Failing to Complete Purchase Property Auction

[Wings]

I placed a Devon rental property up for auction, with the successful bidder/ potential buyer (Suffolk based) signing an agreement/contract to complete by 31 May 2014.

The potential buyer made a deposit of £22k, but has failed to complete by the above date, a further 5 days to complete was then accorded, and again the potential buyer failed to complete.

A Notice of 10 days to complete was then sent to the buyer, with a response today that the potential buyer is unable to raise the finance to complete, but knows a friend of a friend (Suffolk based) who will complete the purchase.

My thoughts are that we should insist that original sale contract should be enforced, and the retention of the Deposit, with the property going back to auction. What would you advise, and are there any legal issues I might have to face, by taking the stance I have decided to take?

[Grandad7184]

you solicitor should give you the best advice.

agree to the sale. As long as his solicitor can verify the funds there shouldn't be a problem. Or list the property at auction and send them the listing and see what they do

[JustinP1]

My understanding is, as you have surmised, when I looked at auction that this is a potential pitfall for a buyer.

That said, in any case for this amount of money, it'd be worth getting some indemnified advice.

My first thought on your buyer is that they will of course be desperate to tell you they have X, Y and Z lined up in the hope of getting finance, simply because they don't want to lose the deposit.

Then what happens if you agree in principle for Random Person X to buy the house, and then they have problems...? Is the first buyer's deposit due back? It's worth drawing up an agreement in any case.

If that is a good reason for continued delay, on the same principle, this could be dragged out for months only ending up with the same outcome, apart from you auctioning a property in grim October.

Edited by JustinP1 on Tuesday 10th June 11:17

[Jobbo]

Wings said:

I placed a Devon rental property up for auction, with the successful bidder/ potential buyer (Suffolk based) signing an agreement/contract to complete by 31 May 2014.

The potential buyer made a deposit of £22k, but has failed to complete by the above date, a further 5 days to complete was then accorded, and again the potential buyer failed to complete.

A Notice of 10 days to complete was then sent to the buyer, with a response today that the potential buyer is unable to raise the finance to complete, but knows a friend of a friend (Suffolk based) who will complete the purchase.

On that timescale, the 10 days' notice to complete won't have expired (and it may be 10 working days, so run up until around 20th June).

The contract may entitle the buyer to assign the benefit, or at least not restrict sub-sales, so he could still complete (though by way of a transfer to his friend) before the notice expires. You can't back out if he does so within the notice to complete's prescribed timescale.

[Wings]

Thanks for all your replies. The solicitor has given me two obvious routes to take, with the auctioneers advising giving the potential purchaser up to when the 10 day working days expires.

The property whilst Devon location, is not coastal, and both the bidder/ potential purchaser and the possible new purchaser are Suffolk based, neither have viewed the property, other than the auctioneer's web site, so seems odd, and whether opting to the new buyer might create a scam or new legal issues.

[anonymous-user]

You have a solicitor, I gather. He or she is presumably competent and will be insured against being negligent. Be advised by your solicitor. If anyone here gives you wrong advice you would struggle to sue them if you rely on that advice to your detriment.

[mikeveal]

^^^ That's advice. ^^^

[JustinP1]

Wings said:

Thanks for all your replies. The solicitor has given me two obvious routes to take, with the auctioneers advising giving the potential purchaser up to when the 10 day working days expires.

The property whilst Devon location, is not coastal, and both the bidder/ potential purchaser and the possible new purchaser are Suffolk based, neither have viewed the property, other than the auctioneer's web site, so seems odd, and whether opting to the new buyer might create a scam or new legal issues.

Might be dodgy, might be not.

Might be a scam to get the £22k back from you. For example, you wire it back to Buyer 1 only for Buyer 2 to drop out for this reason or that like any other house sale. Of course they are not bound by the auction. Could even be a way to launder the £22k?

If I were going to buy a house from you, even if it were a 200 mile drive, I'd at least have a little look first. There is the excuse of the rush of the auction and lack of DD for buyer 1, but for buyer 2...? Hmm...

What is for certain is that the three way situation can cause a lot of issues. I'd also be looking to exchange contracts with at least a £22k deposit from Buyer 2, tout suite, so if you start getting delay and friction or the feeling your time's wasted you can move on quick. As I said before though, your solicitor will know the case better, and they will indemnify you for negligence.

[Jobbo]

JustinP1 said:

Might be a scam to get the £22k back from you. For example, you wire it back to Buyer 1 only for Buyer 2 to drop out for this reason or that like any other house sale. Of course they are not bound by the auction. Could even be a way to launder the £22k?

There is almost certainly no scenario where you'd give the £22k back - you're entitled to keep the deposit if a buyer fails to perform. If there's a sub-sale/assignment so the transfer is to the buyer's friend, you'd keep the £22k and receive the balance to complete.

Quite why the auctioneer is advising and not the solicitor, I can't understand. Don't take advice from them, or anyone on here, as BV suggests; take advice from your solicitor.

[Fish]

I once had someone not complete and we kept the £37k deposit after the formal notice period. We ultimately sold them another plot two years later... realy was a good weeze... Moral of the story don't sign a contract you can't perform to.

[surveyor]

Jobbo said:

JustinP1 said:

Might be a scam to get the £22k back from you. For example, you wire it back to Buyer 1 only for Buyer 2 to drop out for this reason or that like any other house sale. Of course they are not bound by the auction. Could even be a way to launder the £22k?

