Legal issues of buying a house at auction.
In today’s financial climate, buying a house at auction is not necessarily a cheaper alternative to estate agents.
Mortgage providers are still cautious about lending on properties which might be considered higher risk, e.g. in need of modernisation. A lender may value it at a much lower price than the buyer, thus leaving a potential shortfall.
Having a “mortgage in principle” agreement does not necessarily mean the lender will definitely grant the loan on any property. All it means is that the lender thinks you are credit-worthy. The buyer should get “mortgage approval” on the house before bidding on it. This will mean getting the lender to value the property themselves, to be sure of the situation.
The winning bidder at an auction has only 28 days to sort out his finances. Should his lender not be prepared to lend the full amount he needs, and he cannot find the extra cash in time, he will lose the house, together with his 10% deposit!
Be aware also that buildings insurance on the newly-acquired property is the responsibility of the new owner from the moment the hammer falls, which constitutes an exchange of contracts.
Taken from http://www.Property Surveying.co.uk – 28th September 2010