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  • Auction Tribe

    Legal packs at auction - what to look out for?

    Hi everyone, I’m going to an auction for the first time tomorrow, and have just downloaded the legal packs for the properties that we are particularly interested in. Has anyone got any advice for potential red flags to keep an eye out for in the documents?

    I’ll of course read them with rigour, but if anyone has experience to avoid a nasty surprise I’d love to hear your thoughts.

    Many thanks,

    Dan
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    Hi Dan,

    I would strongly recommend that you have a solicitor who specialises in this area to go through the legal pack.

    It is worth the expense imho.

    Some properties with problems as put into auction specifically in the hope of attracting a novice individual who does not do proper due diligence.

    Some issues include:

    > Short lease

    > Caveats in lease that forbid certain activities.

    > Properties with issues which mean that they will not be financeable via mortgages and have to be purchased for cash.

    Remember, the anagram of auction is "caution". Smile
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    (27-07-2015 11:24 AM)DanPalmer Wrote:  Hi everyone, I’m going to an auction for the first time tomorrow, and have just downloaded the legal packs for the properties that we are particularly interested in. Has anyone got any advice for potential red flags to keep an eye out for in the documents?

    I’ll of course read them with rigour, but if anyone has experience to avoid a nasty surprise I’d love to hear your thoughts.

    Many thanks,

    Dan

    Dan
    You say "first time" which worries me that you are looking to buy and now asking about legal packs.
    Once the gavel bangs it's yours and everything that comes with it.
    As Vanessa says, properties are in an auction for a myriad or reasons and I agree with her that in your situation paid legal advice is a must. I would just watch tomorrow and gain the experience for the future. Don't believe all the hype about auctions especially TV programmes.
    With legal packs often it's what's not in as much as what is in.
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    Full time Landlord in WestYorkshire, mentor and property education to new and inexperienced PRS investors. 25+ years of working knowledge. Accredited NLA member & RLA member https://www.landlordgeoff.co.uk [color=#800080]


    It would certainly be advisable for the legal pack to be looked at by a professional. We sell at auction and we usually add clauses into the special conditions that cost the buyer around an additional £1000
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    [Image: New-logo2.png] Manchester based investor. I buy, sell, renovate and rent investment property in East/North Manchester Wink email: mike@brentwoodinvestments.co.uk Call: 0161 681 3724


    Hi Geoff,

    For tomorrow, we're just going along for the experience, rather than with an intention to actually purchase.

    I've downloaded the legal packs for a couple that we would hypothetically be interested in - and am just trying to learn the process and due diligence steps to take.

    Thanks all - your advice is very much appreciated.
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    Be wary of AST's that have been signed in the last 4-6 weeks. This sometimes inflates the price you pay as you think that you have got a fresh tenant who will be staying for the next 5 or 11 months.
    Which auction are you going to?
    I live in Wakefield, Is it a auction in Leeds?
    PM if you want any advise.
    David
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    Afternoon

    everyone has to start somewhere with auctions but those words of caution are wise. I now see it as a numbers game - occasionally 1 project might not go according to plan but the average is normally very good if you do the right research and are very controlled in not over bidding.

    I buy properties for clients at auction and its taken yrs to build close relationships with key staff and directors but also learn all the risks, how to avoid them and understand legal packs.

    Often its whats missing from legal packs that is crucial - if a local search is missing it could well mean there's an issue with planning, building control or lend registry notice / charge.

    Leasehold flats are often sold if there's large arrears on service charges which you inherit when buying, or if the freeholder is about to spend a lot of money on the block (sometimes this adds value back but sometimes not - either way needs to fall part of the budget).

    If you're lucky and buy well enough you can often make the same returns as if building from scratch taking circa 1yr in just a matter of months.

    last 2 I bought at auction where

    buy for 100k spend 34.5k + costs on the market at 210k - 40%+ net margin
    buy for 185k spend 20k + costs on the market at 300k - 40%+ net amrgin too.

    Both came with minor issues (the 100k property damp issue to solve in a flat, (managed to negotiate that the freeholder let me do the works and pay for it).

    the 185k barn conversion required an outstanding bill of 7k to be paid - share of costs for upgrade to private access road.

    feel free to PM if you want to know anymore about auctions.
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    Thanks Andy, that's a big help.

    I'm sure I'll be in touch soon to pick your brains!

    Many thanks,

    Dan
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    Too late for this auction, but for anyone's future reference, if the Title Plan and Title Register from the Land Registry are not in the legal pack then it's worth checking those out via the Land Registry website...only costs a few pounds. That may indicate any restrictive covenants...and you can then factor in the likelihood and cost of having those eased or lifted into your calculations. It's common with auctions to pick up the tab for the seller's legal expenses so keep an eye open for that. I would also search local news on Google for anything related to the property. If you're a regular auction buyer/seller then it may also be worth signing up for specialist auction intel from E I Group. Some properties go in and out of auctions multiple times with unfortunate buyers suffering each time. Another thing to be wary of is completion timeframes...often you get 30 days but some will set 14 days so you (and your financiers) need to be able to move quickly.

    Best,

    Guy
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    Guy Brown
    Blue Infinity Property Group
    M 07791-661491 | T 0118 3360366 | E guy@blueinfinityproperty.com | https://www.blueinfinityproperty.com

    * Flat conversions and residential developments in Reading & surrounds
    * High end HMOs in Reading and Bracknell