Review the Legal PackSellers typically provide an auction or legal pack for the property, usually accessible through the auctioneer’s website. It’s crucial to have a solicitor review this pack. Sellers aren’t obligated to disclose property issues or include specific documents. Missing documents might hint at hidden problems. Scrutinize the pack for any title issues or covenants that might affect your desired use of the property or mortgage approval.
Prioritise a Property Survey The legal pack won’t encompass a property survey. Once you commit after the auction, discovering structural flaws becomes your responsibility. To avoid post-auction surprises, arrange a survey before the event. Structural issues could impact your mortgage eligibility.
Factor in Stamp Duty Land Tax (SDLT) Just like any property purchase, SDLT might be applicable. While budgeting, account for SDLT, along with the purchase price and other costs. SDLT must be paid within 14 days of completion, so make sure you have the funds available.
Understand VAT Implications VAT could apply to the property, potentially increasing the purchase price by up to 20%. Additionally, SDLT is calculated based on the total, including VAT. To accurately gauge the funds needed for completion, confirm whether VAT is applicable by checking the legal pack’s special conditions.
Be Prepared for Extra ChargesSellers often require buyers to cover additional costs upon completion. For instance, if the legal pack includes searches, you might need to reimburse the seller. Also, be prepared to cover some or all of the seller’s legal fees, as outlined in the special conditions of the legal pack.
Set a Realistic Budget Before entering the auction arena, establish a comprehensive budget. Consider all potential post-purchase expenses in addition to the purchase price. Special conditions usually dictate a completion timeline of around 10 to 20 working days, so ensure your budget aligns with your available funds.
Secure Funding Ahead of Time Given the short completion window of 10 to 20 working days, arrange financing well before the auction. Securing a mortgage offer before the event allows your solicitors to meet any lender requirements promptly.
Analyse Leases and Tenancy Agreements If the property comes with existing leases, tenancy agreements, or even unauthorised occupants, assess their terms and conditions. This step is vital for investors as well as those planning to reside in the property. Inadequate agreements could impact your ability to mortgage or sell the property.
Clarify Buyer Identity The auction contract names the buyer, and this identity is binding post-exchange. Consider any tax implications and decide on the purchasing entity beforehand. If you’re seeking a mortgage, ensure the lender’s conditions align with the buyer’s identity.
Time is of the Essence Performing thorough due diligence takes time. Begin early to have ample opportunity to address any issues. Similarly, after the auction, ensure you have the necessary funds for timely completion. Failure to complete could result in the loss of your deposit and possible additional compensation claims from the seller.