How To Buy Property At Auction? [Follow These Steps]

Have you ever wondered how to buy property at auction? Compared to buying a property through an estate agent, bidding on a house at auction is often considered riskier.

There are no guarantees that the house will be available or that it will fall into your budget. So it’s paramount that you ensure everything is ready beforehand because changing your mind can be very costly.

However, there are many advantages to purchasing a home at auction, provided you do your research. It’s a quick and transparent method of purchasing. You might find the renovation project you’ve been seeking or the perfect home among the many hidden gems which go up for sale.

Here we take a look at how to buy property at auction and help you decide whether it’s the right choice for you.

How To Buy Property At Auction?

Do Your Due Diligence

The more information you have on the property you’re interested in, the better your experience will be. Before placing a bid, research the local property market and the typical house prices for homes of a similar specification.

Make sure you know the terms of the sale and your obligations should you find yourself the winning bidder.

Auctions are open to everyone, not just for investors or professionals. If you’ve watched ‘Homes under the Hammer’, you’ll have an idea of who attends.

They might be those who are looking for a rental property, a couple looking to renovate a new home, a family looking to move in, or a business owner looking for a new location.

Make a bid if the property suits your needs and your budget. However, just because someone can purchase doesn’t mean they should.

There are some things everyone should know before attending an auction.

Types of Auction

To learn how to buy property at auction, it’s important to understand what types of auctions exist currently.

Traditional Auctions

Traditional auctions, sometimes called unconditional auctions, are typically preferred by seasoned investors and cash purchasers.

They happen in a much shorter time frame and, to a degree, are less flexible.

An auction house is generally where all the action takes place. All potential purchasers will be there, and they will all place bids in person (in most instances).

On the day of the auction, if you place the highest bid, you’ll exchange contracts and hand over your deposit – which is typically 10% of the purchase price.

If, after the auction ends, you decide you no longer want to purchase, having already exchanged legal contracts, you’ll forfeit your deposit, and the remaining balance must be paid in full within 28 days.

Modern Auctions

The modern auction procedure, also known as a conditional auction, allows the buyer greater time and freedom.

Think of it like bidding on eBay. You can place a bid at any time throughout the online auction, which typically lasts up to 30 days.

You deposit a reservation fee, which is usually 5% of the purchase price. It covers the costs of the auctioneer and estate agent. After then, you’ll have 56 days to complete the sale.

Within 28 days, you must exchange contracts and pay a deposit of 10%. After that, you’ll have another 28 days to complete.

With this extended time frame, securing a mortgage is much easier than at a traditional auction.

Before the Auction

Check Out Properties in the Local Area

First, you’re going to want to decide on the area you want to buy in and get in touch with nearby property auction houses. You can also find properties up for auction on online property websites such as Rightmove.

They may inform you of future auctions and sign you up for a mailing list, so you stay up to date with the most recent listings.

It’s a good idea to register your interest on auctioneers’ websites if you plan to buy at auction in order to receive email updates all year round. 

Organise Viewings

Once you’ve found a property or two that catches your eye, get in touch with the auction house to schedule a viewing. Make sure to do your due diligence on the local area.

To understand what work could be done to the property and how much it might cost, think about bringing a builder along with you.

If there’s anything you’re unsure about, it’s always a good idea to ask the auctioneer any questions you may have. Don‘t be afraid. That’s what they are there for.

Request a Copy of the Auction Particulars

Key details of any given property will be in the particulars, but you might need to request a separate legal pack to obtain the full picture. Most legal documents include searches, but if they don’t, ask your solicitor to do them before the auction.

Legal paperwork might differ from one property to the next, so get a solicitor to review the legal pack for any clauses or loopholes that might cost you more than you anticipated.

Before putting the lot up for auction, auctioneers frequently submit all the legal packs to their website. Typically, they are posted a few days before the auction.

Decide Your Budget (And Stick To It)

Before submitting bids, it’s crucial to determine your budget and stick to it (perhaps the most important thing you can do). Don’t get carried away and start placing excessively high bids on houses in need of significant renovations.

