Auctions of Residential Property
Fri Oct. 3rd 2014
Auctions have become very popular amongst vendors and their agents for selling residential properties in recent years and are often suggested by a real estate agent as a means of identifying buyers early on in the selling process and creating a sense of urgency. They also have other advantages for a vendor as it gives a finite time by which all potential purchasers must have carried out their due diligence in readiness for bidding at the auction when on the fall of the hammer, if the reserve is reached, there is an unconditional sale to the highest bidder. Due diligence may include:
- Viewing a LIM report or checking the Council file if the potential purchaser does not wish to pay for a LIM and one has not been provided by the vendor.
- A builder’s report.
- Pre-approval for finance.
- Having a solicitor check the particulars and conditions of auction and the title and any encumbrances that may appear on the title.
There may be other investigations which a purchaser may wish to undertake such as a valuation but the above are the salient matters most potential bidders will want to address.
The auction process can be a daunting one and an expensive exercise for unlucky bidders if they have expended money on their due diligence and the property/properties have gone beyond their expectation of price. You do hear on many an occasion a buyer in the market postulate that they will not be attending any more auctions.
However, an auction can be beneficial for both vendor and purchaser (particularly if the purchaser is a cash buyer). If there are matters in the particulars and conditions of auction, for instance the date of settlement or a chattel not appearing on the chattels list, to name a couple, that the potential purchaser would like to alter, this is a matter of negotiation between the vendor and bidder. If a potential purchaser, for instance, wishes to change the settlement date from that contained in the particulars and conditions of auction this can be done (if the vendor agrees) by the signing of a variation of agreement prior to the auction allowing that potential purchaser to bid on the basis of those altered terms.
It is essential that any potential purchaser has the particulars and conditions of auction and the certificate of title relating to that property checked by their solicitor as on the fall of the hammer the purchaser is deemed to have accepted the vendor’s title. This is not the case under an ordinary agreement for sale and purchase where 10 working days is allowed for the title to be checked so it is important that due diligence is completed before bidding. If the property does not sell at the actual auction but shortly afterwards the purchaser will still be required to sign the auction agreement.
The contents of this article are for general information only and does not constitute legal advice and should not be substituted for professional legal advice obtained from your solicitor.