Auctions can be a great way to snap up property at the best prices – but only if you know what you’re doing.
Going to an auction is one way to land a property bargain and avoid a potentially lengthy, conventional buying process. But it’s not for the faint-hearted.
Your purchase is binding as soon as the auctioneer’s gavel (hammer) slams on your bid, with all the benefits and drawbacks, that come along with it.
Before even considering buying at auction, it’s important to know what you’re getting into.
A good place to start is with our step-by-step guide, tips and Q&As and expert advice on what the process entails.
1. Seek out local auction houses
First off, you’ll need to track down the auction houses operating in the area you want to buy. Ask for their latest catalogues and put yourself on the mailing list for future issues.
It is important to choose a regulated auctioneer, such as a NAVA Propertymark protected auctioneer.
This will guarantee that any monies you pay will be held in dedicated auction client accounts to protect both you and the seller alike.
Did you know? There’s nothing to stop you sitting in on an auction without bidding or even registering, and it’s a great way for novices to get a feel for the environment.
2. Scour what’s for sale
Once you’ve got your hands on the auction house catalogue, earmark the properties you’re interested in and contact the auctioneer to book viewings.
As a general rule of thumb, there’s around a month’s window between a catalogue being distributed and the auction date.
3. Get your finances sorted
There’s little point choosing a property before you have the means to fund it.
So, just as if you were buying through the standard routes, unless you're a cash buyer, you’ll need to get a mortgage Agreement in Principle (AIP) from a bank or building society or with the help of a mortgage broker.
This will provide an indication of your maximum budget, but also explain to the lender that the purpose of the loan is to fund a property at auction.
This is because you’ll have to pay a mandatory 10% of the sale price as soon as the gavel goes down, and the 90% balance 28 days thereafter. Bear in mind that it's only 20 working days.
It is possible to get a special ‘bridging loan’ to pay for the property if the turnaround on the mortgage won’t be quick enough.
But because this type of finance is designed to be taken over the short-term, it’s very expensive. In other words, it should never be taken in the hope your mortgage will come through.
Want to know how much you could borrow? Get a 5-minute affordability check with Trussle.
A lender will also have to carry out its own valuation to check the home is adequate security for the loan you want, which can be tricky if the property is totally dilapidated.
In short, if you’re organised and thorough, a mortgage is a feasible way of funding a property purchase at auction. Although, it comes as little surprise that seasoned auction buyers often use cash.
Did you know? You don’t have to be at an auction in person to bid – you can do it by telephone. Ask the auction house for more details.
4. Go on viewings
When you’ve chosen the property you plan to bid on, arrange viewings with the estate agent, preferably taking with you an expert such as a surveyor, builder and/or architect. Don’t be afraid to ask for as many viewings as you need.
Gather the opinions of several local agents for their thoughts on its value. Use our AgentFinder tool to compare all the agents near you. You can also try plugging the property address into Zoopla to get an estimate.
5. Instruct a solicitor and study the small print
The auction house will present you with the relevant legal pack for the property – usually for free.
This will include local searches, title deeds, an information form and a list of fixtures and fittings.
The small print here is crucial, so now is the time to instruct a solicitor to study the paperwork on your behalf and make sure it’s legitimate and watertight.
Being up to speed on the ins and outs of a property before the auction also means the solicitor will be able to hit the ground running if your bid proves successful.
6. Commission a survey
It’s not a legal requirement to commission a survey (a health check on a property) but it’s a very good idea, especially given that properties sold at auction are not always in mint condition.
Unless the property is old, listed, unusual, or in a bad state of repair, a Homebuyer’s Report may suffice. But you can find out more about the different kinds of surveys with our handy guide.
Did you know? You can put in an offer before the auction goes ahead. Ask the auction house for more details.
7. Don’t do your sums based on the guide price
The auction guide price, as the name suggests, is just a guide. In fact, it’s often set low in the catalogue to entice bidders and the property could sell for 10% more than that.
As the guide price on a property can be raised before the auction even starts, usually when it’s generated a lot of interest, make sure you monitor it closely in the lead-up to the day.
8. Get covered with insurance
As soon as you’ve successfully bid and the gavel comes down, the property becomes your responsibility.
This means lining up buildings insurance from that day, which will protect the bricks, mortar and structure in events such as fire or flooding.
You don't have to take this from your mortgage lender and you can compare deals with our partners, uSwitch, here.
3 top tips for auction day
1. Be 100% prepared
You’ll typically have to bring two forms of ID to an auction, plus proof that you can afford the 10% deposit.
It’s always best to check with the auction house beforehand, though.
Leave plenty of time to register and bag a seat that gives you both good visibility of the room and the auctioneer. ie. possibly closer to the back.
2. Stick to your plan
Have a bidding strategy clear in your mind and only bid what you know you can afford.
If you change your mind after a successful bid, the 10% deposit is non-refundable. You’re also likely to incur hefty administration fees.
3. Don’t lose heart
If you were outbid on the property you wanted, at least you didn’t blow your budget. And, with the experience under your belt, it could be a lot easier next time.
Q. Are you protected under the Consumer Contracts Regulations?
A. No. If you buy an item online, it falls under the Consumer Contracts Regulations and you can often return the item for a full refund under the Distance Selling Regulations.
