Legal Issues Associated with House Auctions

With the housing market suffering due to the global credit crunch and homeowners losing their homes to repossession as larger mortgage payments leave them struggling there is one area that is flourishing - property auctions.

Auctions enable buyers to get some great deals and many often come away with a bargain. However there are legal issues involved with buying at auction that many consumers may not be aware of.

The main thing to remember when buying at auction is when you agree to buy the property you are entering into a legally binding contract. Once the hammer has fell and your bid has been accepted you are unable to change you’re mind. This can often leave people in quite a mess.

The Bid is Final

Like at all auctions the auctioneer will present an item, in the case a property, and the would-be buyers will make offers on it. In this fast-paced environment it is often tempting to bid more than you originally planned. Indeed some people do so without even realising! However whether you’ve bid on an antique, a piece of jewellery or a three bedroom apartment the same rules apply – once you’re bid has been accepted you are legally required to follow through with the sale. This is why it is absolutely crucial that you set a realistic maximum bid for yourself and do not exceed it. It is often wise to take a family member or friend that you trust with you so they can make sure you do not up the bid when you shouldn’t.

Once you have had your bid for the house you must hand over some of the payment there and then. This is usually 10% of the overall payment. Therefore if you are bidding £200,000 for the property and it is accepted you must handover £20,000 on the day. The remaining 80%, in this case £180,000, has to be paid within 28 days of the sale.

It is this speed that makes auctions appealing to anyone wanting to sell a house quickly. The house selling process can often take months and deals can fall through at the last minute. The legally binding aspect of auctions makes for a swift sale however this is not good for the buyer if he or she changes his or her mind about the sale!

Of course there are other legal issues involved with buying at auction that apply to the house buying process in general. Stamp duty must be paid, this is a government tax on paper work and legal documents that must be completed in order for the sale to go through. Solicitors fees must also be paid. These can greatly add to the cost of the sale and potential buyers should not forget to include these when budgeting.

Despite the unusual nature of the sale, auctions are legally binding and buyers must be 100% sure before they make the bid. There is no going back if the buyer realises he or she has made a big mistake so think carefully before entering into anything.