Avoid getting into a bidding war. That will only eat into your profit margin or cost you more in financing your purchase. 

After the gavel drops on your winning bid, you will exchange contracts or sign a reservation agreement, committing yourself to the purchase.

Check the Fine Print

Remember to read the terms and conditions of the auction house before placing a bid; when bidding, you are indicating your acceptance of them.

To avoid any surprises on the day of the sale, make sure to familiarise yourself with the terms of the sale, what must be paid, when, and how much.

There are many things to consider when buying a property at auction, but remember that this is an opportunity to have fun, so don’t over-complicate things any more than they are.

At the Auction

Arrive on Time

It’s advised to arrive at the auction well in advance of the scheduled start time.

Any extra details or alterations to a property will either be disclosed by the auctioneer prior to the auction or made accessible in an addendum. Make sure you are aware of any changes because they may affect your decision.

Guide and Reserve Price: Know the Difference

It should be noted that each auction item is originally offered at a guide price and is also subject to a reserve price.

The reserve price is the lowest amount the seller is willing to accept, whereas the recommended price is the starting price at which the bidding will start.

Keep in mind when bidding that the reserve price, which is not disclosed to bidders, maybe up to 10% more than the suggested price.

Bidding Etiquette

Make sure you clearly articulate your bids when it’s time to place them. Some auction houses will provide you with a paddle (or something similar), so the auctioneer can quickly recognise you.

Even though it’s easy to get caught up in the moment, try to keep your cool and stick to your budget. The auctioneer will make it clear to everyone in the room where and what the current bid is.

Don’t worry if you’re attending an auction for the first time; there’s a first time for everything, and it’s really not that intimidating. Placing a bid at an auction is exciting experience.

If you are a little apprehensive, it’s recommended that you attend an auction before the one you intend on bidding on so that you can see how it’s conducted. You’ll then have a better idea of what to expect when it’s your turn.

When the Gavel Falls, You’ll Be Bound by Law

If yours is the winning bid (congratulations!), you must sign the contract and hand over the deposit immediately.

You will be subject to the terms and conditions of the sale as soon as the auctioneer’s gavel drops, and you will also be responsible for the property’s insurance as of that time.

You’ll likely incur significant charges if you withdraw from the sale after this.

Having Your Finances in Order

Most auctions need two forms of ID, and a 10% deposit is required on the day of the auction. The typical time frame for completion and payment of the remaining balance of the purchase price is between 14 days and six weeks.

The conditions of sale will make clear any outstanding fees.

Unsold Properties

If a property doesn’t sell, the auctioneer may have the right to sell it privately in the room after public bidding.

Before the sale, be sure to express your interest to the auctioneer and stay until the end of the sale.

How To Buy Property At Auction? – Top Tips

1. Don’t Bid Over Your Budget

Have a clear idea of your maximum bid and your bid strategy. Understand how you’re financing the property deal and have a plan for the funding.

If the bids exceed your price ceiling, be prepared to walk away.

2. Come Prepared With Your Paperwork

You must have a photo ID and evidence of residency with you if you intend to place a bid at an auction.

You might be required to submit these records before your bid can be accepted if the auction is conducted online.

Have your AIP (agreement in principle) on hand if you want to purchase with a mortgage. You’ll need evidence that you can afford the 10% deposit if you’re a cash buyer.

3. Be Patient and Stick At It

Missing out is better than going way over your budget.

Be patient, and don’t give up. There may be a property that is even better than the one you had your heart set on. It’s best to leave your emotion out of it when making decisions of this nature. Be objective and keep an open mind. Other opportunities will come.

If you haven’t already, register for alerts for properties in your area. That way, you’ll be the first to know when new homes go up for auction. Quite often, the early bird gets the worm!

Final Thoughts

Buying a property at auction is a really great option for anyone, whether they’re starting out on the property ladder or a seasoned investor.

Of course, as with any sort of purchase of this size, there is an element of risk involved. However if you can get a full understanding of the process, the property, and the funding beforehand, you stand a great chance of doing well.

If you’re selling a property, it’s important to understand what to and what not to fix so that you don’t have to overspend.