Insights

Andrew Robins

Published 6 December 2022
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Your Guide to Buying at Auction

Buying at auction can be a great way to secure a bargain property in an expedited timeframe, enabling you to renovate and sell on, buy to let or even just secure a family home. To that end, buying at auction can be exciting and rewarding but it is not something that is without risk.

Once the gavel comes down on your bid, the property is yours, even if it’s got chronic subsidence or you’ve just bid way over its market value. Therefore, it’s essential to be both well prepared and informed, as well as having an experienced solicitor on your side. With this in mind, here is our Buying at Auction Guide: 

Research

It should go without saying that you should do some research before bidding at auction.

The local property market 

Take time to understand the local property market including trends, what sells well and for how much. Is there any development planned for the area, what about local schools and transport links? Visit local estate agents to get an idea of property prices and demand. How quickly will you be able to re-sell or rent it?

Research appropriate auction houses

Contact auction houses in your area and ask to be added to their database so that you are notified of any suitable properties promptly. Each auction house will also have an auction catalogue which contains the details of properties coming up for sale in the next few weeks. Identify properties you’re interested in buying and arrange a viewing.

The property

View the property and if needs be, take a builder or surveyor with you. Alternatively, have a full survey done before the auction. Do your due diligence on the surrounding area too.

Check both the guide price and the reserve price. Remember any bid below the reserve price will not normally be successful but the guide price is just that…a guide, and the property could go for much more or less. You may want to get an independent valuation too.

Preparation  

Register

In order to bid, you will normally need to register in advance and the approval process can take a number of days. The auction house will normally carry out anti money laundering checks as part of your registration.

Check the auction house’s terms and conditions very carefully because if your bid is successful, you are immediately bound by the T&Cs. Ask the auctioneers to keep you informed of any alterations or amendments to the sale conditions (sometimes known as an Addendum).

Request the relevant information

Request a legal pack in advance of the auction if this is not available automatically on registration. This should contain all the relevant legal information, including conditions of sale plus land registry and local searches. It is prepared by the seller’s solicitor. You should also request any information which may not be the pack such as terms in respect of the property’s insurance, rent arrears, search fees, and any leasehold requirements. It’s a good idea to ask your solicitor to check the information because it can vary from one property to another.

Finances

Be realistic about what the property is worth and the maximum you are prepared to pay, taking into account any work that will be required after purchase. If your bid is successful you will have to pay the deposit, Stamp Duty, solicitor fees, survey costs and building insurance straight away and then the balance within a few weeks. Therefore any finance will need to be arranged well in advance.

On the day

Getting ready

Arrive early and make sure you have two forms of ID, proof of residency, and the means to pay the deposit. Check whether there have been any changes to the auction catalogue or legal pack. You may want to go and watch a few auctions before the day to get to know how they work. On the day, find a seat where the auctioneer will be able to see you.

Method of bidding  

Auction houses can be fast-paced and intimidating. There are also different methods of bidding including online auctions, and bids by phone or proxy. If you can’t or don’t want to bid personally, someone can act on your behalf but ensure your instructions to them are crystal clear.

Make sure you’re familiar with the bidding method you have chosen.  You will often be given a numbered paddle, make sure you use it in a clear and concise way and do not get carried away in the moment.

Bidding and buying  

The auctioneer will announce each lot, highlight any addendum and invite bidding. The ‘fall of the gavel’ is when the highest bid is achieved and or the reserve price has been met.

If yours is the successful bid, you are now legally obliged to complete the sale. It’s important to note, the sale is not subject to contract.

You’ll have to sign the memorandum of sale and pay the deposit, Stamp Duty, solicitor fees, survey costs and building insurance. You usually have between 14 days to six weeks to complete the sale and pay the balance due. An administration fee to the auction house of between £200 and £300 is often payable.

There is a new and slightly different way of completing the sale known as the modern method. This requires you to pay a fee to reserve the property, which is often a non-refundable percentage of your bid. Then you have 56 days to exchange contracts and complete the sale.

If the property does not sell on auction day but you have registered the highest bid, you may be contacted after the auction.

If you’d like help with or to discuss buying at auction with our experienced property team, please get in touch.

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