Well lots, actually!
But don’t let that put you off. Buying a property at auction can be a good way to get a great deal.
But you need to go to a property auction with your eyes very firmly open.
Let’s face it, few sellers would choose to sell at a property auction if they could obtain a higher price in a conventional open market sale. So, there is almost always a back story to every property being sold at auction.
In this report, I will look at just 21 of the pitfalls (and yes, there are more) that may exist when buying property at auction.
None of these problems need be insurmountable when buying property at auction. However, they underline the importance of making your own checks and taking professional advice wherever necessary.
1.There could be a major structural problem, which makes the property unmortgageable, or the extent/cost of rectification of which is unclear.
2. The property may require refurbishment, the costs of which exceed its current value or which are unclear.
3. The property could be of non standard construction.
See here for an article on investing in properties of non standard construction.
4. There could be no working kitchen or bathroom, which could make the property unmortgageable.
5. There could be Japanese Knotweed on or adjacent to the property, making it difficult to secure a mortgage.
6. The property may not comply with building regulations.
7. The property may be located in a local authority tower block and so difficult or impossible to mortgage.
8. There could be a defect in the title. (There are many reasons why a title may be defective. Legal advice should be sought.)
9. The property may be leasehold, with the current remaining lease being of insufficient period to obtain a mortgage.
10. The property may be leasehold and there are issues with the lease. For example, liability to pay a high service or repair charge is one of the most common reasons.
11. The property might not be available with vacant possession, eg. the mortgagees are not in possession.
12. There could be a sitting tenant, particularly a protected tenant or regulated tenant, or someone else with rights to occupy the problem in residence.
13. There could be a planning issue, ie. the property does not have consent for its current use.
14. There could be a planning issue, eg. a new development or road or railway planned close to the property (or even on it).
15. The property may have access issues, eg. no direct access to a public right of way and/or a dispute/problem with adjoining properties over rights of access.
16. The boundaries of the property could be uncertain, or there could be a boundary (or other) dispute with neighbours, or a dispute over shared areas.
17. There may be a restrictive covenant on what you can do with the property, or the title may lack the usual easements.
18. Ownership of the property may incur certain liabilities, eg. chancel repair liability.
19. The property might not have any mains services, and/or there is a problem with providing them.
20. The property may be at elevated risk of flooding, coastal erosion or there could be some local geological problem. There could be a mineshaft under or adjacent to the property.
21. The true market value of the property could be difficult or impossible to judge, ie. a number of valuations of the property have arrived at widely differing figures. (Hence an auction is used to find the correct market value.)