There are really three ways to buy your next home.

PRIVATE TREATY

The most popular way is to buy a property from an estate agent acting on behalf of the home owner. In most cases this is done by making an offer, subject to contract, and then employing a solicitor and other professionals in order to buy the property formally by private treaty.

SEALED INFORMAL TENDER

Where a property is perhaps slightly unusual or being sold by a third party that is under a legal obligation to achieve the very best price (like a bank or the Executor of a Deceased Estate) then selling a property by informal or formal tender is sometimes used. Informal tenders are still subject to formal contract in most instances.

Selling by tender is similar to private treaty but the seller will normally make the property available to view on specific days or times and invite best offers (perhaps by way of a sealed bid) delivered to the seller’s representative by a specific time on a specified date. This allows the seller to make an informed decision based on best price offered and any associated conditions attached to the offer (for example subject to survey or mortgage offer).

AUCTION

By far the most dramatic and exciting way to buy a property is by auction.

As with private treaty and sealed tender, the property will be available to view prior to a specified auction date. It is expected that all interested parties will thoroughly check the property and undertake all necessary work prior to the auction. This might include commissioning a survey or other specialist reports and commissioning a local search as well as checking the property’s registered legal title and the draft contract for sale. Some sellers will include a new ‘search’ in the auction pack which can save some time and money.

On the day of the auction the buyer will have a maximum purchase price in mind. The seller will have a minimum price at which they are prepared to sell. This is called the reserve and will be unknown to all except the seller and the auctioneer. A guide price may have been published. This is NOT the reserve and is usually set at a figure that will both entice more people to bid for the property but, hopefully, will not be too far away from the reserve price at which the seller is prepared to sell.

Buying at auction is not for the feint hearted. Once the auctioneer’s hammer drops, the person with the highest bid recognised by the auctioneer will, if the reserve price has been exceeded, have entered into a legally binding contract to purchase the property. Not only that, the buyer will be required to sign a written contract immediately thereafter and pay over a deposit, normally 10% of the purchase price.

The upsides to buying at auction are certainty and perhaps the opportunity to buy at a lower price. Most people are not able to buy at auction as they don’t have a mortgage offer or sufficient cash and therefore a seller might be prepared to sell at a lower price at auction in return for a quick deal. Many houses in poor condition that require considerable work to make them mortgageable are sold at auction and many small house builders buy this way.

If you decide to bid on a property at auction make certain you have the money to complete the purchase and you have made all the usual enquiries. If you subsequently fail to perform in accordance with the contract you should be prepared to lose your deposit and perhaps even be sued by the seller for specific performance of the contract (i.e. the judge might make you buy it!) or pay the seller financial damages!

For more information or to speak to a Mortgage Adviser call 01628 507477.

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