Property auctions are a good way to land a bargain or buy a property quickly.
In the past, auctions were mostly favoured by cash buyers and investors.
But these days, all types of people buy property at auction – even if they’re buying with a mortgage.
How do house auctions work?
When a house goes up for sale by auction, it’ll be listed online by either an estate agent or an auction house.
Auction properties are usually online for about a month before the auction. This gives time for interested buyers to view it and decide if they want to bid.
In a traditional auction, there is a set auction day and time. The auctioneer will invite interested buyers to bid in quick succession.
In a modern auction, you can submit bids online up until a final time and date.
In both cases, the seller will set a reserve price. This is the lowest amount of money they would accept to sell.
The highest bidder over the reserve price gets the property.
If you’re the highest bidder, you’ll have to pay a deposit or a reservation fee on the day of the auction.
What are the different types of auction?
The traditional auction method
Traditional auctions are also known as unconditional auctions. They tend to be favoured by experienced investors and cash buyers.
This is because they’re less flexible and they have a shorter time frame.
Traditional auctions are usually held at an auction house. All interested buyers will be there and they’ll place bids in front of each other.
If you’re the highest bidder, you exchange contracts and pay your deposit on the day of the auction. The deposit is usually 10% of the purchase price.
If you back out, you lose your deposit as you’ve already exchanged legal contracts.
You then have to pay the rest of the money within 28 days.
The modern auction method
The modern auction method is sometimes known as a conditional auction, and it gives the buyer more time and flexibility.
Think of it like bidding on e-Bay. The auction runs online, usually for up to 30 days, and you can bid at any time.
If you’re the winning bidder, you put down a reservation fee. It’s usually around 5% of the purchase price. It pays for the estate agent and auctioneer costs.
You then have 56 days in total to complete the process.
You have to exchange contracts and pay a 10% deposit within 28 days, then you get another 28 days to complete.
With this longer timeframe, it’s much easier to buy with a mortgage than in a traditional auction.
Why do people choose to sell by auction?
The speed and ease of an auction sale are the main benefits for sellers. You can have a legally binding sale within a few weeks or a couple of months.
The seller might want to sell the house quickly because they have inherited it or have no use for it anymore.
Other sellers choose an auction if they don’t want to fix issues with a property. It might need lots of refurbishment work or some structural improvements.
There are fixed timeframes once the house has been sold at auction. This means that the sale progresses smoothly and quickly, with less need for communication between different parties.
How to find properties for sale by auction
You can find auction properties for sale on Zoopla by:
Listings should say if the home is being sold via the traditional or modern auction method.
If you’re interested in a property, get in touch with the estate agent or auction house featured on the listing.
They will be able to give you more information about the house, help you arrange a viewing and give you any important dates.
They might be able to add you to their mailing list or send you a brochure with other auction properties on their books.
Check the auctioneer is compliant and trustworthy. It should say on their Zoopla profile or their website if they’re associated with a professional body like NAVA Propertymark.
How to prepare for a house auction
There’s usually about a month between a house being listed for sale and the start of the auction (modern method) or the auction day (traditional).
You’ll need to move fairly quickly, but it’s all doable in this timeframe.
The main thing is to do your homework about the property, its value and the auction process.
If you prepare well, you’re more likely to be successful at the auction.
1. View the property (and think about taking an expert with you)
Check the house out before you bid on it at auction. Use our property viewing checklist to make sure you don’t miss anything.
It can be useful to take an expert with you, like a surveyor, builder or architect. They can inspect it and give their opinion on the cost of any renovation work.
Don’t be afraid to book as many viewings as you need to feel confident about the property.
2. Get your finances sorted
If you’re planning on buying with a mortgage, you’ll need an Agreement in Principle (AIP) from a bank or building society.
You’ll need to explain to the lender that you will use the loan to buy a property at auction.
The AIP will help you understand your finances and set your budget.
3. Research similar properties
Do your homework on the local property market so you know what a fair price would be.
Find current and historic prices for any UK property. Compare nearby properties and see how their value has changed over time.
This can help you understand what the property’s worth and how it could gain value in the future.
4. Get a solicitor to study the small print
The auction house should give you a legal pack, and it's usually free.
It has all the important information about the house, including searches, title deeds and a list of fixtures and fittings.
Now’s the time to instruct a solicitor. They can study the paperwork and make sure it’s legitimate and watertight.
Having a solicitor on board now is useful if you’re successful at the auction. They’ll be able to hit the ground running with the next steps.
If your auction is the traditional method, get a survey done now. It’ll be too late to back out if you find anything wrong after you’ve won the auction. (You can do the survey later if it’s a modern auction.)
5. Don’t be too guided by the guide price
The auction guide price is just that – a guide.
In fact, homes for sale by auction will often have a low guide price.
A low guide price can increase interest and entice bidders. The property could sell for a lot more on auction day.
Try to settle on a maximum price you’d want to pay that still feels like a good deal to you.
