- Our series of three articles is about buying a property at auction
- This final instalment looks at what you need to do once the gavel goes down
- The winning bidder usually has 28 days to complete – and there is plenty to do
One of the many unique things about purchasing a home at auction is that, once the gavel goes down and you are the winning bidder, you are legally obliged to buy it.
The fall of the gavel in the auction is binding and it is at this point that contracts are exchanged – so unlike a traditional purchase, there is no backing out.
The clock is ticking, and you’ve usually got 28 days to complete.
In this article, which is the final instalment of our news of three articles about buying a property at auction, we take a look at what happens after the auction and what you must do to ensure a smooth completion.
The good news is that if you did your homework before the auction, everything should now be a formality. However, there are still things you need to do.
Before you leave the auction room
Ian Kitson of Cheffins auctioneers and estate agents highlights the wave of emotions you may feel once the gavel goes down and you are the winning bidder.
He says: ‘When the gavel falls and you’re confirmed as the highest bidder, for most buyers, there is often a huge sense of joy and relief and a wave of adrenaline.’
As the heart rate begins to fall, the most immediate thing to do is to sign the memorandum of sale in the auction room – or remotely if you have been bidding online – and pay the deposit. This is normally 10 per cent of the purchase price.
These two steps confirm the exchange of contracts and begins the countdown to completion of the sale.
Keep everyone in the loop – and sort the money
At this stage, it is vital is to communicate with all the parties involved.
This includes letting your solicitor know that you have exchanged contracts, along with your finance broker – or whoever is organising your funds.
Kitson adds: ‘The next task is to notify your solicitor of your success, and advise them that the auctioneer will be sending through the memorandum of sale in the coming days.
‘Your solicitor should already be aware of the property – assuming you asked them to check through the legal pack pre-auction – and will therefore liaise with the seller’s solicitor to arrange the transfer documents and ensure that all is ready for completion, which is typically set at four to six weeks after the auction.
‘Your solicitor will normally ask you for the balance of the purchase funds a few days before completion, so make sure that the required money is available in your account, and available to transfer in the required timings.’
Keep to the completion deadline
Andy Thompson, of Pugh Auctions, explains that one of the biggest advantages to auctions is having a 28-day completion deadline.
He says: ‘While that can be a bit daunting, everyone works better to a deadline.
Buying a house can take five months, but at auction it can take less than five weeks
‘If you look at buying a property under private treaty, it can take you five months between an offer being accepted and completion. But here it can take less than five weeks.’
He advises that it is important to keep your channels of communication open after the auction and before completion.
‘Everyone needs to know the sense of urgency and if there are any problems, you can act on them,’ he says.
‘For example, if you have a busy solicitor and your finance broker is hard to get hold of, things may get forgotten or missed.
‘The more you communicate with all parties, the easier it is to get resolved.
‘The seller has come to auction for a prompt, secure and transparent sale. They have not come to steal your deposit.
‘Sometimes in life things don’t go to plan, but you have a better chance of resolving things by being transparent.
‘Don’t bury your head in the sand and leave a call to the day before completion to say that you are not going to be ready.
‘If you can communicate in good time and can demonstrate that you are working hard to get it resolved, then it is more likely to work.’
He also says that it is worth using this time after the auction and before completion to line up any tradespeople if there is renovation work to be done.
Arrange insurance on your auction property
‘The other thing to arrange in the immediate aftermath of the auction is the necessary insurance for the property,’ says Kitson.
In many cases, the legal pack will state that the buyer should commence insurance from the point of exchange – ie the auction – and buyers therefore need to arrange this quickly to ensure that they have a policy in place.
‘The four-week period between the auction and completion goes unbelievably quickly,’ he adds.
‘Keep in regular contact with the auctioneer and your solicitor, be organised and you’ll be fine.
‘And of course, you can start getting excited about what you plan to do with your new acquisition.’