However, at a property auction you should view the item in advance and choose whether to bid, as you won’t be protected by this law, even if you bid via live webcast.
Q. Can you avoid losing your 10% deposit if you cannot complete?
A. Once the hammer falls, you are required to pay a deposit of 10% of the purchase price. The sale then has to complete within 28 days, which means you are expected to pay the remaining 90% balance within that time-frame.
This is a legally binding contract – without provision of a ‘get-out clause’ – so you must make your mortgage arrangements and have a written mortgage offer before bidding on a property.
But if the lender drags its feet or you lose your job unexpectedly and cannot pull the remaining funds together, will you lose the entire 10% deposit?
We asked three property experts if they could help clarify the situation on deposits put down at auction. Here are their responses:
Peter Mugleston, co-founder of advice portal, Online Mortgage Advisor, says: “Unfortunately, it is usually tough to get your deposit back.
"Your offer and acceptance at the point of purchase is binding, and in the contract it will state that you must pay 10% on the day, which is not refunded if you pull out.
“It is the responsibility of the buyer to ensure they have the funds available, or that they can get them in time, before making an offer on the property.
“It may be that the auctioneer and vendor are prepared to offer some flexibility – or even an extension – if you can convince them that the funds are due.
“This is unlikely, but in the rare cases where flexibility is offered, an additional fee may be levied.”
Guy Nyirenda, senior broker at mortgage brokerage, Coreco, says: “The deposit you put down is not 'in good faith’ as the purchase is contractually binding.
“You should not bid on a property at auction unless you are sure you can complete the purchase.
“If a buyer fails to complete, technically, they will forfeit their deposit, unless they can strike a deal with the vendor and auction house, and only be hit for fees."
Jonathan Harris, director of mortgage broker, Anderson Harris, says: “If you buy a property at auction, you are on the hook, and it would be difficult to wriggle out if you were to have trouble raising the balance within the tight time-frame.
“If you have a good case to argue as to why this is the case, the property could always go back into a future auction.
“However, some would then argue the property would be tainted as a result of having to be re-auctioned.
“Any resolution may therefore result in you not getting back your full 10% deposit when the property is finally sold."
If you are in a situation where, say, your mortgage gets declined, it may still be possible to press on with the auction purchase using what is known as ‘bridging finance.’
Bridging loans are a short-term funding option. In the right circumstances, this finance can be completed in just a few days.
But you need to bear in mind that a bridging loan can be a costly way to borrow, as this type of finance is designed to be taken over the short-term, and you should generally only consider this as a last resort.
Q. What is an online conditional auction?
A. A conditional auction is where buyers bid for an exclusive option to buy a property and win a specific period, typically 28 days, to exchange contracts, with a further 28 days to complete.
The winning bidder pays a non-refundable reservation deposit to the auctioneer who holds this until contracts are exchanged.
This ensures the buyer is unable to walk away from the purchase without incurring financial loss, but also means he or she cannot be gazumped. The process is as follows...
1. Register to bid
First off, you'll need to register your details with auction companies.
2. Study the small print
Properties are typically marketed online for 14 days, long enough to give you the opportunity to study the sales details and download any relevant legal packs.
You may also be able to view properties in person if you speak to the auctioneer.
Once you’ve pinpointed the particular property you’d like to bid on, appoint a solicitor to check over the legal paperwork and speak to a financial adviser or broker about getting a mortgage on it.
3. Bid on the property
Bidding opens for typically seven days. You’ll need to register your bid online, in a similar manner to how you would bid for an item on eBay.
What you will actually be bidding for is an exclusive option to buy the property.
4. Successful? Put down a deposit
If your bid is successful, you must hand over a non-refundable reservation deposit to the auctioneer.
This is typically 5% of the final selling price and the auction house will hold this until contracts are exchanged.
5. Sign on the dotted line
You’ll normally get 28 days to exchange contracts from the gavel going down. Use this time to instruct your solicitor to proceed, get your mortgage issued – and commission a survey of the property.
Once contracts are exchanged, the deal becomes legally-binding. You’ll then have another 28 days to complete the deal.
Martin Roberts' advice for buying property at auction
The Homes Under the Hammer presenter believes more of us should consider buying property at auction. But first we need to understand what we’re doing.
“Not enough people buy property at auction and there are some great bargains to be had,” says the BBC property expert.
“But you’ve got to be really careful. Not all auction properties are bargains, but there are bargains at auctions.
"The only way to really know if you're getting a bargain is to look at what’s out there and see how much similar properties are selling for.
“Then you’ve got to go and visit the property beforehand. You can’t know what a property is like until you've actually seen it. It could be under a flight path.
"It could have the neighbours from hell. It could have all sorts of issues which you can’t see from an auction catalogue.
“The auction catalogue is just a shop front. The legal pack is the thing which contains all the information you need to know about the property: rights of way, covenants, does it have a lease that’s going to run out in two months’ time? Whether it is actually available for sale!
“You need to read the legal pack or get it to somebody who actually knows what they are talking about.
“You must also go to auction with your finances in place. You cannot go and think: ‘Oh, I’ll buy that and then try and work out the finances.’ If you haven't got the money, or you can’t get the money for sure, don’t bid.
“You haven’t got very much time once the hammer goes down - a maximum of 28 days to sort out the finances. So if you go there without having them in place, you’re setting yourself up for a massive fall.”
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