Q? Are these Allsops Auctions still going on? Are there other similar National Auctions? Is there anything that I should watch out for over and above what needs to be checked in a normal property purchase?
Yes, the Allsops Auctions are continuing regularly as before. While many of the properties on offer at these auctions are being sold by Banks and Receivers still, there are also many properties that are being sold by private owners who are not in negative equity. Other large national estate agent franchises including Sherryfitzgerald, Leinster Property Auctions and others are holding similar auction events with multiple properties for sale on the same day. Property transactions are notoriously stressful events even for a seasoned buyer. Buying a property at an auction, particularly in circumstances where the Vendor may be a Receiver or the property may be in negative equity, can be even more frustrating and stressful again! Indeed, on occasion, it can prove to be disastrous for the unprepared. I have attended most of these Allsops Auctions since they started, both on behalf of buyers and sellers. It still shocks me that so many buyers are prepared to attend at these auctions and bid large sums of money and are totally unprepared. Many naively think that because it is an auction everything must be ok! Many buyers do not understand the process at all. However, for a buyer who has done his homework and is well prepared, it can be a very transparent process that can be successfully and quickly navigated. Here are a few useful tips which should at least prepare you for what is involved. My advice is not to turn up at the auction unless you have prepared several weeks in advance. There is no point in contacting your Solicitor a few days before the auction or on the day of the auction.
The first choice you will need to make is who to engage as your Solicitor to act in the purchase and mortgage transaction. Remember, this may be the biggest financial decision of your life so the decision as to whom to engage as your Solicitor is a serious one. Also remember that this is a service and not a product and service levels can vary dramatically from firm to firm. Do not make your selection based on the lowest price only. Ideally you should select a firm with a good reputation in this area and one that has been recommended to you by a family relation, friend or other business advisor. You should make sure that your Solicitor is not only prepared to review contracts and title in plenty of time for you but is also prepared to attend the auction for you in Dublin.
Many, but certainly not all, of the properties offered for sale at these auctions are distressed sales. Sellers, often Receivers/Banks/ individuals being pressed by the Banks to sell, must take a very different approach to that which a normal willing seller would be expected to take. When it comes to the legal transaction it may appear that the seller seems unwilling at the outset to furnish all of the standard documents that should be expected in a normal transaction. My experience with these Allsops auctions has been that the seller’s Solicitors, if approached early enough, are usually very helpful and will answer reasonable pre contract queries in advance of the auction.
Normal Warranties- To be fair, Banks or Receivers selling distressed assets cannot give all of the normal warranties and assurances which a private seller would be expected to give. The Bank or Receiver may have very little personal knowledge of the history of the property, disputes with neighbours over boundaries, notices that may have been received etc. Extra care should therefore be taken by you in advance of signing the contracts. Arm yourself with as much local knowledge as possible, have a chat with someone else living nearby to see are they aware of any problems.
Planning Permissions and planning warranties-
General Condition 36 of the Law Society standard contract of sale contains a warranty whereby the seller agrees to prove that the property fully complies with all planning permissions and building regulations and will prove compliance by furnishing a certificate of compliance with these rules signed by an appropriately qualified Architect or Engineer. Even where there are no planning problems this condition is very frequently excluded from the sales contract. The result is that the responsibility and cost of having these matters investigated passes from the seller to the buyer. For this reason the buyer should engage and pay an Architect or Engineer prior to the auction to make these investigations and issue the appropriate certification to perfect the buyer’s title if successful.
Structural Surveys and maps-
You should engage an Architect or Structural Engineer to carry out a structural survey and to check the accuracy of the title maps on your behalf prior to the auction. If you do not do so and are successful at the auction then you must pay for the property regardless of subsequently finding out about structural problems and you will have no come back against the Vendor.
You should never buy a property at an auction unless you are 100% certain that you have all of the funding guaranteed in advance of the auction. If you are successful at the auction then you will be asked to pay a 10% non- refundable deposit that day and to sign a binding contract. That contract will have a completion date, usually 3 weeks away, by which date you will have to pay the remaining 90% of the purchase price or face financial penalties. This process ideally suits a cash buyer who does not need a Bank loan.
Although not impossible it is extremely difficult to part fund such a purchase using a secured Bank mortgage due to the time constraints involved.
At the earliest possible stage you will need to prepare a simple budget of all costs and expenses that buying a property will involve. Your Solicitor will help you with this process. You will have legal fees and outlays, valuation fees, survey fees, life assurance premiums, buildings insurance etc. If you address this issue in advance then there should be no nasty financial surprises awaiting you as the process unfolds. You will inevitably have increased expenses associated with buying a property in negative equity or at auction so it is best to find out about any such increased costs as early as possible. If you do fully prepare in advance of the auction you need to realise that if you are not successful then you will have spent some money without achieving a result-however this is preferable to spending a huge sum of money on a property with a title, planning or structural problem.
Do not bid at such an action unless you have had the contracts and title examined by a competent and experienced Solicitor and remember that you will incur a fee for this service whether you buy or not.
Do not bid on the property unless you are a cash buyer or are 100% certain that you have a written letter of loan offer from a Bank and that you can comply with all of the loan conditions between the auction date and the closing date.
Do not assume that all of the auction contract conditions are going to be fair or that the title will be ok because it is being offered for sale by auction.
If you are not experienced bidding at auctions then you would be better engaging your Solicitor to bid for you on the day.
Be careful out there!
Val Stone is the Managing Partner of Stone Solicitors, The Bull Ring, Wexford and Specialises in Commercial Property, Residential Property and Commercial Law.
Stone Solicitors can be contacted on 053 9146144, by email at firstname.lastname@example.org