Buying a property at auction can be an exhilarating experience, offering the potential to purchase property at more competitive prices and with faster transaction times than traditional buying methods. However, the auction process can also be daunting, especially for first-time buyers. This guide will walk you through everything you need to know about purchasing a property at auction in the UK, from preparation to completion.
Understanding Property Auctions
Property auctions are public sales events where buyers place bids on properties. The highest bidder successfully purchases the property. This approach is particularly attractive for those looking to purchase unique homes, investment properties, or bargains. However, it requires thorough preparation and a clear understanding of the risks involved.
Popular Property Auctions in the UK
Several companies and auction houses specialise in property auctions across the UK. Here are some of the prominent ones:
- Auction House UK: A network of property auctioneers that operate nationwide, offering a broad range of residential and commercial properties.
- Allsop: One of the UK’s largest commercial property auctioneers, they also handle residential properties.
- Barnard Marcus: A well-established auction house that deals in residential property auctions, often holding regular events.
- Clive Emson: Specialising in land and property auctions, particularly in the South of England.
- John Pye Auctions: An auction house that encompasses a variety of properties, including residential and commercial lots.
- Pugh: A regional property auctioneer with various properties across the UK, focusing on both residential and commercial real estate.
- Savills: A well-known global real estate services provider that conducts property auctions, including residential and commercial properties.
- Sotheby’s: Known for luxury real estate, Sotheby’s holds high-profile property auctions.
- William H. Brown: Part of the Connells Group, this auction house offers residential property auction services.
These companies conduct various auctions throughout the year, each with specific properties and terms. Always check their websites for upcoming auction dates and property listings.
Steps to Buying a Property at Auction
Research Thoroughly
The cornerstone of a successful auction purchase is research. Here are some steps to guide your preparation:
- Auction Catalogue: Obtain the auction catalogue as soon as it’s available. This document, typically accessible online or through auction houses, details all the properties up for sale. Review it extensively to identify any properties of interest.
- Property Viewings: Never bid on a property you haven’t seen. Viewings allow you to assess the property’s condition, location, and suitability for your needs or investment goals. Check for structural issues, the layout, and any renovation work that might be necessary. At this stage you may also want to arrange a professional property valuation from a RICS Chartered Surveyor, but this will increase your upfront costs, even though you may not end up buying the property.
- Legal Pack: Each property at auction comes with a legal pack containing vital information like title deeds, leaseholds, and planning permissions. It’s crucial to have a solicitor or conveyancer review these documents to ensure there are no hidden legal issues or obligations that might affect your purchase.
Financial Preparation
Financing a property at auction differs from traditional purchases, mainly due to the speed of the transaction:
- Set a Budget: Establish a clear budget that includes the property’s purchase price, auction fees (typically a buyer’s premium and administration fee), legal fees, and potential renovation costs. Be mindful of your maximum bid limit during bidding.
- Mortgage of Bridging Loan Arrangements: If you plan to finance your purchase via a mortgage or bridging loan, arrange an agreement in principle (AIP) ahead of time. Many lenders offer specific products for auction purchases. Speak to a qualified residential mortgage broker, commercial mortgage broker or bridging loan broker to assist you in finding the best loan for your needs.
- Deposit Arrangements: Be ready to pay a deposit on auction day, usually 10% of the purchase price. This is a non-refundable payment confirming your commitment to purchase the property.
Development of a Bidding Strategy
Developing a sound bidding strategy is fundamental to a successful auction experience:
- Advance Registration: Register to bid at the auction. This can often be done online, or in person on the day, depending on the auction house’s requirements.
- Bidding Practice: Attend a few auctions as an observer to familiarise yourself with the process, dynamics, and types of bidders present.
- Determine Bidding Limits: Decide in advance how much you’re willing to bid and stick to this limit. The fast-paced, competitive nature of auctions can tempt you to overbid.
Auction Day and Bidding
Preparation is key to maintaining composure and making informed decisions on auction day:
- Arrive Early: Arriving early at the venue gives you time to settle, review any last-minute changes to the auction listings, and observe early bidding activity.
- Listen for Changes: Pay attention to any announcements regarding updates or changes to the property listing. Auction properties can sometimes have last-minute changes in terms and availability.
- Confident Bidding: As the property you’re interested in comes up, bid confidently and remember to stick to your predetermined budget.
Post-Auction Completion
Once the hammer falls in your favour, there is a final set of steps to complete the purchase:
- Sign Contracts: Immediately after winning a bid, you’ll sign a binding contract agreeing to purchase the property and pay the deposit.
- Completion Timeline: Typically, the sale must be completed within 28 days, making it essential for your solicitor to facilitate the legal and financial formalities swiftly.
- Further Inspections: If necessary, conduct detailed inspections and arrange insurance immediately, as you’ll become responsible for the property.
Summary – How to Buy a Property at Auction?
Purchasing a property at auction offers a potential pathway to acquiring property quickly and potentially below market value. Following the below steps will ensure you can navigate the auction process effectively and make informed decisions about auction properties.
- Research the Auction Catalogue: Identify properties of interest and review their details.
- Attend Property Viewings: Inspect the condition and locality of the property.
- Read the Legal Pack: Consult with a solicitor or conveyancer about important legal documents.
- Set Your Budget: Calculate the total costs including the deposit and additional fees.
- Arrange Financing: Secure a mortgage in principle if necessary.
- Register to Bid: Ensure you’re registered for the auction.
- Bid Confidently: Stick to your budget and remain calm during the auction.
- Complete the Purchase: Sign the contract and pay the deposit on auction day.
Whether for investment or personal use, buying at auction can be a rewarding journey into the property market.
