The hidden risks of buying at auction | Money | The Observer

The hidden risks of buying at auction | Money | The Observer

When Colin Todd successfully bid for an unmodernised flat in the Renfrewshire town of Gourock, he thought he had landed a bargain. The Victorian property overlooked the Firth of Clyde in a handsome part of town, and the auction catalogue declared the repossessed ground-floor flat an "interesting development opportunity for a dwelling or holiday property".

"Interesting" it indisputably was. A week later the building had vanished. A tip-off had alerted the local council to alleged structural problems and it was demolished after council inspectors deemed it unsafe. Todd now faces the bill for the demolition, plus the £37,500 price of a property that no longer exists. "I can't even pick up the key because there's no front door," he says.

Todd's plight is a dramatic example of the pitfalls that can face the unwary as a rising number of repossessions fuels a boom in property auctions. Under UK law, a purchaser at auction is contractually bound to pay 10% of the bid price immediately, and the balance within 28 days. They also become liable for any damage to the building as soon as the hammer falls, and a premonitory, but standard, clause in Todd's contract specifically exempts the seller from costs associated with the destruction of the building as soon as a bid is accepted.