If you’re thinking about purchasing a property through an auction for the first time, you probably have a lot of questions. One of the most common questions first-time auction buyers have is whether you need a solicitor when buying a house at auction. Answering this question and exploring other important information relating to the role of property solicitors in auctions will be the main focus of this article.
Do you need a solicitor to buy a house at auction?
You will need the legal services and help of a solicitor for buying a house at auction. In fact, your solicitor will have an even more important role than when you’re buying through an estate agent. This is because of all the legal due diligence that needs to take place before you bid. So, you’ll be relying on your solicitor a lot both before and after the auction for your residential conveyancing.
Even though it is possible to get a steal of a deal on a house at an auction, they can offer attract “problem properties” as well. This means that there are several things your property solicitor will need to check to ensure you don’t make a very expensive mistake.
Why do you need a solicitor when buying at an auction?
When you purchase a property the traditional way, through an estate agent, the legal work takes place after the seller has accepted your offer. This is beneficial to you as a buyer because if your solicitor finds anything wrong then you simply pull out of the sale without any cost to you. However, everything works differently when you buy a house at auction.
If you submit the winning bid for a property at an auction, then that’s it. You now have a legally binding contract to buy the house as well as having to pay a chunky deposit immediately. The deposit is normally 10% of the purchase price, but it can sometimes be slightly less if you’re buying through the modern method of auction.
If you decide not to buy the property later on and try and withdraw from the purchase, you’ll lose out on the full deposit you have paid. Alternatively, if you decide to proceed and buy the property despite any issues that have been found, it could end up requiring you to pay even more to fix everything. That’s why it’s so important to have good property solicitors in your corner who will do their legal due diligence before you enter a bid.
What kind of problems will using a solicitor help you avoid?
When a solicitor does a pre-auction legal report on your behalf prior to the auction, there are several checks they will carry out. These checks protect you from the extensive list of problems you could encounter if you buy a property at auction without proper checks. Some examples include:
- Title checks- to make sure that you’ll have full legal ownership of the property.
- Enforcement notices- these would affect you after you buy.
- Easements- to check that no one has any abnormal rights of way over the house.
- Encroachments- to ensure a neighbour’s land doesn’t overlap onto yours.
- Positive covenants- which put in place an obligation for to do something (e.g., contribute funds towards maintaining a road or walls).
- Negative covenants- which limit how you can use the property.
- Local area- finding out whether there are any plans for major roads or developments to be built close to the property.
- Tenancy checks- to look for any existing tenancies and making sure the tenant is paying rent dispute-free.
Any of these issues can lead to serious problems for the buyer. Let’s look at enforcement notices as an example. An enforcement notice could be for something small, like completing minor maintenance on a house. This may not dissuade you from buying it.
On the other hand, an enforcement notice might say that the property needs to be knocked down, or a substantial part of it has to be (this can happen if a property is constructed, or an extension is added without planning permission). Purchasing a house that needs to be knocked down would be a nightmare for the buyer. Basic legal checks by a property solicitor can avoid these types of situations.
Keep in mind, if you identify serious flaws with a house after the hammer falls and you have won the auction, it’s already too late. You won’t be able to back out of the sale and it’s likely that you won’t have any comeback against the auction house or the seller. Consumer legislation won’t be able to help you either. The types of laws that protect buyers from damaged goods don’t apply to buying property.
Although the legal process involved might sound overwhelming and stressful, it shouldn’t deter you from buying a house at auction. Yes, there are things that could potentially go wrong, but that’s no different to going through an estate agent.
Purchasing a home at auction can be a great way to find a hidden gem of a house at a cheap price. If you’re buying or selling a house and need knowledgeable property solicitors in Gateshead, Toomey Legal can help. Contact our friendly team today to find out more about the auction property conveyancing process and what we can do for you.