A client recently approached us and told us that he was thinking of buying a property at auction and he wanted to know whether this was in any way different to buying in a straightforward sale where you agree a sale with a vendor and no-one else is involved.
As part of our initial free consultation, we outlined the various differences for him and they mainly relate to what happens before the sale is agreed.
Buying via direct negotiations with the vendor
In a regular sale that takes place via an estate agent, you agree a purchase price with the vendor and a booking deposit is paid to secure the sale. Usually this amounts to something in the region of €5,000 – €10,000. This money is held by the estate agent and is returned to you if the sale falls through before contracts are signed.
Once the booking deposit has been paid, the vendor’s solicitor sends the contracts and title documents to your solicitor who will review them at that time. They will then raise any queries they have with the vendor’s solicitor and it is only when those queries have been answered satisfactorily that your solicitor can advise you to sign the contracts.
When the contracts are being signed, the purchaser must pay a contract deposit of 10% of the sale price less the amount that has been paid as a booking deposit. The contract deposit is a non-refundable sum which is held by the vendor’s solicitor and not paid out to the vendor until the transaction has completed and the keys handed over.
Once you have signed the contracts and paid the contract deposit, and the contracts have been signed and returned by the vendor, a legally binding contract is in place.
Things are a bit different with an auction.
Buying at auction
You don’t make an offer via the estate agent. Instead, you tell the agent that you are interested in the property at which time they will arrange for the vendor’s solicitor to send out contracts and title documents to your solicitor. Your solicitor will then review the documents and make any queries with the vendor’s solicitor. These will often be of a fairly minor nature.
The auction usually takes place in the offices of the estate agent, where the purchaser will bid against other interested parties. The highest bidder is successful and at this stage they sign the contracts there and then and pay the full 10% of the contract deposit.
This means that your solicitor is given the chance to review the contracts before the auction and you must be satisfied with everything before the day of the auction so that you can go ahead and sign contracts.
So the main difference between the two is the time at which the contracts are signed. Everything is front-loaded in an auction situation so that the contracts are signed in the auction room and the sale then proceeds to completion.
If you have more questions about buying at auction, fill out the form below and we’ll get in touch.