After my recent diary entry I have been reading more reports this week about the issues with the Modern Method of Auction (MMA); and interestingly, this is alongside more clients contacting me to say that they have bought their dream property by way of this system.
Transparency is key in auctions; there is always a reason why a property is being sold at auction. In the past, I have had clients buy properties at traditional auctions only to then find when we look at the documents in detail there is a reason the property has not been sold before or has sold and the buyer has decided not to proceed.
With that knowledge, I believe estate agents and auction houses should warn buyers about the risks, including details of why previous sales did not proceed. But that does not happen with auction properties.
Here’s a recent example of my own; a long standing client of mine bought a property at auction. He signed the reservation agreement and paid the reservation fee. I was sent the contract pack which included searches. I had a few concerns but knew I should be able to iron them out. The buyer needed a mortgage so made an application and the lender sent the valuer to the house. He was then told that no mortgage offer would be made as the house was unmortgageable. There were severe structural issues none of which would be apparent from the documents sent. What should the buyer do? Should he walk away and lose his reservation fee? Should he make enquiries about getting some form of bridging finance to enable him to complete the purchase and then do the works to make the house mortgageable?
We had many conversations about the best way to proceed. Neither I nor the client would ever have known about the structural issues. But guess what… the estate agents did. The house had been sold with two local estate agents and both times, a sale could not proceed due to the prospective buyer not being able to obtain mortgage finance. This was why the estate agents decided it would be a good idea to put the property into an MMA scenario. Get the reservation fee paid and hope the buyer can proceed but if not, then at least the estate agents and the auction house will be paid.
Have you come across similar scenarios? What did/would you do?
This column is written by a real high street conveyancer who wishes to remain anonymous. The views expressed are those of the author and not those of Today’s Conveyancer.
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