6 min read
A property auction is a public sale where properties are sold to the highest bidder via either an in-person or online bidding process. Learn more about the auction process and the risks involved so you can bid with confidence.
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Looking to secure a property bargain at auction? Whilst it is a great way to buy a house, once the hammer falls, the deal is final and there's no pulling out. That's why it's important to be well prepared. In this guide, we walk you through the process of buying a house at auction.
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A property auction is a public sale where properties are sold to the highest bidder, either in person or online. If you are successful, you will need to exchange contracts immediately and pay a 10% deposit of the purchase price on the day of auction. While most of us are familiar with the concept of properties being sold to the highest bidder, the intricacies may not be quite so well known.
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. Find out what the differences are below:
In a traditional auction, also known as an unconditional auction, participants bid for properties in real time at a set location, often at an auction house where all interested buyers gather to place their bids. The winning bidder will need to exchange contracts immediately, making a 10% deposit on the day of the auction. You must then pay the rest within 28 days, which is not usually long enough to secure a mortgage.
It's important to remember this deposit is non-refundable if you decide not to go ahead with the purchase, as the legal contracts have already been exchanged.
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, also non-refundable, and is 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 the deposit. You then have another 28 days to complete your purchase.
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. Property estate agents specialising in auction properties can offer access to off-market listings or inside information, too. Joining property auction investment groups online or locally, such as Property Investors Network, the Property Hub, and localised Facebook groups and communities could also be a good idea as these communities share valuable tips, promising auction properties, red flags to watch out for, and successful bidding strategies.
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.
Here, we take a look at some risks associated with buying a property at auction. These can include:
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.
Auctions can be a way to sell problem properties, so it's extremely important 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. For example, 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 highly recommended.
Before going to auction, 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.
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 you 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.
If you want to buy your new home through a quicker process than usual, then an auction could be right for you. There’s no waiting around for offers to be accepted, and you can eliminate the risk of being gazumped. After the auction, you usually get 28 days to complete the purchase, which could be ideal if you’re in a hurry.
This, however, comes with added pressure, so it’s something you need to be comfortable with. There’ll be less stress in those four weeks to completion if you’re prepared with your mortgage in principle, have your deposit, and a set budget or maximum bid, and carry out all the research and checks you can.
Properties sold at auction are often far from the finished article. You may need to be prepared to see properties that require significant renovation, repossessed properties, or unique opportunities like former commercial buildings ripe for conversion. These properties may have structural issues, legal complexities, or require major repairs.
If you’re planning to renovate in stages, consider whether you can live amidst the building work and if you’re happy to spend the time and money fixing up your new home to pick up a bargain.
Are you ready to join the ‘bidding war’? It's essential to remember that an auction isn’t a blind process where you simply pick a property to bid on from a brochure of options.
Follow these steps before buying an auction property to make an informed decision:
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 available prior to the auction.
There are now online platforms, such as Sprift and PropertyData, that can provide insights to help you optimise your bidding strategies and make an informed decision.
Before you decide to bid on a property, it's crucial you thoroughly check all documents to ensure complete understanding of the purchase. 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.
Instruct a conveyancer today and get auction ready.
Read the terms and conditions to avoid any unpleasant surprises on the day of the auction. The T&C's will include key information like purchase price, deposits, completion deadlines, property details, and more. Being fully aware of hidden auction fees and legal terms helps prevent any unpleasant financial surprises later down the line.
You should arrange a viewing to make a thorough inspection of the property prior to the auction, looking for any signs of damage, necessary repairs, or unusual features that could impact the value of the property or your renovation plans. It's also important that you:
Take builders or surveyors with you to uncover any hidden defects, structural or electrical, and give you a realistic budget for remedial works
Seek legal advice from a conveyancing solicitor on the contract, title, and searches to protect you from any financial liabilities and future ownership disputes
Beyond the property itself, research the local area, looking 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
A survey will help you find out more about the overall condition of the property, as well as any urgent or hidden structural defects, and more. We've partnered with an expert survey firm, The Moving Portal, who can advise on the different types of home surveys available.
With auctions, don't expect to pay the guide price. Instead ask yourself, what's the maximum amount you're willing to spend? It's important to remember to not 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.
It's also important to remember that if you're not a cash buyer, you need to 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.
When it comes to any bidding disputes, the auctioneer's word is final. Once the reserve price that is 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.
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.
Take note of timings, bidder prompts, and restraining your excitement to 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 so you can bid with confidence.
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.
There are now Virtual Reality (VR) tours that provide 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.
Here are a few tips to help make auction day successful:
It's important to remain calm and focused on auction day, which is easier if you're prepared:
Observe from an advantageous position allowing you to read the room, but still allowing you to bid confidently
Avoid reacting emotionally and getting drawn into rapid-fire bidding wars
Use tactical pauses allowing yourself a brief moment to pause to assess the pace and recalculate your strategy if you feel it's becoming too quick
On the day of the auction, you need to have two forms of ID and proof you can afford the 10% deposit. Missing documents can prevent you from bidding and taking part in the auction.
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.
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.
If your bid is successful, as soon as the hammer falls, you're classed as having exchanged contracts, which is legally binding. You will sign the contract, transfer your deposit (usually 10%) and pay any fees due to the auction house.
It's worth noting that you will be responsible for insuring your new property as soon as you exchange contracts.
If the bidding exceeds your limit, be prepared to step away confidently. There will always be other opportunities, and avoiding an impulsive decision is key to staying financially secure. Be aware of auction pace and increments.
No Move No Legal Fee guarantee
Unlike many high street solicitors, if the transaction falls through, through no fault of your own, you won’t have to pay us any legal fees. Also, if you have already paid for searches, we will honour searches free of charge on an alternate property.
Property Specialists
The conveyancers we work with are all specialists in this field – this is all that they do, so they are better placed to help you with specialist knowledge and without any other distractions.
Online document submission
All the conveyancers we work with are based online, so you'll never need to visit your conveyancers offices. You can manage your move online through our eWay portal, meaning a lot less paperwork and delays.
Get in touch with one of the team
If you would like to speak to your conveyancer, please log in to your eWay account where you can find their contact details.
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If you would like to email us, please send it to the following email address:
quotations@myhomemoveconveyancing.co.ukMonday - Friday
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