Buying property at auction: a step-by-step guide

Buying property at auction can be a quicker process than the normal route. And if you’re savvy, you might be able to get a bargain.

But a property auction isn’t without pitfalls, which is why it’s important to know what you’re doing.

What to know about buying property at auction

Many people believe there are property auction bargains out there, so it’s not surprising that this method of buying property is becoming increasingly popular.

According to Essential Information Group, which compiles information on UK property auctions, lots offered have grown 7.8 per cent year-on-year and 2022 will be another “bumper year” for the industry.

But what do you need to do if you’re thinking of taking this route?

Research property for auction carefully

As part of your research, you should look into:

Auction houses – contact auction houses, finding ones that you like. You can get added to their databases so you’re notified when suitable properties come up. Auction houses also have auction catalogues you can use, which detail the lots coming up over the next few weeks.

Guide prices – the auction catalogue will list guide prices, but properties can end up selling for much more, or much less. Treat this price as an indication and remember that sellers will also list a reserve price. No bids below that will be successful. The guide price should help you work out how much you’re willing to pay.

The market – more generally, are you up-to-date with the current state of the market and property prices in your area? You can find out how much similar properties have sold for by getting in touch with local estate agents, or checking out recent auctions.

Check the property

Property auctions happen fast, but it’s important that you make sure you’re buying a viable property:

View the property – not only should you view the property, it’s best to get a full survey done in advance too. If the property is old and run down, it may have structural issues or other problems that would be very costly to remedy.

Get an independent valuation – if it’s a bargain you’re after, you’ll want to make sure the guide price isn’t over the odds. As well as a professional valuation, you can call on your own research into the market and any conversations you’ve had with letting agents.

Organise the legals and financials

It’s important to have everything ready before the auction, because if you do win the property, the situation moves quickly:

The legal pack – this is prepared by the seller’s solicitor and has vital legal information, including conditions of sale plus land registry and local searches details. The legal pack is usually available from the auction house and you should ask your solicitor to check it before bidding.

Auction conditions – you should speak to your solicitor about the terms on the property you’re bidding for. The auction conditions will usually have a set of terms that relate to the property’s insurance, rent arrears, search fees, and any leasehold requirements.

Auction property finances – you’ll need to pay the deposit on auction day and the balance will usually need to be paid within 20 days of the auction. This means that if you’re using a buy-to-let mortgage, it needs to be arranged well in advance.

How to buy property at auction: step-by-step

So, you’re all prepared, but what happens on auction day itself?

1. Take your paperwork

Because auctions are fast-paced, you’ll need to have everything ready in case you’re successful. This includes your ID and proof of residency, as well as your solicitor’s details and the method by which you’ll be paying the deposit.

2. Check if there’s been any changes

Sometimes there are amendments to the auction catalogue or legal pack, which means you’ll need to thoroughly check these on the day to avoid surprises.

3. Get familiar with the auction house process

Auctions can be chaotic, but the process often differs between auction houses. Make sure you’re familiar with how to make a bid.

Auctions may also be held online and they’ll also accept bids by telephone or proxy (where the auctioneer accepts your bids up to a set price).

If you’re attending an online auction, make sure your WiFi and computer won’t cut out.

4. Take part in the property auction itself

Minimising any opportunities for stress should help you steel your nerves. Get there early and find a seat in view of the auctioneer, so that it’s easier for you to catch their attention.

A property auction is often exciting, but don’t get caught up in the moment. Keep the price you’re happy to pay in mind so you don’t go over the odds.

5. Win the property

If you’re the highest bidder when the gavel comes down, a contract is created between you and the seller and you won’t be able to back out.

You’ll sign the memorandum of sale and hand over the deposit. Other money you’ll need to pay will include auction house fees, Stamp Duty Land Tax, solicitor fees, survey costs and buildings insurance. The remaining balance for the property will be due within the specified timeframe.

6. What happens if a property doesn’t sell at auction in the UK?

If the property doesn’t sell at auction but you’re still interested, it can be worth approaching the seller to see if you can agree on a price.

The auctioneer may also ask interested buyers to make private offers after the auction.

7. Understand the property auction method

This will affect the exchange and completion process.

The traditional method is as described above. You’ll pay the deposit and exchange contracts straight away, with the balance due within a set timeframe.

The modern method is different, as you’ll pay a fee to reserve the property, which is often a percentage of your bid (if you pull out, you won’t get this refunded). You’ve then got 56 days to exchange contracts and complete the process.

How to get a mortgage for auction property

Mortgages are available for auction properties, but you’ll need to find a lender that’s willing to offer you one for the property you’re interested in buying. They may ask for an inspection of the property to make sure it’s in good condition, or can be refurbished easily.

When it comes to buy-to-let, lenders may want to see that tenants are able to live in the property in its current state.

You’ll need to have an agreement in principle with the lender, also known as a mortgage in principle or decision in principle. This lets you make the balancing payment quickly.

If you aren’t able to get a mortgage for an auction property, you could try securing a bridging loan.

Have you ever been to a property auction? Let us know how you got on in the comments below.

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