There is almost certainly no scenario where you'd give the £22k back - you're entitled to keep the deposit if a buyer fails to perform. If there's a sub-sale/assignment so the transfer is to the buyer's friend, you'd keep the £22k and receive the balance to complete.

Quite why the auctioneer is advising and not the solicitor, I can't understand. Don't take advice from them, or anyone on here, as BV suggests; take advice from your solicitor.

Quite.

On the post above I have known people buy property at auction sight unseen. They usually end up disappointed and find out just why it was so cheap.

[JustinP1]

surveyor said:

Jobbo said:

JustinP1 said:

Might be a scam to get the £22k back from you. For example, you wire it back to Buyer 1 only for Buyer 2 to drop out for this reason or that like any other house sale. Of course they are not bound by the auction. Could even be a way to launder the £22k?

There is almost certainly no scenario where you'd give the £22k back - you're entitled to keep the deposit if a buyer fails to perform. If there's a sub-sale/assignment so the transfer is to the buyer's friend, you'd keep the £22k and receive the balance to complete.

Quite why the auctioneer is advising and not the solicitor, I can't understand. Don't take advice from them, or anyone on here, as BV suggests; take advice from your solicitor.

Quite.

On the post above I have known people buy property at auction sight unseen. They usually end up disappointed and find out just why it was so cheap.

Oh yes, I know that it does happen, that was my point. In the auction scenario, you may take a punt on a house 200 miles away and not invest the time.

However, for buyer 2, they now have the time to at least go and have a look before they commit to buy.

[Wings]

Breadvan72 said:

You have a solicitor, I gather. He or she is presumably competent and will be insured against being negligent. Be advised by your solicitor. If anyone here gives you wrong advice you would struggle to sue them if you rely on that advice to your detriment.

Yes, I have a solicitor, although first time i have commissioned this firm of solicitors to act for me.

The solicitor has offer me the two options, with no advice on possible issues by taking either one of the two options.

Of course I will follow any subsequent advice I receive from my solicitor, just wanted to throw the situation to the masses on PH, and receive the thoughts from posters such as your good self and JustinP1.

[Jobbo]

I'm not clear from your posts what the two options suggested by the solicitors are. If you are unsure what the risks are of each, ask them.

[George111]

Wings said:

Breadvan72 said:

You have a solicitor, I gather. He or she is presumably competent and will be insured against being negligent. Be advised by your solicitor. If anyone here gives you wrong advice you would struggle to sue them if you rely on that advice to your detriment.

Yes, I have a solicitor, although first time i have commissioned this firm of solicitors to act for me.

The solicitor has offer me the two options, with no advice on possible issues by taking either one of the two options.

Of course I will follow any subsequent advice I receive from my solicitor, just wanted to throw the situation to the masses on PH, and receive the thoughts from posters such as your good self and JustinP1.

Don't forget your common sense, if you have any. I have used solicitors who have had the common sense of a retarded seagull. One went into court with a simple matter of a tenant owing us £2k in service charges, came out us owing them £2K in unpaid repairs. Absolute cretin who didn't get paid and certainly didn't contest the fact that he wasn't deserving of his fee. Solicitors, of the high street variety (present company excepted, of course ) are the lowest form of legal advice and you can sometimes do better on PH than in their offices. That's not a recommendation, just an observation.

If you want to sell the property then expend your time and effort on that, not arguing with a cretin who bought something he can't afford - if he can't afford it now then he's unlikely to be able to afford it next month.

[Wings]

Update;

I went for the original auction sale contract being enforced, with the retention of the Deposit £22k.

Today the 10 day Notice period expired, with the contract not being completed.

Again today my solicitor offered me two (2) options, giving the buyer more time, or rescind the contract and retain the deposit, with a possible claim for damages, being further agents, legal fees, difference in price between sale and re-auction price if sold for less etc. etc.

[Jasandjules]

Retain the deposit, relist the property.

[Steffan]

Jasandjules said:

Retain the deposit, relist the property.

Good advice. Obviates any nonsense with the deposit and any potential laundering or similar scams. Clean and simple. As others have suggested in property transactions your first point of advice and action must be through your solicitor. That is whom I would seek confirmation from that retaining the deposit and relisting the property is the most prudent course. The market will hear that the previous buyer failed to complete and I think the new sale will leave you with an unanticipated bonus. In fact non completion recompense is not limited to the deposit but once again you need the specific informed and insured advice of your solicitor. Best of luck.

[Wings]

My solicitors advice was to retain the Deposit and to enlist the property again at the next auction. Whilst there was a possibility of litigation to claim possible damages, the solicitor felt the current market suing the buyer for damages may not be worth it.

Rather odd that a person would neither view the property, attend the auction (phone bid), yet Deposit £22k against the purchase of the property, without first arranging finance to complete the purchase of the same.

[Jasandjules]

Wings said:

My solicitors advice was to retain the Deposit and to enlist the property again at the next auction. Whilst there was a possibility of litigation to claim possible damages, the solicitor felt the current market suing the buyer for damages may not be worth it.

Rather odd that a person would neither view the property, attend the auction (phone bid), yet Deposit £22k against the purchase of the property, without first arranging finance to complete the purchase of the same.

Yes, I suspect the additional fees will cost more than the likely damages. You have 22k, take it. It may be set off against a lower purchase at the next auction if necessary, or you may do even better. Either way, the reason there is a deposit is for this situation and to my mind you are quite right to take it.

They may have believed that the finance would not be a problem, only to run into one. I've known someone to look to purchase a property for cash which was based on the fact that their inheritance would "come along now". Of course, the process took rather longer....