When you’re considering buying a property through auction for the first time there are inevitably lots of questions that spring up.
One common question we receive from auction first-timers is whether you’ll need a solicitor to buy at auction.
You will need a solicitor when buying at auction. In fact, your solicitor plays an even more vital role when buying through auction than when buying through an estate agent. This is because the legal due diligence takes place before you bid. This means you’ll rely on your solicitor both before and after the auction.
Although it’s possible to bag a bargain at a property auction, auctions can attract “problem properties” too. There are many things you’ll need your solicitor to check to help you avoid a very expensive mistake.
1. Why you need a solicitor when buying at auction
When you buy a property through an estate agent (i.e. “the traditional way”), the legal work comes after the seller accepts your offer. This is nice for you as a buyer because if your solicitor finds anything un-toward then you can simply withdraw from the purchase without cost.
However, when buying through auction it’s totally different.
If you place the winning bid at an auction, that’s it. You have a legally-binding contract to buy the property, and you also have to pay a hefty deposit straight away.
The deposit is usually 10% of the purchase price, although it can be slightly lower if buying through a modern auction.
If you later decide not to buy and you try to back out of the purchase then you’ll forfeit the entire deposit you’ve paid. If you decide to go ahead and buy the property in spite of any issues that have been identified, the costs can end up being even more.
This means it’s critical to have your solicitor do their legal due diligence before you even bid.
1.1. How much does pre-auction legal advice cost?
Getting advice from a solicitor before the auction will cost you, and admittedly this is a cost you’ll lose if you end up not purchasing the property.
However, it can still be a false economy to try and save the money and skip this step. A few hundred pounds saved in legal advice could cost you tens of thousands of pounds down the road (not to mention a massive headache and a lot of stress). So you should always consult with a solicitor before buying.
The price you pay for the report usually comes off your final legal bill too if you are the winning bidder.
There are two main tiers of pre-auction advice:
We’d always recommend the more detailed report. Just be aware that you’ll need to allow your solicitor more time to complete it, so don’t leave it until the last minute!
1.2. Do experienced buyers still need a solicitor?
The only possible exception is if you’re an extremely seasoned and experienced property purchaser and are familiar with reading over these legal documents yourself. Perhaps then it may be quicker and cheaper to review the paperwork yourself.
However, even then we’d still advise using a solicitor. The down-side cost can just be so severe if something goes wrong that it isn’t worth the risk.
Furthermore, mistakes can still happen no matter how experienced you are. If a solicitor misadvises you then you may be able to seek compensation through their professional indemnity insurance. However, if you misadvise yourself there’s no one to fall back on!
It’s an extra level of cover, and it’s really difficult to justify not working with a solicitor when buying at auction.
2. What kind of problems will a solicitor help me avoid?
When you pay a solicitor to do a pre-auction legal report for you there are many checks they’ll carry out. These protect you from a long list of problems you could end up with if you buy a property without the proper checks.
Here are a few examples:
- Title checks to ensure you’ll end up with full legal ownership of the property.
- Enforcement notices which would affect you after you buy.
- Easements to check no one has any unusual rights of way over the property.
- Encroachments to check a neighbour's land doesn’t overlap yours.
- Positive covenants which create an obligation for you to do something (like contribute money towards maintaining a road or walls).
- Negative covenants which restrict how you can use the property.
- Local area – checking there are no plans for major roads or developments to be built near the property.
- Tenancy checks to uncover any existing tenancies and to make sure a tenant is paying rent and is dispute-free.
Any of these issues can present serious problems for a buyer.
Take enforcement notices for example. An enforcement notice could be for something minor, such as carrying out minor maintenance on a property. This might not deter you from purchasing.
But imagine if an enforcement notice said the property needs to be knocked down, or a large part of it has to be. (This sometimes happens if a property is built or extended without planning permission).
Buying a house that has to be knocked down would be a disaster for any purchaser. Simple legal checks can prevent these types of situations from arising.
Remember, if you find serious flaws with a property after you've won the auction, it's already too late. You can't back out of the purchase, and you likely won’t have any comeback against the auction house or the seller.
Consumer legislation won’t save you either. The types of laws that protect buyers against faulty goods simply don’t apply to buying property.
2.1. Look out for Auction Special Conditions too
Auction “special conditions” can present a particular risk to you as well.
The general conditions will usually be presented in the sale catalogue for an auction. They’ll usually be in small print, but are generally easy to find.
However, there can also be special conditions to the sale. These often relate to a complicated and costly issue the property may have.
For example, if the seller’s solicitor knows there’s a particular issue with the legal title they may add a special condition about it. This prevents a buyer from raising any enquiries or objections to it after the sale.
If you don’t review the legal pack you may accidentally stumble into these.
2.2. Other pre-auction due diligence (Surveys)
Along with getting the view of a solicitor before buying at auction, it's possible to get a survey done before the auction too. It’s certainly worth considering a survey. While the solicitor reviews the legal aspects of a property, the survey is concerned with the building itself.
You don’t want to unknowingly buy a property with perfect legal title but a serious subsidence issue. Getting a survey before bidding helps protect against this.
Consumer advice website Which.co.uk states that:
“You should always have a survey done, especially if you're buying a 'doer-upper' at auction, as the seller may be trying to offload a property with serious structural issues.”
Some solicitors will even review the survey report for you as part of their pre-auction report.
So we’ve established that you need a solicitor when buying at auction. But how do you find the right one?
3. Finding the right solicitor when buying at auction
The usual rules apply when finding the best conveyancer/solicitor to work with.
Just remember to find one with auction experience, and who offer specialist auction services. This will ensure they work to quicker turnaround times (which you’ll need for a successful auction purchase).
For example, although they aren’t the cheapest Irwin Mitchell offer a specialist auction conveyancing service for both buyers and sellers.
Alternatively, please feel free to reach out to us directly for recommendations.
4. Key Takeaways
Although the legal process may sound intimidating, it shouldn’t put you off buying a property at auction.
Yes, there are things that can go wrong, but that’s no different than buying through an estate agent. Buying at auction can be a great way to pick up a property at a cheap price too.
Just engage a solicitor early in the process, be prepared to pay for their advice, and make a considered decision once you receive their feedback.
5. Related Questions
5.1. What are the risks when buying at auction?
The three main risks when buying at auction are:
- Not having enough information about the property. (This means not uncovering any potential issues before you bid)
- Not being prepared in advance. You should have finance in place before the auction, if required. Make sure to leave yourself plenty of time for a solicitor and surveyor to inspect the property before bidding too.
- Getting carried away and overpaying. While it's certainly possible to bag a bargain at auction, not every property that sells at auction is a bargain. Set your limit before the auction, and don't get carried away in the moment.
Check out this free download for more information:
We'll be writing a more in-depth article about the risks of buying at auction soon. Subscribe to our mailing list for updates.
5.2. Can a buyer pull out after auction?
It's certainly possible for a buyer to pull out after an auction win. However, in most cases this will be very costly to them.
With most auctions you're committed to paying a 10% deposit as soon as the auction ends. (Note that this can sometimes be less when buying through modern auction). If you walk away from the purchase then you forfeit that deposit.
Learn more here: Can a buyer pull out after auction?
By Matthew Cooper, Founder of Home Selling Expert