Time to knock it off
In common, no doubt, with many other property lawyers recently, Quinta Law LLP have been receiving many requests from clients to review legal papers for forthcoming auctions. The auction houses are busy and that’s good news for everyone involved in the industry.
However, there is one particular aspect of the process about which I have always been uneasy and would welcome feedback:
It sometimes appears that people spend more time, and carry out more research, before buying a pair of trainers than sticking their hand up (digitally nowadays) at an auction.
The ubiquity of Rightmove, Zoopla and other portals, and the amount of information that is, as a result, now readily accessible in the public domain has seemingly made everyone a property expert. TV programmes such as the BBC’s “Homes under the Hammer” have also encouraged punters into the auction arena. It sometimes appears that people spend more time, and carry out more research, before buying a pair of trainers than sticking their hand up (digitally nowadays) at an auction.
Uninitiated buyers often get carried away in the moment and pay more than they budgeted for.
The result is that certain peculiarities of the auction system can hold nasty surprises for the unwary or inexperienced buyer. For example, it is common for special conditions of an auction sale to require the buyer to pay a percentage of the purchase price, in addition to the purchase price, as a contribution to the seller’s legal fees. This can be as high as 1.5% of the price – often more than a seller will be paying to its conveyancer for acting on the sale - and will frequently appear in the small print as “one and a half per cent”, the use of words rather than figures making it easy for the buyer to miss. I recently encountered exactly this in a legal pack released by a reputable auction house at 5pm on the day before the auction, with little time for any meaningful due diligence to be carried out.
Uninitiated buyers often get carried away in the moment and pay more than they budgeted for. The last thing they need is an unwelcome surprise on the completion statement. And it’s an easy fix: all auctioneers should simply require conveyancers to ensure that all extra costs are clearly set out in a separate text box, such as this:
Auctions play an invaluable role in the property market. They save a considerable amount of time, prevent gazumping, and are a reliable indicator of true market value when a need to be seen to be achieving the best price is paramount. Nonetheless, it is important that they are fair and transparent and that buyers are easily able to determine the true cost of a prospective auction purchase before committing.
This article is for information only and is not intended to amount to advice on which you should rely or take any action. If you wish to obtain legal advice in respect of the content of this article or otherwise, please contact Nick Green.