Buying a house at auction – all you need to know

Auctions are perfect if you want to avoid the lengthy process of traditional house-buying, and eliminate a potentially tedious conveyancing chain. It is also the ideal place to find unusual or unique properties that an estate agent will not generally touch. The unnoticed potential of the property by other buyers could result in you finding a bargain. In the past, auctions were only for experts in the housing market – usually only appealing to those with insider knowledge, but auctions are gaining popularity. The sale is finalised as soon as the hammer falls, so there is no risk of being gazumped, or the sale falling through. It is important to understand that there is also no going back once your bid is accepted, so before you commit to buying a house at auction, there are a few essential points to consider.

What are the fees to buy at an auction?

There is an obligatory administration fee to the auction house that ranges between £200 and £300 at the time of print. As with any "traditional" house purchase, you will also still be eligible to pay solicitor fees and stamp duty. None of the standard legal obligations can be circumvented through an auction.

Where do you find an auction?

Finding an auction is the easiest step. You simply need to contact an auction house in the geographical area of interest and sign up for their mailing list. As long as the auctioneer is NAVA Propertymark Protected, you know you will be dealing with a professional body. Alternatively, you can also visit the UK Auction List website for an extensive list of upcoming properties for auction.

Generally, there is a 4-week period between the publication and the auction taking place, so if you find a property you like, you need to act fast and do your research.

How to prepare for an auction

You will have to do your own research and legwork, so it is best to make a shortlist of your desired properties and arrange with the auctioneers for viewings. To ensure that you don't rely solely on the price guide, take an expert with you to the viewing so that you know what you are getting yourself into. That said, keep an open mind. Some auction properties are in a poor state, which is why you can get it at a bargain. An expert eye will give you an indication of how much it will cost additionally to get the property in tip-top shape (or at the very least, liveable). Interested buyers might consider getting a survey done in advance a waste of money, considering that you are not guaranteed that your maximum bid will be accepted, but it is always advisable to get an inspection done. Some bidders do run the risk of bidding on a property, only to have it declared condemned for demolition a few months down the line. It is also a good idea to familiarise yourself with the auction process before you start bidding yourself, so feel free to visit a few auctions as a spectator.

Don't overlook the legal pack provided by the auctioneers on the properties you are interested in. This will include title deeds, environmental searches, and the seller's information. When in doubt, a solicitor can overlook the documents for any loopholes that could end up costing you dearly.

Educate yourself on the difference between the guide and the reserve price. The guide price is the price at which the bidding will commence, while the reserve price is the minimum amount the seller will accept – the latter is generally not disclosed to the bidders.

Also, ensure that your finances are in order before the auction takes place. A mortgage in principle will provide some assurance because when the hammer falls on your bid, you need to immediately pay 10% of the property value. You will only have 1 month to come up with the remaining 90% or lose your deposit. If you are really unlucky, you will also have to cover the cost of re-selling the property and any shortfall between your bid and the new bidder. Do not shoot from the hip – make sure you know what you can afford!

On the day of the auction

Get there early to secure a comfortable spot where you will be in plain sight of the auctioneer. Make sure that you have at least two forms of recognised identification with you, and that you have the 10% deposit available.

While emotions of excitement run high at an auction, stick to your plan. It is crucial to not get caught up in the moment, stuck in a bidding war that you cannot afford.

Don't get too disheartened if the reserve price is not met. Sometimes the seller might decide to offer the property to the highest bidder, but only at the end of the auction, so it might pay to stick around. If the property still remains unsold, you may still be able to buy it privately, so approach the seller at the end of the auction to negotiate a private sale.

What are the potential pitfalls of buying at an auction?

If the bid does not go in your favour, you will lose any money you have already invested in your research. A homebuyer's report, for instance, will cost around £600, which you will forfeit, along with the auctioneer and survey fees. It can also be a blow if you had your heart set on a property, only to be outbid.