Guide to buying a house at auction

Property auctions can be a great way to buy a house – assuming you’re well prepared. Fortunately, the process isn’t too tricky to get to grips with. Here, we walk you through the process of buying a house at auction.

In this article:

How does a property auction work?

At auctions, properties are sold via a live bidding process. A month or so before the bidding begins, the property due to be sold by auction will be listed online by an estate agent or auction house. This gives you the opportunity to check out the property in person and decide if you’re interested.

On the auction day, you need to compete with other prospective buyers to make a winning bid, some of which will be experienced investors. In traditional auctions, bidding happens quickly at a set time and place, while modern auctions allow for online bids until a specified deadline. If you succeed in making the highest bid, you need to pay a non-refundable deposit or reservation fee on the auction day.

There are two ways to buy at auction: traditional or modern-day auction.

Traditional auction method

In a traditional auction, also known as an unconditional auction, participants bid for properties in real time at a set location, often an auction house where all interested buyers gather to place their bids.   The winning bidder needs to exchange contracts immediately, making a 10% deposit on the day of the auction. This deposit is not refundable if you decide not to go ahead with the purchase, as the legal contracts have already been exchanged.  You must pay the rest within 28 days, which is not usually long enough to secure a mortgage.

The modern auction method

The modern auction method, also known as the conditional auction, takes place online, usually over 30 days or more, allowing prospective buyers to bid at any time.

If you’re the winning bidder, you'll need to pay a reservation fee, generally about 5% of the purchase price, covering estate agent and auctioneer costs. Most importantly, you have the option to complete the purchase in 56 days, granting you more time to arrange a mortgage, if necessary.

Within the first 28 days, you must exchange contracts and pay a 10% deposit. Then, you have another 28 days to finalise your purchase.

How to find a house at auction

Searching for and identifying the right properties to bid on at auction requires a bit of work, but it can be rewarding.

Start with auction houses, such as Essential Information Group, which provide detailed listings of upcoming sales. Review these listings online and in any printed auction catalogues, focusing on property details, location, condition reports, and photos. This will help you prioritise properties that align with your investment goals.

Beyond auction houses, explore property listing websites, such as Zoopla, Rightmove, Savills Auctions and Auction House UK, which often have auction sections within search filters. Real estate agents specialising in auction properties can offer access to off-market listings or insider information, too. Joining property auction investment groups online or locally could also be a good idea as these communities share valuable tips, red flags, and bidding strategies.

Other particularly valuable resources can be property auction investment groups, such as Property Investors Network, the Property Hub and localised Facebook groups and communities. Members may share tips on promising auction properties, red flags to watch out for, and strategies for successful bidding.

Whichever approach you take, be sure to thoroughly vet the auctioneer and ensure they are compliant and trustworthy. Look for signs they are associated with professional bodies like NAVA Propertymark, which can give you confidence in their integrity and expertise.

Narrow down your options with virtual property tours

There are now Virtual Reality (VR) Tours that provide a detailed visualisation of properties and allow you to remotely explore houses in detail. This reduces the need for in-person visits until you’re seriously interested in a property.

What are the risks of buying a house at auction?

Risks of buying a house at auction can include:

Not being financially prepared

If your offer is successful, you need to make sure that you can pay the remaining 90% during the set timescale. If you fail to do so, you’ll lose your deposit as well as your opportunity to buy the property.

Not investing in research and surveys

Auctions can be a way to sell problem properties, so it’s key to be well-prepared. Inspect the building yourself and invest in surveys to avoid any hidden structural problems. A conveyancer could also help you avoid legal issues, by reading through the legal pack for any restrictions or title problems and advising on them – it may be that the property couldn’t be sold on the open market in the traditional way, so having an expert review the papers before you put any money down is essential.  

Bidding more than you can afford

It’s important to work out the maximum amount you’re willing to spend on a property and stick to your budget. This will help you avoid overspending for a house by getting caught up in that auction adrenaline.

Dealing with existing occupants

Purchasing an auction property with existing occupants – such as legitimate tenants with protected rights, unauthorised squatters, or former owners refusing to leave – has risks. Understanding each occupant's legal status is crucial, as it affects your ability to take possession.

Reviewing any existing tenancy agreements, checking land registry records, and finding out exactly what the occupants' legal status is will help determine the best approach, whether that's serving the right eviction notices, going through accelerated possession proceedings, or finding a way to work with the tenants.

The legal procedures involved are complex, so it’s essential to get expert help from your conveyancer to prevent your auction purchase turning into a financial and logistical nightmare.

Before buying a property at auction

Ready to join the ‘bidding war’? Keep in mind that an auction isn’t a blind process where you simply pick a property to bid on from a brochure of options.

