Should You Commission a Survey Before Bidding at a Property Auction?
Should You Commission a Survey Before Bidding at a Property Auction?
Buying a property at auction can be exciting. The process is fast, competitive and capable of presenting opportunities that do not always reach the conventional market. However, that speed also creates substantial risk.
With a conventional private sale, a buyer can usually arrange a survey after agreeing the purchase price and withdraw or renegotiate before exchange. At a traditional unconditional auction, the successful bid normally creates a binding contract when the hammer falls. The buyer cannot then treat a serious defect discovered afterwards as a reason to renegotiate the price.
For that reason, commissioning an appropriate survey before bidding can be particularly important.
Why Are Properties Sold at Auction?
A property being offered at auction does not automatically mean that it has serious defects. Auctions can be used by executors, housing associations, local authorities, lenders, investors and owners who require a quick and certain sale.
However, auction properties can include:
· Buildings requiring substantial refurbishment.
· Properties affected by dampness, structural movement or roof defects.
· Homes with unauthorised alterations or incomplete building work.
· Vacant properties that have deteriorated.
· Non-standard or difficult-to-mortgage construction.
· Properties with short leases, restrictive covenants or complex legal issues.
The guide price should not be treated as an indication that the building is in satisfactory condition. The cost of repairs must be considered when deciding the maximum amount that you are prepared to bid.
What Happens After a Successful Bid?
Under a traditional unconditional auction, contracts are generally exchanged when the auctioneer accepts the successful bid. A deposit is then payable, and completion commonly follows within a comparatively short period.
This differs from the “modern method of auction”, where the successful bidder may initially enter a reservation agreement and pay a non-refundable reservation fee. The precise terms vary, so the auction conditions and legal pack must be reviewed by a solicitor before bidding.
Once committed, a buyer who cannot complete could lose the deposit and face further financial consequences. Discovering extensive roof repairs, structural movement or severe dampness after the auction does not ordinarily release the buyer from the contract.
What Can a Pre-Auction Survey Identify?
The appropriate survey depends upon the property’s age, construction, condition and the buyer’s intentions.
A Level 3 RICS Survey is generally the most suitable option for an older, altered, unusual or visibly neglected property. It provides a detailed assessment of the accessible parts of the building and considers the nature and significance of identified defects.
Depending upon the property, the inspection may identify concerns relating to:
· Roof coverings, flashings, chimneys and rainwater goods.
· Structural movement, distortion and significant cracking.
· Dampness, condensation and timber decay.
· Defective external walls, render or pointing.
· Inadequate drainage or high external ground levels.
· Poorly executed extensions, loft conversions or internal alterations.
· Deteriorated windows, doors, floors and finishes.
· Visible concerns affecting electrical, heating or plumbing installations.
A survey is normally visual and non-destructive. Concealed parts of the structure cannot be confirmed without opening-up work. Nevertheless, a detailed inspection can reveal warning signs, identify where specialist investigation is required and help the buyer understand the likely repair liabilities.
Is the Auction Legal Pack Enough?
No. The legal pack and building survey perform different functions. The legal pack may contain the title, searches, lease information, tenancy details, special conditions and other documents relevant to the transaction. It should be examined by a solicitor experienced in auction purchases.
A building survey considers the physical condition and construction of the property. The surveyor does not replace the solicitor, and the solicitor does not normally inspect the building for defects. Both reviews should ideally be completed before bidding.
What If There Is Very Little Time?
Auction catalogues are sometimes published only a few weeks before the sale. Buyers should therefore act promptly. The surveyor will require access through the auctioneer or selling agent. Access may be restricted, particularly if the building is occupied, unsafe or heavily furnished. Roof spaces, cellars, locked rooms and external areas may not always be accessible.
Any access limitations should be considered before bidding. If an important area cannot be inspected, the buyer may need further investigation, additional information or a larger financial contingency. A limited inspection is not the same as confirmation that the inaccessible area is satisfactory.
Will the Survey Tell Me How Much to Bid?
A building survey is not automatically a market valuation. Its principal purpose is to assess condition and explain the significance of defects. However, the findings can help the buyer establish a realistic overall budget. This should include:
· The proposed purchase price.
· Immediate and foreseeable repairs.
· Professional fees and specialist investigations.
· Auction and legal costs.
· Finance costs.
· An appropriate contingency for concealed or unexpected work.
Where defects are identified, quotations should be obtained wherever the auction timetable permits. Preliminary repair allowances in a survey should not be treated as fixed contractor prices.
Could the Survey Cost Be Wasted?
If you commission a survey and do not win the property, you will still have incurred the survey fee. This understandably discourages some bidders. However, the survey may prevent a far greater loss by identifying a property that requires unaffordable repairs or is unsuitable for the buyer’s plans. It can also give the buyer greater confidence when setting a maximum bid. The alternative is to make a legally binding commitment without understanding the physical condition of the building.
Make an Informed Decision Before Bidding
Auction purchases require decisions to be made quickly, but speed should not replace due diligence.
Before bidding, buyers should review the legal pack with a solicitor, confirm their funding, inspect the property and commission an appropriate survey. They should also establish a firm maximum bid that reflects the condition of the building and the likely cost of repairs.
Rectory Surveyors Ltd provides detailed residential surveys across London and the surrounding areas. If you are considering an auction property, contact us as early as possible to discuss the property, available access and the appropriate level of inspection.
Rectory Surveyors are experts in building and surveying, friendly and experienced, with a high degree of professionalism for all your surveying requirements. Learn more >
T: 020 7249 4954
E: info@rectorysurveyors.co.uk
