I got an Instagram message from a guy called Peter who was thinking about buying a property at auction, asking me my opinion. I had a look and it turned out there were a number of red flags with the legal pack. I told Peter not to buy the property without getting the legal pack checked out by his legal adviser. Peter did just that, and it turned out there were very many issues with this property and he thanked me for telling him to get it checked out.
I think that Peter’s story could help a lot of people out, so I am going to tell you exactly what his solicitor found out about the property. It turns out there were 5 things that were real issues with the property, some of which are pretty huge. Hopefully, reading this will help a lot of people avoid these types of issues when buying a property, particularly at auction.
1. Property sold as is. But the terms state you cannot rely on the description or sales brochure.
That means if the floor plans are wrong, the pictures are wrong and if it is completely mis-sold, you have to sign away any recourse you might otherwise have. This is a red flag that something could be wrong with the property.
2. The legal pack was incomplete.
This means they did not provide information that they are meant to provide. One bit of information that was missing was who owns the property. The solicitor said there was confusion over who even is the seller. That is another red flag. But it is nothing compared to what’s coming.
3. There was no guarantee that the property was being sold with vacant possession.
If a property is sold without a guarantee of vacant possession, someone could be living at the property. In this case the property did have someone inside it. It wasn’t a tenant either. It turns out the property has a squatter in it. Imagine buying a property with a squatter in it and not knowing beforehand!
4. Hidden fee of £10,000.
On top of the price of the property, there is a hidden fee of £10,000 that needs to be paid directly to the seller. If Peter had bid on this property and won, he would have ended up paying this additional fee for a property with a squatter in it, that may have not matched the description in the sales brochure! But it gets so much worse!
5. The property is being sold with a mortgage.
Peter’s solicitor said that the seller isn’t obligated to remove the financial charge prior to completion. This means that there is a chance that if Peter bought the property he would be stuck paying back an existing mortgage, on top of the sale price of the property!
I hope this story helps people that are thinking about buying a property. It highlights the importance of good legal advice and getting proper training when investing. When property is done right, it can be a great investment that has made many of my students financially free and even wealthy. When it is done badly, it can be very costly to those involved. Make sure you are a clued-up, educated investor before getting into the property game and make sure to seek appropriate professional advice before purchasing.