Buying a property at auction can be a brilliant way to find a home or investment at a competitive price, but it’s not without its complexities, nor it’s risks if you are looking to buy with the assistance of finance from a lender.
We are often asked, “Is buying a house at auction a good idea?”
The short answer is “It can be,” if you do your homework, understand the pro’s and con’s and have sufficient funds to complete on the purchase you agree on.
Here’s what you need to know before, during, and after buying property at auction in the UK.
Before the Auction: Preparation is Key
Research Properties and Auctioneers
Start by identifying the area you’re interested in and make contact with any local property auction houses. Ask to be added to their mailing lists so you receive auction catalogues in advance, these will be useful in identifying a suitable property.
Arrange Viewings and Ask Questions
Once a property catches your eye, contact the auction house to arrange a viewing. Bring along a trusted builder or tradesperson if possible, so you have a realistic idea of potential renovation costs. Don’t be afraid to ask questions.
Request the Legal Pack
Auction houses will provide a legal pack for each property, often including title deeds, leases, and searches. It’s vital to have a solicitor review this before you bid, especially to identify hidden clauses, covenants or issues that could cost you later.
Move Quickly
Auction catalogues are usually released just 3–4 weeks before the sale. That means you’ll need to act fast with viewings, solicitors and any applications for finance. Timing is everything.
Set a Firm Budget and Have the Right Finance in Place If You Need It
- Set your maximum bid and make sure you stick to it.
- Factor in renovation costs, fees, stamp duty, and other expenses.
If you’re not a wholly cash buyer, you’ll need to arrange up front, and have ready, suitable finance since completion often needs to happen in 28 days or less. Expecting to use a standard mortgage can be very risky in that any standard mortgage application will be subject to valuation so if the condition of the property is not suitable you may find that a mortgage application is declined. We would usually suggest Bridging Finance as the best funding option for an auction as this type of finance will usually have more flexibility in relation to property condition and funds can be approved and released to the solicitor usually a shorter period of time.
Understand the Terms
Familiarise yourself with the auction house’s terms and conditions. By placing a bid, you’re legally bound to the sale if you win, so it’s crucial to know exactly what you’re agreeing to.
On Auction Day: Stay Calm, Stay Informed
Arrive Early
Turn up well ahead of time. You’ll be able to review any last-minute changes to property details (known as the Addendum) before bidding starts.
Know the Guide and Reserve Prices
The guide price is a starting estimate. The reserve price, which is confidential, is the lowest amount the seller will accept, and it may be up to 10% higher than the guide. Bid wisely and try not to get carried away.
Make Clear Bids
Use your paddle or hand clearly and stay within your budget. Auctions can be fast paced, so stay alert and calm.
Arrange Proxy or Phone Bids if Needed
If you can’t attend, some auctioneers allow proxy or phone bidding with prior notice and a deposit cheque. You can also appoint a solicitor to bid on your behalf.
After the Auction: What Happens If You Win
You’re Committed Once Your Bid Wins
Once your bid wins, you must sign the contract and pay a 10% deposit immediately. You’re legally bound from that moment, and responsible for insuring the property.
Be Ready to Complete
You’ll usually have between 14 to 28 days to complete the purchase. The remaining balance must be paid within this time, so have your solicitor and finance provider, if applicable, ready to act quickly.
Unsold Properties? You Can Still Buy
If a property doesn’t sell on the day, the auctioneer may be authorised to negotiate a private sale right after the auction. Let them know you’re interested and stay in the room.
Buying a property at auction in the UK can be a fantastic way to secure a good deal, particularly for those open to renovation or looking to invest. But it requires confidence, quick thinking, and preparation.
As advisers, our top tip is….
If you require finance to complete a purchase, put the groundwork in up-front to have in place all of the funds as soon as possible to complete the purchase. Once your bid has been accepted know who to speak to progress everything asap.
If you’re considering buying at auction, speak to us TODAY to understand the options available to you and put in place behind you the right team to support your purchase!
*Please note: Your home maybe repossessed if you do not keep up repayments on your mortgage.