Buying Property At Commercial Auctions - Pitfalls And Tips

When Jones Lang Lasalle closed its auction division in May 2012, many in the property industry were asking what the future holds for commercial property auctions. The answer to this seems to be that the future is bright with the Acutus' July auction sale raising a total of £18.8 million. There is certainly an appetite for buying properties at auction but buyers need to be aware of the pitfalls. Hopefully the tips in this article will be of use.

Pitfalls

Never has the principle of "caveat emptor" ("let the buyer beware") been more pertinent than in respect of sales at auction. Once the hammer falls and the buyer is successful there is no going back. Against this background it is worth remembering that properties are put into auction for a variety of reasons, including a defect in the title to the property or difficulty selling on the open market.

Tips

It is vital that anyone buying at auction gives consideration to the following:-

  1. Investigation

    A buyer should obtain copies of the General Conditions of Sale, the Special Conditions of Sale and any legal pack in addition to the Auction Guide. It is important that these are investigated by a solicitor so that the buyer is aware of exactly what it is taking on. The buyer's solicitor will be able to review the title to the property and any leases or other documents relating to the property. If searches have not been provided with the legal pack, then the solicitor will be able to put these in place as well. Buyers should also be in regular contact with the auctioneer in advance of the auction to ensure that they are fully aware of any changes to the Conditions of Sale, the extent of the property being sold or the guide price.

  2. Price

    Guide prices are simply indicative of the seller's desired price and can change at any time. It is crucial when buying to have an understanding of what the property is worth on the open market and how much you are prepared to pay for it.

  3. Inspection

    Buyers should inspect the state and condition of the property before an auction as it is extremely risky to buy a property 'blind'. We recommend that a survey, as well as an inspection, is carried out if there is time.

  4. Funds

    It is standard for a deposit of at least 10% to be paid when contracts are signed immediately following the successful bid for a property. The buyer will therefore need to (i) have these funds readily available before the auction and (ii) be clear of its maximum bid price before hands start being...

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