Do you fancy snapping up a bargain on your next property? Or maybe you’ve discovered your dream home is set to go under the hammer? Whatever the reason, property auctions can be a brilliant way to buy a house – if you know what you’re doing.You need to know what to expect at auction so you can prepare for how things work, and avoid getting stung. Fortunately, most of the ins and outs aren’t too tricky to get to grips with, even if it’s all completely new to you.If buying a property through action is something you’ve been thinking about, let us talk you through the basics.
What is a property auction?
Put simply, an auction is where properties are sold via a live bidding process where you compete with other prospective buyers to secure the purchase. 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.
It’s a good idea to do your research on auction houses beforehand, and look for one that specialises in the area and type of property you’re interested in. It’s worth pointing out that an auction isn’t a blind process where you simply turn up on the day and pick a property to bid on from a brochure of options.
You can see the full catalogue of properties that will fall under the hammer prior to the auction, and arrange viewings through the auctioneer. You can take builders or surveyors with you, and carry out seek legal advice on the contract, title and searches on any property you’re interested in. Just because the bidding process is much faster, it doesn’t mean you skip the preparation in the build-up. Carefully study the auction pack for the property or properties you like, and always keep in mind the potential you can see in a new home.
Is an auction right for me?
If you want to buy your new home through a quicker process than usual, then an auction could be perfect for you. There’s no waiting around for offers to be accepted, while 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 perhaps comes with added pressure though, so this is 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 in a mess. If you’re planning to renovate in stages, are you going to be able to live in and around the building work? Ask yourself if you’re happy to spend the time and money fixing up your new home, in order to pick up a bargain or secure the property you have your heart set on.
You shouldn’t let your heart rule your head though, as it can be easy to pay over the odds at auction. Don’t expect to pay the guide price, but don’t get carried away with the excitement of a bidding war if you’ve reached your limit. Can you cope with the auction itself, or do you have someone who’s able to be your steady hand while bidding?
Another good way to decide whether an auction’s right for you, is to go and sit in on a couple to see what they’re like. Your own first-hand experience could go a long way in telling you whether a property auction is the right path for you to go down.
What do I need to do before the auction?
It’s very important to do all your research before the day of the auction, which includes checks on the property you want to bid on. Have searches done if you can, or organise look into search indemnity insurance if this isn’t possible. Arrange as many viewings as you feel necessary, and instruct a conveyancing solicitor lawyer to complete review and advise on the legal side of your potential purchase.
Your conveyancer can look through the auction pack and any conditions of sale before you bid, and even though you’ll still have to pay for a pre-auction report, this could save you a huge amount of money if any issues come up. Plus, with your solicitor already on board, you’re in a much better position to complete the purchase within the 28 days that are usually specified. You don’t want to end up tied into a contract to buy a property for which the legal title is so poor or defective that your mortgage lender refuses to lend you any money.
What will happen on the day?
It’s important to remain calm on the day of the auction, which is easier if you’re prepared. Make note of any changes to the guide price, as this can fluctuate before a property goes under the hammer. After waiting for your lot to come around, make sure you bid clearly to register your offer with the auctioneer.
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 reserve the right to regulate the bidding and refuse a bid.
What happens next if I choose to buy?
Make sure you have all your finance in place should you be successful, with the ability to pay the deposit straight away. This is because when the hammer falls on your winning bid, you’re classed as having exchanged contracts. You’ll sign a contract and transfer your deposit, which is usually 10% of the purchase price, and pay any fees due to the auction house.
It’s worth noting you’re responsible for insuring your new property as soon as you exchange contracts, while completion should take place within 28 days. If you fail to meet this deadline, you stand to lose your deposit. This is why you should have your solicitor lawyer on board prior to auction.
If you’re looking for some more advice on how the conveyancing process works at auction, don’t miss our handy guide