Buying a house at auction is vastly different to the more conventional channels.
For this reason, many of us have unanswered questions concerning the process. Can you bag a bargain? Is the process more hassle than it’s worth? What are the advantages and disadvantages?
We’re here to settle these queries once and for all. Here’s a guide to buying property at auction.
Buying property at auction: why bother?
This method of buying a house has risen to popularity in recent years - as buyers find out immediately if they’ve been successful. It avoids the common property chain scenario, where expectant buyers often find their hopes dashed.
Property auctions are also particularly useful in the case of unusual properties, such as unique buildings that local estate agents are having trouble selling.
Is buying at auction right for me?
An auction can be a great way to buy property if you’re organised, committed and understand the general process. If you manage your spending carefully, you could end up with a great property and a tidy profit when the time comes to sell.
Before we delve into how to buy a property at auction, it’s essential you consider whether this is the right situation for you.
Pros of property auctions
There are many positives involved with buying a house through auction, including:
- Property auction costs can be surprisingly low, with a good chance of a sale at the end
- When it comes to buying a home at auction, the process is quick. This avoids draw-out situations, where it feels as though the seller can’t make up their mind
- With property auctions, you don’t have to worry about being gazumped, or someone in the chain dropping out last minute
- While the house is sold to the highest bidder, there are no fixed prices. Therefore, those who successfully bid have a chance of securing a good deal
- Houses going to auction often sell for less than the equivalent high street price or market value. This will leave you with more money to carry out any necessary renovations
Cons of property auctions
However, inevitably, everything has a downside.
- If you’re outbid, the entire process can feel like a waste of time
- The properties sold at auction often require some level of refurbishment or renovation
- It’s easy to get carried away and bid on something you can’t actually afford. Plus, if you win, you’ll have to pay a deposit and the rest of the money for the property later
- Ignore auction guide prices. These are often brought down to tempt you in, and are a misleading representation
This isn’t an exhaustive list, rather, some examples of things that can go wrong on auction day. The more you understand about the process, the better.
How to buy a property at auction
So, if our list of pros and cons has convinced you that buying a home at auction is right for you, you’ll need some advice to ensure you’re prepared.
Here’s some arrangement advice for how to buy at auction:
Research the area
Where you live is just as important as the house itself! Before the auction, you should ensure you’ve visited the area and have concluded you’d enjoy living there. Also, speak to local estate agents to get a feel for how much properties sell for.
Track down local auction houses
Once you’ve established what area you’d like to live in, seek out all the auction houses nearby.
Don’t go with the first auction house you find. Put yourself on multiple mailing lists or subscribe to newsletters to make sure you’re up to date with all the latest information on properties for sale.
It can also be a good idea to contact the auction house directly and get the lowdown on any hot properties coming up. If you see something you like, enquire about the reserve price - this will be the lowest price the property will be sold for at auction.
Sort out your finances
Before you even think about bidding on a property, make sure you’ve sorted out your finances.
Speak to a mortgage lender so you fully understand how much you’re entitled to borrow. Ensure this is arranged in advance, as you’ll need to know exactly what you can afford to ensure you don’t bid on something out of your price range. You don’t want to lose your 10% deposit!
Understand the costs involved
While you have a chance of bagging a bargain, it’s important to be aware of the costs involved.
- You will still pay stamp duty on the property
- Auction houses usually charge somewhere in the region of £200-£400
- If you win, once you’ve signed the contract - it’s your responsibility to insure your new home
- Survey and solicitor fees
View the property
If you’ve found a property you feel you might like to bid on, ensure you visit it - paying close attention to every detail.
Try to view the property more than once if possible, as most of us notice something new second time around.
Read the small print
Ensure you carefully read over any paperwork, legal packs and auction catalogue.
Hire a solicitor to study the small print on your behalf, as this ensures nothing is missed.
Arrange a survey
Never skip the survey! With auctions, many of the properties will require some form of refurbishment. So, make sure you find out if there are any hidden issues with the property by using a chartered surveyor.
It might also be a good idea to speak to property developers, as you’ll have a clearer idea of exactly what needs doing.
Decide on your budget
Deciding on a budget is critical.
Make sure you stick to it!
Don’t use the guide house price as an indicator for where to set your budget. Do your research and find out what similar properties are selling for in the area.
Property auction tips
How do property auctions work?
Truthfully, the world of buying at auction is a difficult one. So, when the day finally arrives, you’ll need to make sure you can handle it.
The process can be challenging, but being armed with the right tips can make it much easier. Here’s how to buy a house at auction:
Make sure you have the right paperwork
When the day of the auction arrives, you’ll need two forms of ID.
Also, you’ll need to prove you can afford the 10% deposit.
Get a good seat
It sounds trivial, but getting a good seat for the auction makes all the difference.
Make sure you can see the auctioneer clearly!
Stick to your budget
Never bid for something you can’t afford! Stick to your upper price limit.
If you win, you’ll have to stump up the deposit and possibly lose it. Even if it seems like your dream home, make sure you stick to your price range.
Don’t give up
If you get outbid, don’t feel disheartened.
Put this down to good experience. Your dream home is still out there!
When the hammer falls
If you do place the winning bid, you have 28 days to finish the transaction. Completion then usually occurs within 20 working days if no alternative date is set.
Property auctions are legally binding, so you need to have absolute confidence in your ability to raise the money (i.e. a mortgage offer). If you can’t raise the funds, you’ll lose the 10% deposit you paid when the hammer fell.
Before you buy at auction
Like any other property, a house for auction requires some serious investigation. Remember to get as much information on the local area as possible, from local schools to nearby planning applications. You can find all of this research and more in a property report!