Bang! The hammer drops and that’s it – you’ve just bought a house in less time than it takes to watch an episode of your favourite TV show.
Buying a house at auction works quite differently from the usual way of purchasing property. Forget the usual drawn-out process with estate agents and endless viewings, auction properties offer a refreshingly different way to purchase your next home or investment.
The auction property conveyancing process moves at lightning speed, and the auction itself comes with its own set of rules, so it’s worth getting prepared before you commit.
How does buying a property at auction work?
Traditional Property Auctions
At a traditional auction, you’ll find yourself in a room with other potential buyers. The auctioneer presents each property up for sale and starts the bidding at a guide price. The price goes up as people bid against each other. When no one wants to bid any higher, the auctioneer brings down their gavel to signal the end of bidding. The bidding must meet or exceed the reserve price, which is the minimum that the seller will accept and is usually roughly 10% more than the guide price.
Here’s the really important bit: once that gavel comes down, if you’ve put in the highest bid, you’re legally committed to buying the property. You’ll need to pay a 10% deposit straight away, with the remaining 90% typically due within 28 days.
Modern Property Auctions (Bidding Online)
In modern property auctions, the process takes place entirely online. It works similarly to traditional auctions, but there are slightly different rules and requirements. For example, the auction can run over several days or weeks, and there are often “conditional” terms for the successful bidder, like having 28 days to exchange contracts and then another 28 days to complete the sale. This is particularly helpful if you’re buying a property at auction with a mortgage.
Financial Preparation Before Bidding
You will need to get your finances in order well before you set foot in an auction house or on an auction site. As auctions are legally binding, you need to make sure you can afford whatever property you bid for.
Set Your Budget
When you work out your budget, you need to factor in:
- The property price itself
- Any auction fees
- Stamp duty land tax
- Solicitor’s fees
- Survey costs
- Any immediate repairs the property might need
Most properties sold at auction need significant repair, so keep this in mind. While it might seem like a bargain, you will probably need a renovation budget, too.
Be strict about your maximum bid, and don’t get caught up in auction excitement. It’s all too easy to keep bidding when you’re in the moment!
Arrange Your Mortgage or Finances
You will need to have your finances lined up before you start bidding.
If you’re using a mortgage:
- Get a mortgage agreement in principle before the auction.
- Make sure your lender knows you’re buying at auction.
- Check the lender is happy with the specific property (some won’t lend on certain property types).
- Confirm the lender’s work with the tight auction completion timeframes.
If you’re a cash buyer, make sure the funds are readily accessible within the required timeframe. Some investment accounts can take time to release the funds.
Check the Auction Fees
Auction houses charge fees that you’ll need to pay on top of your winning bid. These often include:
- A buyer’s premium (often around 2% of the purchase price)
- An administration fee
- VAT on these fees
Online auctions might charge a reservation fee instead, which can be several thousand pounds. These fees are non-refundable and payable immediately when you win, so you’ll need to have the money available to pay.
Research The Property
When buying at auction, the fast pace means all properties are ‘sold as seen’. This means you need to do as much homework on it as you can ahead of the auction, so you’re not bidding on something that will take you over budget to renovate.
Arrange a Viewing
Many auction houses arrange block viewings for interested parties. Don’t skip this step, even if it means making a special trip. Photos in the auction catalogues often don’t reveal the full story, and you need to know what you’re getting into.
Viewing in person will allow you to assess the property’s condition and identify any major issues that you need to budget for. You can also get a sense of the local area and check access and boundaries.
Hire a Solicitor or Conveyancer
The auction house will provide a legal pack ahead of the auction. This usually includes important documents like title deeds, property information forms, the fixtures and fittings list, and sometimes local searches. It’s a good idea to have a professional review these documents and do due diligence to save you from bidding on a property with serious legal problems.
A solicitor or conveyancer will:
- Review the legal pack provided by the auction house.
- Check for any concerning covenants, restrictions, or unusual lease terms.
- Identify any potential title issues.
- Verify planning permissions and building regulations compliance.
- Highlight any missing information that could represent a risk.
If the property has structural damage, you might want to commission a survey. Though this is an upfront cost and there’s no guarantee you’ll win the auction, the information could save you thousands by revealing problems that might affect your bidding decision.
Prepare For Auction Day
Being well-prepared for auction day can make the difference between a successful purchase and a stressful experience.
Register for the Property Auction
For in-person auctions, arrive early to complete registration and familiarise yourself with the venue. For online auctions, register at least 24-48 hours beforehand to allow time for verification.
Some auction houses require pre-registration several days before the event, so check the specific auction process as soon as you decide to participate.
Plan Your Bidding Strategy
Bidding in an auction is exciting, and it’s easy to get swept up in the emotions of the day. To help keep level-headed, you need a clear bidding strategy. Make sure you:
- Review the auction catalogue and note the lot number of your property.
- Decide on your maximum bid and firmly stick to it.
- Understand how much the price will go up each time someone bids. This is known as increments and could go in jumps of £1000, £5000 or more.
- Consider how to time your bids (some buyers prefer to enter late to avoid driving up the price).
- Have a backup plan if you’re outbid on your preferred property.
Documents You Need to Buy A House At Auction
Getting your documents prepared shows your credibility as a buyer and will help you to complete the transaction within the tight timeframes.
To participate in a property auction, you’ll need to have several important documents ready:
- Proof of identity: A valid passport or driving license that shows your photograph, full name, and date of birth.
- Proof of address: Recent utility bills, bank statements, or council tax bills from within the last three months.
- Proof of funds: Bank statements showing you have sufficient funds to pay the deposit and evidence that you can access the remaining balance within the completion timeframe.
- Mortgage in principle: If you’re not a cash buyer, this document confirms a lender is provisionally willing to provide you with a mortgage.
- Method of payment for the deposit: Most auction houses accept debit cards, banker’s drafts, or sometimes direct bank transfers. Cash is rarely accepted for large deposits because of anti-money laundering checks.
- Solicitor’s details: The name, address, and contact information of your legal representative.
If you are the winning bidder, you’ll need to provide additional documents during the completion process:
- Buildings insurance: Proof of insurance covering the property from the moment the gavel falls, as you’re responsible for the building from this point.
- ID verification for anti-money laundering checks: These are now standard requirements for property purchases.
Considering Buying A House At Auction? Contact Triangle Legal Services First
Whether you are planning to bid on a ready-to-move-in home, or somewhere that needs a total overhaul, Triangle Legal Services can help with the legal side.
Our experienced conveyancing team will help you review the legal pack thoroughly before you bid and identify any potential legal issues or hidden costs. Then if you’re successful, we’ll work efficiently to prepare all the necessary documentation and complete the purchase within the auction timeframes. Don’t risk thousands of pounds on an auction purchase without proper legal advice. Contact Triangle Legal Services today for a conveyancing quote, and let us help make your auction property purchase a success.