Take these steps to make an informed decision:

Do your research

Contact a local property auction house for the area you’re interested in. They’ll be able to guide you through the process and advise you on any upcoming auctions. They’ll also provide you with a full catalogue of properties prior to the auction.

There are now online platforms, such as Sprift and PropertyData.co.uk, that can provide insights to help you make informed decisions and optimise your bidding strategies.

Carefully study the auction pack

Before you decide to bid on a property, do your due diligence on any property you're interested in. Work closely with your conveyancer to uncover as much information as possible about the property's history, condition, and legal status. They can review the auction pack, conduct searches, and advise on any hidden covenants or loopholes.

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Check the terms and conditions

Read the terms and conditions to avoid any unpleasant surprises on the day of the auction, including additional costs or fees you may have to pay on top of the purchase price.

Arrange viewings through the auctioneer

Arrange a viewing to make a thorough inspection of the property prior to the auction: look for any signs of damage, necessary repairs, or unusual features that could impact the value of the property or your renovation plans. Take builders or surveyors with you, and seek legal advice from a conveyancing solicitor on the contract, title and searches. Beyond the property itself, you'll want to research the local area as well. Look into any planned developments, infrastructure projects, or market trends that could affect the long-term value and rental potential. Don’t hesitate to talk to the neighbours to find out more about the property’s history and local information, too.

Consider a survey

A survey will help you find out more about the overall condition of the property and any urgent defects. Find out more about the different types of surveys

Get on top of your finances

Not a cash buyer? Get your mortgage sorted before the day of the auction. Make sure you have your mortgage pre-approved and deposit money readily available. You should also consider creating a clear plan for completing the purchase within the tight auction timelines – using specialist auction finance if needed.

Set your budget

What’s the maximum amount you’re willing to pay? Don’t expect to pay the guide price. However, don’t get carried away with the excitement of a bidding war if you’ve reached your limit. Keep in mind that prices may seem low, but there are bound to be further costs once the property is yours.

Know how bidding disputes work

The auctioneer’s word is final when it comes to any bidding disputes. Once the reserve price set by the seller has been met, the highest bid will usually secure the property. Auctioneers may re-offer a property at their discretion, while they also have the right to regulate the bidding and refuse a bid.

Attend an auction beforehand to gain confidence

Observe both online and in-person auctions to familiarise yourself with the auctioneer's methods and the behaviour of bidders. This experience can help you grasp the nuances of bidding strategies, and the language used during auctions.

Taking note of timing, bidder prompts, and restraining your excitement can help you make informed decisions when it's your turn to bid. You could also talk to experienced auction attendees or join forums for tips and mistakes to avoid.

What to do at the auction

Here are a few tips to help make auction day successful:

Stay calm and focussed

It’s important to remain calm on auction day, which is easier if you’re prepared. Make notes of any changes to the guide price, as this can fluctuate before a property goes under the hammer. Remember that any additional information might be announced by the auctioneer before the process starts.

Have all the necessary documents

On the day of the auction, you need to have two forms of ID and proof you can afford the 10% deposit.

Know what ‘guide’ and ‘reserve price’ mean

Auction properties are initially offered at a guide price, which is the starting price, indicating the seller's general expectations.

They’re also subject to a reserve price, namely the minimum amount the seller will accept. When bidding, keep in mind that the reserve price can be up to 10% higher than the guide price. If bidding doesn't meet the reserve, the property might not sell.

Understanding the relationship between these two prices can give you insight into the seller's motivations and room for negotiation. A property with a wide gap between the guide and reserve price may indicate the seller is keen to sell, potentially leaving room for an aggressive bid. A tight spread could mean the seller has firm expectations and is less willing to accept a lower offer.

Doing your research on comparable sales and consulting with your conveyancer can help you assess whether the guide and reserve prices seem reasonable.

Bid clearly

After waiting for your slot to come around, make sure you bid clearly to register your offer with the auctioneer. Auction houses often provide a paddle or similar tool to help the auctioneer spot your bid easily. The auctioneer will clearly indicate the current bid and who holds it, keeping everyone informed.

What happens if you win the bid?

Make sure you have all your finances in place, and that you can pay the deposit straight away. Remember that when the hammer falls on your winning bid, you’re classed as having exchanged contracts, which is legally binding, so you’ll sign the contract, transfer your deposit (usually 10%) and pay any fees due to the auction house.

You will probably be responsible for insuring your new property as soon as you exchange contracts.

Find out more about how the conveyancing process works at auction

This guide covers buying a house at auction. For a guide on buying a house the traditional way please read our article the process of buying a house.