16th September 2020

Buying at auction September 2020

I recently wrote a blog explaining the differences between buying a new build property and buying a second hand property.  Following on from that here are some ways in which buying a property at auction also differs from buying a second hand property.

  1. Deposits are rare in Scotland but at auction the purchaser will immediately have to pay a non-refundable deposit which will be deducted from the balance of the purchase price.
  2. The contract for the purchase of property in Scotland is usually formed by an exchange of letters, know as missive letters, between the solicitors acting on behalf of the purchaser and the seller.  Clauses such as ‘subject to sale’ or ‘subject to mortgage’ are commonly included in the first missive letter known as the ‘offer’ which is usually submitted by the purchaser’s solicitor to the estate agent.  Only once all of the terms are agreed are missives said to be ‘concluded’ and this process normally takes several weeks. If successful at an auction, however, the purchaser will immediately sign a contract called ‘articles of roup’ and will be bound to proceed.  There will be serious financial penalties and the purchaser will be in breach of contract if the price is not paid in full when due.
  3. The purchaser is deemed to be satisfied with the title deeds, condition of the property etc. when he or she makes a bid.  There is no opportunity to check these at a later stage so the legal pack should be looked at carefully in advance.  A solicitor can help with this.
  4. The seller is unlikely to produce a home report or EPC (energy performance certificate).  I would never advise buying a property without a survey of some description so find out if a survey can be arranged.
  5. Searches are usually provided at the seller’s expense but following an auction sale the seller won’t produce these so this is another expense which falls to the purchaser and could cost around £200.
  6. Further fees are likely.  In addition to his or her own legal fees a purchaser may have to pay an auction fee and/or the seller’s legal fees.  Neither of these sums will be deducted from the purchase price.  If there are any outstanding notices or monies owned to a factor or the local authority then the seller won’t pay these off and they may also become the Purchaser’s responsibility.
  7. Usually the date of entry will be around 6-8 weeks following submission of a successful offer but at auction the purchaser will be expected to pay the balance of the purchase price in full within 28 days so immediate access to funds is necessary.
  8. Risk usually only passes to a purchaser on the date of entry but, following an auction purchase, buildings insurance must be arranged by the purchaser immediately.

Katharine Smith, Director
Blackadders LLP




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