Are you considering buying a house at auction? You’re in luck! Our comprehensive guide will tell you everything you need to know if you’re purchasing a property through auction.
In this article, we’ll walk you through the ins and outs of house auctions in the UK, providing you with essential information to make informed decisions. Whether you’re a seasoned investor or a first-time buyer, we’ve got you covered! Let’s dive in…
How Do House Auctions Work?
House auctions provide a unique opportunity for prospective home buyers to purchase properties through a competitive bidding process. Typically, auction houses hold regular events where prospective buyers gather to bid on a variety of properties. The property is sold to the highest bidder, subject to meeting the reserve price set by the seller.
The process is known for its transparency, speed, and potential for finding properties at a good price!
Types of House Auctions:
Traditional Auctions
Traditional auctions have been around for centuries and are typically conducted in person at a physical location, such as a designated auction house or a public venue. They follow a well-established format where potential buyers gather and bid on items or properties.
Bidding Process: In a traditional auction, bidders raise their hands or use bidding paddles to indicate their interest and place bids. The auctioneer moderates the bidding process, incrementally increasing the price until the highest bidder emerges.
Timeframe: Traditional auctions typically occur on a specific date and time, with the auction event lasting for a defined period. Bidders must usually be physically present during the auction to participate, although the auction house may allow ‘absentee bids’, which are submitted before the auction.The auction house will then bid on your behalf up to your maximum bid.
Atmosphere: Traditional auctions are known for their lively and energetic atmosphere. The presence of bidders in the same physical space creates a sense of competition and excitement, often accompanied by the fast-paced chant of the auctioneer.
Modern Auctions:
Modern auctions, also known as online auctions, have emerged with advancements in technology and the internet. They provide a digital platform where buyers can participate in auctions remotely from anywhere in the world.
Bidding Process: In a modern auction, participants place their bids electronically through a dedicated auction website or platform. Bidders can submit their bids at any time during the auction’s specified duration, often with the option to set maximum bids or use automated bidding systems.
Timeframe: Modern auctions typically have a predetermined timeframe when bidders can place their bids. The duration can range from a few hours to several days, providing greater flexibility for participants to participate according to their convenience.
Convenience and Accessibility: Online auctions offer the convenience of participating from the comfort of one’s own home or office. They eliminate the need for physical presence, allowing a larger number of potential buyers to engage in the bidding process.
Transparency and Information: Modern auctions often provide detailed information and photographs of the items or properties being auctioned, enhancing transparency for buyers. Participants can review the descriptions, terms, and conditions before deciding to bid.
Range of Items: Online auctions cover a broad range of items, including collectables, artwork, vehicles, and even properties. The online format facilitates access to a wider variety of items compared to traditional auctions, which may be limited to specific categories.
While traditional auctions have a long-standing history and offer a unique atmosphere, modern auctions have gained popularity for their convenience and accessibility. Both types of auctions have their merits, and the choice between them often depends on personal preference!
How to Find Properties for Sale by Auction:
Estate agents, auction houses, and dedicated auction websites are excellent sources for finding listings! These platforms often provide detailed property information, including descriptions, photographs, and guide prices.
Websites like Zoopla and Rightmove both have their own list of auction-ready properties. If you’ve found a property you’re interested in, contact the estate agent or auction house shown on the listing. They will be able to give you more information about the property, help you arrange a viewing and give you any important dates!
Why Do People Choose to Sell by Auction?
Sellers may opt for auctions because they’re looking for a quick sale, while others are searching for a transparent and efficient process. Auctions attract a wide range of buyers, including investors and those looking for unique property opportunities.
Selling at auction also eliminates the need for negotiations and reduces the chances of a chain collapsing, offering peace of mind to sellers!
How to Prepare for a House Auction:
Preparation is key when it comes to buying a house at auction. Start by establishing a clear budget and obtaining a mortgage agreement in principle, which demonstrates your financial readiness to proceed. Thoroughly research the properties you’re interested in, considering their condition, potential value, and legal implications. It’s crucial to visit the properties, conduct surveys if necessary, and seek legal advice to ensure you’re making informed decisions.
If you’re thinking about buying a property at auction, try following these steps:
View the property:
Before participating in a house auction, it’s crucial to view the property in person. This allows you to assess its condition, potential, and any potential issues. Consider bringing along a trusted expert, such as a builder or surveyor, who can provide valuable insights and help you make an informed decision.
Get your finances sorted:
Ensure your finances are in order before attending a house auction. Set a clear budget and determine how much you’re willing to spend. If you require a mortgage, obtain a mortgage agreement in principle beforehand to demonstrate your financial readiness to proceed.
Research similar properties:
Conduct thorough research on similar properties in the area. Examine recent sales prices to gauge the market value and understand the potential price range for the property you’re interested in. This knowledge will help you set realistic bidding limits and avoid overpaying.
Get a solicitor to study the small print:
Engage a solicitor experienced in property transactions to review the legal documentation and terms and conditions of the auction. They will ensure you understand any potential risks, obligations, and restrictions associated with the property. Seeking professional advice will help you make informed decisions and avoid any legal complications.
Don’t be too guided by the guide price:
While the guide price provided by the auction house can give you a rough estimate, it’s important not to solely rely on it. The guide price is often set lower to attract potential bidders, and the final sale price may surpass it significantly. Base your bidding decisions on your research, the property’s value, and your budget.
Go along to other property auctions to see how it’s done:
Attending other property auctions as an observer before participating can provide valuable insights into the process. Observe how bidding unfolds, learn from experienced bidders, and familiarise yourself with the atmosphere and dynamics of an auction room. This firsthand experience will help you feel more confident and prepared on auction day.
Get your deposit ready:
If you’re successful at the auction and secure the property you’re after, you’ll usually need to pay a deposit immediately. This will usually be 10% of the property selling price but the auction house can set a higher percentage, so make sure you check before bidding. Some auction houses also set a minimum deposit amount of around 3-5k.It’s a good idea to check what payment methods are acceptable with the auctioneer.
How to Succeed at a House Auction:
On auction day, it’s important to come prepared. Arrive early to register and familiarise yourself with the auction process. Set a maximum bid limit and stick to it, avoiding impulsive decisions in the heat of the moment. If successful, be ready to pay the deposit immediately and complete the necessary paperwork promptly. Remember, patience, confidence, and a cool head are valuable assets in the auction room!
Mortgages for a House Auction: What You Need to Know!
When buying a house at auction, you usually have 28 days from winning the auction to complete the purchase or you could risk losing the 10% deposit you put down. Sounds simple enough, but in reality it’s not very likely that you will be able to secure a mortgage and get the accompanying conveyancing work done that quickly. At Key Solutions, we’ve known people lose deposits because of this!
You must speak to a mortgage adviser (assuming you’re not a cash buyer) and conveyancer before going to a house auction. In most cases, you’re going to need to consider the use of specialised short-term auction finance. This is more costly, but is designed to work within very tight timescales. You usually only need it for long enough to bridge the gap between the auction purchase and the time taken for a traditional mortgage to complete.
Buying a house at auction can be an exciting and rewarding experience. By understanding the auction process, researching properties thoroughly, and making sure you’re well-prepped, you can increase your chances of success!
If you’re considering purchasing a property at auction, our team of expert brokers can help you secure a mortgage. Contact us today to discuss your options and secure the financing you need for your auction purchase.