Keep an eye on the property in the run-up to auction day. If the seller has already had lots of interest, they might raise the guide price beforehand.
6. Go along to other property auctions to see how it’s done
Seeing how auctions work in real life can build your confidence before you take part.
Whether it's online or in person, watch how the auctioneer runs the bidding and what the interested buyers are doing.
You can start to understand their language and how people place bids.
How to succeed at a house auction
It’s easy to let your emotions influence your decisions at an auction.
Keep your budget at front of mind and drop out if the bids go too high. There’s always next time.
If you’ve made the highest bid when the hammer goes down, you’ll be bound by the terms and conditions of the auction.
3 top tips for auction day
1. Have the paperwork ready
If you plan on making a bid in an auction, you need to have a photographic ID and proof of residence with you.
If the auction is online, you may need to provide these documents before your bid can be accepted.
If you’re buying with a mortgage, have your AIP with you. If you’re a cash buyer, you’ll need proof that you can afford the 10% deposit.
2. Stick to your bidding plan and budget
Have a bidding strategy and your maximum bid clear in your mind.
Be ready to walk away if the bids go higher.
3. Don’t lose heart if you miss out on a home
It’s better to miss out than blow your budget.
Don’t lose heart. An even better property could turn up.
If you haven't already, register to set an alert on your search. It'll make sure you're the first to hear about new houses up for auction in your area.
What do I need to do once I’ve won a house at auction?
Congratulations! It’s now time to pay your deposit or reservation fee and get cracking with the legal side.
1. Get a survey on the home
If you bought the house at a modern auction, now’s the time to get a survey.
A house survey is a health check that everything’s in order, and there are a few different kinds of surveys.
Getting a survey is not a legal requirement but it’ll help you spot any issues.
If you bought through the modern auction method, you could still pull out if there were any major problems in the survey.
2. Secure your mortgage
If you’re getting a mortgage, your lender will have to carry out a valuation to check the home is worth what you're planning to pay for it.
In the valuation, mortgage lenders will check there’s a functioning kitchen and bathroom. They’ll make sure the property’s in a liveable condition.
If they’re happy with the property, you should get your mortgage offer through soon after.
3. Get covered with insurance
As soon as you’ve exchanged contracts, the property is your responsibility.
Get building insurance straight away. This will protect the bricks, mortar and structure in events such as fire or flooding.
Compare home insurance deals on uSwitch. Remember, you don’t have to go with the insurer that your mortgage lender recommends.
Will I lose my deposit if I pull out of an auction purchase?
You will lose some money if you back out of an auction purchase. How much you lose will depend on which auction method you bought through.
You might also be hit with hefty administrative fees.
Buyers tend to back out if they find something wrong with the condition of the property or the legal side of things. For example, there might be structural issues or enforcement notices that will affect their plans.
The traditional method
Once the hammer falls on a traditional auction, contracts are exchanged.
That means you’re legally bound to complete the sale. If you pull out of the purchase, you’ll lose your 10% deposit, and you might have to pay admin fees.
The modern method
It’s easier to back out of a modern auction but you’ll still lose money.
If you back out within the first 28 days before you exchange contracts and pay the deposit, you’ll lose your 5% reservation fee.
If you back out after you’ve exchanged contracts, you’ll lose your reservation fee and your 10% deposit.
But if the seller pulls out of a modern auction sale, you’ll get your reservation fee and deposit back.
What are the pros and cons of buying a house at auction?
You might get a bargain
Auctions are a great place to find a renovation project or low-value home.
You can see what others are bidding and you're less likely to get gazumped by a seller changing their mind.
You’re on a level playing field
There’s no rush to get your offer in first or convince an estate agent that you’re the right buyer.
The whole process is wrapped up within a month or two. Delays are less likely than other sale methods.
You can buy with a mortgage
More banks and building societies are willing to lend for auction purchases these days, particularly in the modern auction method.
There’s no guarantee you’ll be the highest bidder for the property you like.
You have to pay quickly
You pay a good chunk of money on auction day, and the rest soon after.
You’re locked in
It’s hard to back out of an auction purchase if you change your mind. You could lose a lot of money.
Bidding at an auction can be an emotional rollercoaster.
So, should you buy a property at auction?
Buying a house at auction is riskier than purchasing a property through an estate agent.
There’s no guarantee that you’ll get the house or that it’ll meet your budget. You need to make sure all your ducks are in a row beforehand, and it’ll be expensive if you change your mind.
But, if you do your homework, there are plenty of benefits of buying a house at auction.
It’s a fast and transparent way of buying a property. There are lots of hidden gems offered for sale by auction, and you could find that renovation project you’ve been looking for.
The more you know about the property you’re interested in, the better off you’ll be. Do your due diligence before making a bid, and research the local property market and house prices.
Brush up on the auction process and rules. Make sure you understand the terms and conditions of the sale, and what you’ll be liable for if you win the property.
And don’t go at it alone – pull in the professionals to help. A solicitor, surveyor and estate agent will make buying a house at auction a lot smoother.