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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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
The opinions expressed in this blog are of the author only and do not necessarily represent the opinions of Blackadders LLP.
Blackadders takes all reasonable steps to ensure that the content of this blog is accurate and up to date. The blog is not, however, intended as a substitute for seeking legal or other professional advice but rather as an informative guide to the services provided by Blackadders and topical legal developments. Blog users should always seek advice tailored to their specific situation. Consequently, Blackadders accepts no responsibility for any loss or damage suffered by anyone acting or failing to act on the basis of information contained on this blog. Downloading of material contained on this site is at the user’s own risk and all necessary virus checks must first be carried out by the user. Blackadders is not responsible for the material found on any web sites linked to this one and links to this site may only be made with Blackadders prior consent.
Blackadders owns the copyright in this blog and all material contained on it. The material on this blog may be downloaded for personal use only and must not be altered. Otherwise, Blackadders’ written consent is required before any material on this site is reproduced, copied or transmitted in any way.
Information passed to us via this blog is kept confidential and will not be disclosed to third parties except if authorised by you or required by law.
© Blackadders LLP 2020
Members of the Law Society of Scotland.
Blackadders Solicitors is a trading name of Blackadders LLP, a limited liability partnership, registered in Scotland No SO301600 whose registered office is 30 & 34 Reform Street, Dundee, DD1 1RJ. Reference to a ‘partner’ is to a member of Blackadders LLP.