Buying a House at Auction in the UK
More people than ever are buying property at auction in the UK. They are rejecting the traditional method of house buying to speed up the process and create a little certainty regarding timescales. However, buying houses at auction is not without its risks. Once the hammer comes down on your bid, you’re legally committed to following through.
Before you take the plunge at a property auction, there are a few things you need to know about the process. Learn more from our beginners guide to Auctions.
Why should you buy a house at auction?
A lot of buyers are attracted to auctions because they provide a relatively fast and straightforward way of purchasing a property. The process is more or less set in stone, which means far fewer things can go wrong between having an offer accepted and completion of the legal process.
Another reason for the growing popularity of property auctions involves the types of homes available. If you’re in search of a quirky property, such as a renovated Church, house boat, lighthouse or commercial building, you’re far more likely to find what you’re looking for in an auction than in the open market.
With the right timing and an open mind, it is often possible to pick up properties for well below their market value at property auctions. However, the competitive nature of the process means you’re just as likely to pay more than the going rate.
What are the disadvantages of buying a house at auction?
Buying a home at auction is never a guarantee of success. For instance, if you become embroiled in a bidding war, the chances are you could end up paying more than you might on the open market.
When you buy a home the traditional way, you have an offer formally accepted, and you can request that the property is taken off the market giving you some degree of protection when it comes to paying for costly surveys and searches. The recommendation is also to do this for auction properties, but could all be for nothing if you are unsuccessful in the bidding process. And if you’re particularly unfortunate, the home you’ve had your eye on for several weeks could be sold before the auctioneer even starts the bidding.
You will have to pay all the same conveyancing and legal fees you’d be expected to pay on the open market. However, also, you will need to pay the auction house an administration charge of between £200 and £300.
I’m interested in buying a house at auction in the UK, where do I start?
The easiest and fastest way to search for property auction houses in your area is to perform a quick Internet search. Call them and speak to an auctioneer directly. Request catalogues for upcoming sales, and don’t make any decisions until you’ve read the terms and conditions of each auctioneer. There are also lists of upcoming auctions and auction houses on the Essential Information Groups and Auction List websites.
3 top tips for buying at auction
It’s important to note that there is often just a three or four weeks lead time between the publishing of catalogues and the auction which means you need to act fast when you find a property that interests you. Arrange a viewing at the earliest opportunity, and make sure you take a professional along with you. Never bid on any property without performing the necessary searches and surveys. If you don’t have time to check out an auction property, move on to the next one.
1. Research auction properties in advance
Jump straight into an auction at your peril even when the ideal purchase becomes available, as it’s essential you take the time to study the auction catalogues thoroughly. Keep an open mind about the types and sizes of property you’ll target, as the next bargain could be just around the corner.
You should visit every home you intend to bid on before the event. It’s important that you take your time to assess the current condition of the property. Money on updates, renovations and repairs may be needed, so take a building professional or architect with you.
While some buyers still buy houses at auction by just one viewing, you should be ordering a survey before making a bid to protect your investment. There have been several cases of people buying property at auction only for it to be condemned at a later date.
You will need to fork out around £600 for a survey, and that figure could be substantially higher if a structural survey is required. Once that hammer falls on a successful bid, you’re committed to the purchase.
Before the bidding starts, you will be provided with a legal pack, containing details of environmental searches, the fixtures and fittings included leaseholder information, title deeds and a few other pertinent items. Take some time to check everything carefully. Consider protecting your investment by paying a solicitor or conveyancer to assess the legal pack on your behalf.
2. Make sure your finances are in place beforehand
Auction houses won’t go into too much detail about how you intend to settle the balance of your purchase. You are expected to have the funds in place before making a bid. If you need a mortgage, make sure you are in possession of a “mortgage in principle” letter before the auction. You have 30 days before the balance is required, which isn’t a long time when it comes to mortgage applications.
And remember: you will have to pay a 10% deposit on the day. You will also need to bring two forms of ID to the auction. In most cases, auction houses ask for a passport or driving licence and two utility bills.
3. Don’t let your emotions do your bidding
It’s vital that you keep a cool head when the bids start coming in. Buying property can become an emotional issue if you have a competitive side, but you could end up making bids you just can’t afford.
Set a maximum price you’re willing to pay based on your need for a return, your available finance and your ability to repay any finance. Under no circumstances should you go beyond this price? Move on to the next property if your bid is unsuccessful. If your bid is the highest, but it hasn’t met the reserve price, don’t despair. Approach the auctioneer, and ask whether or not the seller is interested in accepting the highest bid or negotiating privately.
Buying a house at auction in the UK is a relatively straightforward and fast process. With some careful planning and research, you could find the perfect property for the perfect price.