What happens when you hit a snag or a problem when buying at auction?
Have you ever thought about buying an investment property at auction?
Maybe you have bought at auction and everything went according to plan?
However, there are things that can and do go wrong with auction purchases.
This is something I don’t see talked about online.
It is something I definitely cover when training and mentoring.
You may already know that when you purchase a property at auction you have a certain number of days to complete the purchase. It can me 14 , 20 , 28 or any number of days really as these terms are set in the auction pack and auctioneers brochure.
But what happens when you don’t complete in the required time scale?
Well, this is where there are penalties that can be applied.
Now, I don’t want to go into who or why the purchase wasn’t completed in time as there are many reasons, not necessarily your fault, and people that could have caused this. I could go on for pages and pages exploring all these. Situations like poor /lazy/incompetent solicitors, auctioneers not assisting or being lazy, slow lender processes, poor understanding by the buyer or seller, bad practices, ever underhand tactics…
All of these I have experienced over the last 20+ years
If you do not complete in the timescale set out and the date passed you are in a situation that you must rectify asap. You see the sellers solicitor can issue a “ Notice for completion” This means you have not completed on time , if you don’t complete now the seller can keep your deposit , this is normally 10% of the sale price. The seller can then pull out of the sale. You could be a lot of money out of pocket and no property to show for it. You could also be hit with further fees incurred by the sellers solictor for the extra work created by not completing on time. You could also be hit with interest payments. Interest payments such as the sellers mortgage interest and repayments. There is also a possibility that you could be charged interest on the total sale value of the property for the delay in completing.
Let me give you an example of a property that I sold for £100,000 :
I have decided to sell a property at auction as I want a quick sale.
I have another property to invest the money from the sale into.
This is because I can get better returns from the new purchase.
The new purchase is time sensitive. I have to get exchanged on it in a certain time to get the deal I negotiated.
My property goes into auction, in this case, it was an online traditional auction style.
It sells and the buyer puts down the 10% deposit of £10,000.
The completion date is set for 28 days later (20 working days).
During the process, I am continuously communicating with my solicitor and the auctioneer.
I cannot communicate with the sellers solicitor as he is not acting for me.
I ask for updates each week after the sale was agreed from my Solicitor and Auctioneer.
The Auctioneer says, “Everything is on track, “They have the funding sorted,” and “All is looking good for the set completion date”.
My solicitors say they are concerned at the lack of communication from the buyer’s solicitor. Every week, they have asked for confirmation that all is on track, and only after 3 weeks do they get a response that all is going to be fine.
The day of the completion comes around.
The seller’s solicitor should have drawn down the funds now (should have applied 5 days before to the lender for the funds) and send over the mortgage money plus deposit and any fees.
This hasn’t happened by 12:00.
My solicitor has called at 9am , 11am and 12pm to ask for confirmation all has been sent.
No reply from the seller’s solicitor.
Eventually, around 3pm my solicitor has a conversation with the buyers solicitor who had taken the morning off !!
He says that he must deal with a third solicitor who is acting for the lender.
*** This is not unusual as the buyers solicitor may not be an approved solicitor for the lender . This is another topic for another time though!
My solicitor tries to contact the 3rd solicitor who says that they have only just applied for the funds which will be another 3-4 days !
My solicitor is fuming at the poor practices from the buyers solicitor and we have a chat about this.
Now in auction rules there is a 10 day optional period that can be granted by the seller for the transaction to complete from the official completion date.
My solicitor and I discuss this and the awful practices from sellers solicitor and auctioneer and what we will do.
We decide to serve notice given the underhand and dishonest communications from the buyers solicitor.
Now if there was a genuine reason for the delay, like they have been hospitalised for a week following a car accident for example, then I wouldn’t have serviced notice.
I also feel that the buyers have been let down here by their solicitor and do not blame the buyers for the delay and they should seek compensation from their solicitor.
What does this mean for the sellers/me though.
Well, because there is a delay ,my deal that I am preparing to buy with the proceeds from the sale is in jeopardy. I will have to try and negotiate a delay there or hope they are understanding and can wait 2-4 days longer.
They might now though!
Also my solicitor has charged extra to serve the notice and the extra time she has to commit to this sale.
I also will incur further mortgage interest payments from the lender on the property to sell.
Now as I said before, if there was a good reason for the delay I would not do this and accept that it’s delayed by a few days. However, given the way the solicitors and auctioneer has acted I really don’t feel they should get away with it.
I hope this all makes sense and it shows you how you as a buyer could be penalised heavily if you don’t get everything done in time .
If you want to chat with me about this ,
Maybe you want to know what happened in the end?
or
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