Buying Property at a Public Auction Subject to Mortgage Approval

When purchasing real estate, it is common for buyers to make the purchase conditional on obtaining a mortgage loan. But how does this work in the case of a public auction? Can a buyer also make the purchase of a property at a public auction conditional on obtaining a loan from the bank? In this article, we explain the possibilities and what to consider when buying property at a public auction with a loan condition.

What Is a Mortgage Condition for a Public Auction?

A mortgage condition means that the purchase of a property becomes final only when a specific event occurs, such as the buyer successfully obtaining a mortgage loan from the bank. If the buyer does not secure the loan, the sale can be canceled without legal consequences for the buyer.

Previously Impossible at Public Auctions

Until recently, it was impossible to purchase property at a public auction subject to the condition of obtaining a mortgage loan. Once the highest bid was made, the sale was final, and no conditions could be attached. This meant that buyers needed to ensure, well in advance of the auction, that they were approved for a loan or risk losing the deal without financial backing.

A Recent Change: Now Possible to Buy With a Mortgage Condition

Recently, it has become possible in certain cases to buy real estate at a public auction subject to the condition of obtaining a mortgage loan. However, this is only possible if it is explicitly stated in the auction conditions. If this possibility is not included in the terms, the previous rule remains in effect, meaning the sale is final once the highest bid is placed.

This change aims to make it easier for buyers to purchase property without being 100% sure of their financing beforehand. It can also help sell properties that may otherwise struggle to find a buyer.

What Happens If You Don’t Get the Loan?

If the auction conditions allow for a mortgage condition and the buyer does not secure the loan, the purchase is void. This means the buyer has no further obligations to the seller. However, it’s important to note that the buyer may still be responsible for any costs incurred during the bidding process, such as administrative fees or other costs specified in the auction terms.

Conclusion: Caution and Conditions Are Key

Buying property at a public auction subject to the condition of obtaining a mortgage loan is now possible, but only if this is explicitly mentioned in the auction terms. It is still important to carefully check with your bank and confirm that you will be able to secure the loan before placing a bid. This helps to avoid unexpected costs or legal issues. Always read and understand the auction terms before participating in a public sale.