob­tain­ing a mort­gage, you must have a mort­gage in prin­ci­ple in place prior to the auc­tion.

It is also pru­dent to in­struct an ex­pe­ri­enced so­lic­i­tor to carry out due dili­gence on the le­gal pack and ti­tle to mit­i­gate the risks by iden­ti­fy­ing any ti­tle is­sues such as awk­ward covenants or re­stric­tions con­tained within the deeds or any boundary is­sues which may be prob­lem­atic.

They can re­view the con­tract as well and iden­tify any hid­den con­di­tions of sale, which may in­clude pay­ing the ven­dor’s fees.

There is usu­ally not much time be­tween the ad­ver­tise­ment of the auc­tion and the auc­tion it­self, there­fore, time is of the essence to in­struct a so­lic­i­tor as soon as pos­si­ble so that they can carry out mean­ing­ful en­quiries on your be­half. Check the ad­den­dum sheet with the auc­tion­eer on the day of the prop­erty to see if any in­for­ma­tion has changed.

If you buy at auc­tion with­out get­ting pro­fes­sional ad­vice and you find some­thing wrong with the prop­erty post-com­ple­tion, there is un­likely to be any come­back against the ven­dor or the auc­tion­eers.

You may have a rem­edy if there has been mis-de­scrip­tion in the auc­tion cat­a­logue. How­ever, this area of law is com­plex and may lead to costly lit­i­ga­tion.

It is also ad­vis­able to stick to a bud­get on the day of the auc­tion as it can be easy to get car­ried away with the bid­ding for a prop­erty that you have po­ten­tially al­ready in­vested a lot of money in by in­struct­ing a sur­veyor and so­lic­i­tor.

How­ever, if you fail to com­plete the pur­chase due to dif­fi­cul­ties with fi­nance, for ex­am­ple, the ven­dor will re­tain the de­posit and has the right to take fur­ther le­gal ac­tion such as su­ing for con­se­quen­tial loss if the prop­erty is even­tu­ally sold for a lower amount.

You will also be li­able for the auc­tion­eer’s fees.

You buy the prop­erty sub­ject to all doc­u­ments and terms of con­tract, whether you have read them or not.

There­fore, get pro­fes­sional ad­vice first and avoid be­ing left with a prop­erty which is a bur­den, not a bar­gain.

Buy­ing a home which has gone un­der the ham­mer can bag you a bar­gain, but you must know what you are do­ing

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