How to buy a house at auction
Auctions are a great way to avoid lengthy and uncertain buying procedures – but be warned: as soon as the hammer falls you're locked into paying, so be prepared.
Why buy property at auction?
Auctions are great for people looking for unusual properties that estate agents wouldn’t know how to sell. And, if no one else has noticed its potential, you could find a bargain.
But auctions aren’t just for the experts with insider knowledge – over the past decade they’ve become increasingly popular with buyers who want to avoid the traditional house buying chain. At an auction, the sale is agreed as soon as the hammer falls, so there’s no risk of everything falling through at the eleventh hour. And you see all the other bids as and when they’re made. So there’s no chance of being gazumped and there’s a lot less that the estate agent can hide from you.
What are the downsides to buying at auction?
Even though things are completely transparent, just like in any other buying process you could get involved in a bidding war, and if you lose out you will lose any money you’ve already invested into researching and carrying out surveys on the property.
If you’re really unlucky, you could spend all that time and money on making sure a house is worth bidding on, only to find that someone has bought the property before it goes to auction.
How much does buying at auction cost?
- You’ll have to pay an administration fee to the auction house, which is typically between £200 and £300
- You’ll also have to pay your solicitor or conveyancer
- You will have to pay stamp duty
- On signing the contract you’ll be responsible for insuring the property
How do I find an auction?
Decide on the area you’re interested in and contact the auction houses that cater to that area, then ask for a catalogue and subscribe to their mailing list. For a list of upcoming property auctions, visit the websites of UK Auction List or Essential Information Group.
And remember: there is usually four weeks between the publication of the auction catalogue and the auction – so if you like a place act fast.
Before the auction
- Study the catalogue and make a shortlist of properties you’re interested in. Then contact the auctioneers and arrange an appointment to view the properties.
- Keep an open mind – auction properties are often in a poor state, which is why you can get some absolute bargains.
- You need to make sure you bid an appropriate amount and don’t pay over the odds. Take a builder or an architect with you to any viewings so you have a better idea of what you’re letting yourself in for and how much it will cost if you end up owning the property.
- Don’t rely on the guide price (the advertised price – see below). Ask local estate agents and neighbours for their opinions and compare it with other properties on sale locally so you have a realistic price in mind for when you go to auction.
- Go and watch a few auctions and get to know how they work.
2. Consider a survey
- One buyer in Scotland bought a home only to have it condemned by the local council soon after the sale. Not only did he lose the property but he also had to pay for the demolition. So make sure you know what you’re buying – a homebuyer’s report will cost about £600 and then more if you want a structural survey, too. You’ll lose this if you decide not to buy the property or if your bid is unsuccessful.
3. Scrutinise the legal pack
- Auctioneers will often give you a legal pack for properties you’re interested in – this includes the title deeds, local authority and environmental searches, fixtures-and-fittings list and a seller’s information form, plus any relevant leasehold information.
- Consider asking a solicitor to look over this for any hidden covenants or loopholes that could end up costing you more than you bargained for.
4. Don’t expect to pay the guide price
- To entice buyers the guide price is usually set a lot lower than what the property is likely to go for. It’s worth monitoring the guide price because if it goes up before the auction this might mean there is a lot of interest in the property.
5. Get your finances in order
- If you need a mortgage, get a ‘mortgage in principle‘ sorted before the auction so it’s ready as soon as you own the property.
- As the hammer falls you’ll have to pay 10% then you’ll only have a month to pay the remaining 90% – if you can’t you will lose the 10% as well as the chance of buying the house.
- But that’s not all you’ll lose – you may have to cover the costs of re-selling the property, as well as any shortfall between the price you agreed and the final selling price. You may even be charged interest for every day until the property is sold.
On the day of the auction
1. Keep calm
- Some people find auctions exciting, others find them frightening – you need to make sure you can play it cool on the day.
- Make sure you know what you can afford and don’t get caught in the moment only to find you’ve spent way more than you can pay. Remember: if you don’t get this one there’ll be more.
2. Get there early
- Make sure you get a spot where you’re comfortable and the auctioneer will be able to see you.
3. Make sure you have everything you need
- You’ll need two forms of identification, such as a passport or utility bill, and proof that you can afford the 10% deposit.
4. If you don’t reach the reserve price don’t despair
- If the property doesn’t go for the reserve price the seller might decide to go for the highest bid once the auction is over – so stick around and approach the seller at the end.
Buying via the modern method of auction
In recent years a new type of auction has become popular known as the modern method of auction. Used by some estate agents the modern method of auction allows buyers to bid on a property online. The buyer will pay a non refundable reservation fee and but will have longer completion timescale, giving the buyer time to sort mortgage finance.
Good luck! And if you want to have someone on your side, with independent advice and experts to help you through the process, join us today.