Buying a property at auction can mean big savings but you have to know what you’re doing.
If you’ve ever been caught up in a lengthy chain when you’ve been buying property and had to wait for months while everyone else is in a position to move, you may be attracted by the idea of buying a property in a day.
House auctions can be a way of getting a property cheaper than it would be sold on the open market. After the financial crisis of 2008 they were filled with ‘distressed sales’ properties that had been repossessed because the owner couldn’t pay the mortgage. But can you really make savings or are you likely to end up with a property you wish you hadn’t bought? Here, we look at what buying a property at auction involves, and how to prepare your finances if you’re planning to take this route.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Do plenty of research
If you’re interested in buying a property at auction it’s vital that you go to one (or several) before you think of bidding.
Find an auction that’s local to you and ask for the catalogue. You can do this via the website Propertyauctionaction.co.uk which lists property auctions and the dates that they are taking place across the country. The site contains links to access property auction houses where you will find catalogues and details for land and property auctions across the country. You can sort your search results by date, name, or area.
Each catalogue will provide you with information about each property that’s due to be sold including the guide price. However, it is only a guide and the property may go for far more. The catalogue also contains ‘addendum’, which are changes to the details of specific lots. You must read these as they are part of the conditions of sale. You can also download legal information and find out who the seller’s solicitor is.
Arrange to view the properties you like. First of all, don’t be alarmed if the internal decor of the property isn’t exactly ‘Ideal Home’. Some of these properties are quick sales and they vendors are unlikely to have spent time plumping cushions in accent colours. You must be able to see beyond the surface.
There is usually strong competition for well located unmodernised houses, and less demand for properties not in the best locations, even if they’re in better nick.
Once you’ve found a property
When you’ve found a property you want to bid for, you’ll need to register your interest with the auctioneer. That way if the property is withdrawn from sale before the auction or information, such as the guide price, changes, you can be told. You can often register on the day, unless the auction house has a pre-registration system, but you should make sure you get to the auction room at least 45 minutes in advance so you’ve got time to do this.
You should also make sure you do plenty of research about the area in which you’re buying, so you can see how much comparable properties have sold for. This can help ensure you don’t end up over-bidding on the day.
Get your solicitor to look through the legal paperwork. You can download the legal documents from the auction company’s website (or ask for a paper copy, if you prefer). If your bid is successful you’ve entered into a formal contract so you have to do all the checks you need to in advance. If you don’t already have a solicitor read our article How to find a good conveyancer or solicitor to find out how to find a conveyancer to suit your needs. Or, you can search for a solicitor through the Law Society’s free Find a solicitor service. Make sure you check reviews for the solicitor you’re planning to use, so you can see how other people have rated their service.
You’ll also need to get a survey done on the property you want to buy. Some people buy at auction without having a survey done but if you’re a novice it could be an expensive mistake. If you know a friendly builder it may be worth taking them with you before you spend money on a survey done to see if they can spot any obvious problems. They can point out what might need doing and how much it could cost you. Find out more about property surveys in our guide Which property survey should I get?
Get your finances arranged
Unless you’re a cash buyer, before you bid on a property at auction, you’ll need to sort out a mortgage agreement in principle with a bank or building society. This means that they agree to lend you an amount of money subject to final credit checks being done on you. You can find out more about mortgage agreements in principle in our guide What is a mortgage agreement in principle? They will want to carry out a valuation before they agree to the mortgage so make sure you apply to the lender in good time before the auction.
Remember that there are no guarantees you’ll definitely be offered the mortgage agreed in principle, or that the lender will be able to provide it within the often tight deadlines imposed by auction houses. If you bid more than you planned, this could potentially compromise your mortgage application.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
You’ll need to have a 10% deposit ready for auction day, as if your bid is successful, contracts will be exchanged and this will be payable straight away. You’ll be directed to the contracts desk following your winning bid, where you will sign the Memorandum of Sale, and pay the deposit along with any fees. Additional charges may include a Buyer’s Premium and the cost of searches. These charges should be explained in the property legal pack, so they shouldn’t come as a shock on the day.
Check with the auction house how you can pay the deposit in advance, as most will only accept certain payment methods. Deposits usually need to be paid from cleared funds via bank transfer or banker’s draft. Make sure you take ID such as a passport or driving license with you too as this will need to be checked to meet Anti Money Laundering procedures. You’ll also need to show proof of residency, which can be an energy bill, bank statement or council tax statement.
Bear in mind that there is usually only 28 days between exchange and completion if you’re buying at auction, so you’ll need to ensure the rest of the purchase price is available so that completion can take place on the agreed date. If you can’t complete the purchase within this timeframe, there’s a risk you could lose your deposit.
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