Auction Contracts-Look out for the additional costs

Bidding on a property at auction can be exciting. Whilst you can pick up a good bargain, it is worth bearing in mind that properties are often sold at auction because they are in poor condition or have title issues.

Unlikely the traditional conveyancing procedure, an auction contract is binding as soon as the hammer falls. It is therefore important that you carry out all necessary searches, surveys and inspections and ensure your finance is in place before the day of auction. You should also read the legal pack carefully.

The legal pack will usually  refer to common auction conditions which will form part of the sale contract and are likely to be varied by special conditions. The legal pack can be amended by way of an addendum at any point before the auction takes place.

The special conditions of a contract may contain clauses requiring a buyer to pay additional costs on completion such as auction fees, the seller’s conveyancing costs or the seller’s costs for preparing the legal pack.

It is also becoming increasingly common to see reference to a “Buyer’s Premium in the special conditions. A buyer’s premium is a sum payable on completion in addition to the sale price. The modern buyer’s premium was first introduced to auction houses by Christies and Sotheby in the 1970’s. It is typically calculated as a percentage of the hammer price. The percentage payable can vary however, you should be aware that such premiums are now commonplace in property auction transactions and can significantly  increase the total cost of purchase.

We would recommend that you instruct a solicitor to review the legal pack if you are interested in a particular property, before you place a bid at auction.

If you are interested in purchasing a property at auction and have any queries, please contact Varsha Varsani at Meaby&Co: or call 020 7703 5034

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