Buying a house at auction can be a great way to snap up a property bargain, or to avoid a potentially long buying process. That being said, it can also be a cut-throat and challenging means of buying your new home, and once the hammer falls, there’s no pulling out of the deal. This is why it’s very important to understand the process of how to buy a house at auction beforehand, and what you can do to make your experience run as smoothly as possible.
Find an auction house
Firstly, you need to locate a good auction house that deals in property within the area where you want to buy. After you’ve found one, get on their mailing list for property catalogues, which give you information on things like viewing times and guide prices. They are usually available around a month prior to the auction, and allow you to identify the properties you like the look of and book viewings.
Sort out your finances
Lots of people like to pay cash for properties bought at auction. This is because the full balance usually has to be paid within 28 days of the sale, which isn’t a long time if problems arise with your mortgage. However, this isn’t possible for lots of other people, so buying a house at auction with a mortgage is then the only option to fund the purchase.
You can arrange a mortgage in principle just like with any other property, but you need to inform the lender that you’re buying at auction. As you have to pay a 10% deposit on the day of the auction, you will lose that and potentially incur other costs if the rest of the house isn’t paid for within the 28 days.
If you have concerns about whether your finance will be in place in time, it may be possible to take out a bridging loan. These are typically much faster to arrange than a regular mortgage, but it’s an expensive form of finance as it’s only meant to be a short-term fix. You shouldn’t take out a bridging loan if you think your mortgage might not be approved – this could be a very costly mistake.
Arrange your viewings
Whether you only have one property you’re interested in, or you’re targeting a few to bid on, you’ll need to arrange viewings with the estate agent to take a look around. You might want to get a survey done on the house, which can be very useful even if you’re reluctant to pay for one or more surveys on properties you’re interested in. Searches are often included in the property’s legal documents, but it’s a good idea to take a builder, surveyor or architect along on your viewings, especially if you aren’t having a full survey. This is particularly important if work needs to be done on the house, and you shouldn’t hesitate to book in as many viewings as you need with the estate agent.
Organise your legal help
You’ll need a conveyancer to help with the legal aspect of your purchase at auction. They’ll look through the legal pack provided by the auction house, which should include things like local searches, title deeds and a list of fixtures and fittings. Your conveyancer will go through all of the paperwork and study the small print to ensure everything’s in order: if there is a defect in the title you need to know before you are bound by the contract, particularly if it is something which would stop a mortgage lender agreeing to proceed. If you’re on top of this part of the buying process, the purchase will go through much quicker if you’re successful at the auction.
Make sure you stay on top of the guide price in the run-up to auction day, as it can fluctuate depending on interest. Don’t read too much into the guide price though, as properties can end up selling for much more or much less. If you’re successful with a bid, your new home becomes your legal responsibility from auction day onwards. After paying your deposit, you’ll also need to arrange building insurance to protect yourself in the event of things such as fire and flooding.
Top tips for buying a house on auction
- Go and sit in on a few auctions prior to your own, to get a feel for the atmosphere and how they work – you don’t need to bid or even register to do this.
- Ensure you read the auction house’s terms and conditions on everything from administration fees to payment of the balance – you are bound by these terms once you enter a bid.
- Do lots of research on the local area before the auction to get a good idea of the property’s market value.
- Be aware that auction guides and estimates can’t be below the reserve price on the property.
- Set a maximum bid and stick to it no matter what – you can bid by proxy if you’re worried about getting carried away.
- Be aware that a sale at auction is final, and there’s no backing out – there could be huge costs and even court action if you do.
- Bring the appropriate ID and payment method with you on the day of the auction in case you’re successful.
- If a reserve price isn’t met, you may still be able to do a deal with the seller through the auction house.
Disclaimer: The article above is only a rough guide to give you some idea of the of what is involved with buying a house at auction.