How to buy a house at auction?

Answer

Buying a house at auction can be a great way to find a bargain or purchase a property quickly. Auctions used to be favoured by cash buyers and investors but, nowadays, you'll find a wide range of buyers at the auction house - even those relying on mortgages.

What is a property auction?

A property auction is an event where properties are sold to the highest bidder in a competitive environment. Unlike the traditional home-buying process, auctions provide a quick way to buy and sell properties. 

Auctions are often used to sell homes quickly or at a competitive price, appealing to both investors and domestic buyers looking for bargains and unique properties. The auction process ensures that sales are straightforward and final.

Why should I consider when buying a house at auction?

Buying a house at auction can be appealing for many reasons - mainly because you might be able to purchase a property at a lower price compared to the usual market rates. 

The auction process is also, generally, much quicker, meaning once you win the bid the property is yours without the lengthy back-and-forth of traditional sales. 

What are the different types of auction?

The Modern Auction Method

The modern auction method offers buyers slightly more flexibility than the traditional approach. After winning the bid, the buyer typically has up to 56 days to complete the purchase, which can be incredibly beneficial for those who need time to arrange their mortgage or conduct additional property checks. 

Unlike traditional auctions, this method offers a more manageable timeline for finalising the transaction.

The Traditional Auction Method

The traditional auction method, sometimes referred to as the unconditional auction, is a faster and more decisive process. Here, the highest bidder must immediately pay a deposit once the hammer falls, usually around 10% of the purchase price. The buyer then has a strict 28-day period to complete the purchase. 

This means buyers must have their finances fully prepared before bidding, which is ideal for those who can act quickly and decisively.

How Can I Prepare for Auction Day?

Preparation is key to a successful auction day. Here are some steps to ensure you're ready:

• Do Your Research: Thoroughly research the properties listed and attend viewings.
• Set a Budget: Decide on your maximum bid and stick to it.
• Get Your Finances in Order: Ensure you have a mortgage in principle or cash ready.
• Review the Legal Pack: Have your solicitor check for any legal issues.
• Register in Advance: Sign up for the auction and get your bidding paddle.
• Arrive Early: Get familiar with the auction environment and finalise any last-minute details.
• Stay Calm: Keep a clear head and bid confidently within your limits.

Review the legal pack

Before the auction, the seller, through the auctioneer, will provide a legal pack. This typically includes:

• Office copy entries and property plan.
• Special conditions of sale, detailing if the property is vacant or let, completion date, and any extra costs for the buyer.
• Local authority search.
• Energy Performance Certificate (EPC).
• Leases and tenancy agreements, if applicable.

Additional searches like environmental, drainage, water, or coal mining may also be included based on the property's location. Buyers usually bear the cost of these searches upon a successful bid. Additionally, it's wise to commission a survey to check for issues like damp, rot, or structural problems.

We highly recommend that you have your Residential Conveyancing Solicitors at GloverPriest review the legal pack before the auction. 

Can you get a mortgage on an auction property?

Yes, you can get a mortgage on an auction property, but it takes some planning. 

First, make sure you’ve secured your mortgage in principle before the auction day so you can prove you have the funds lined up. You should also let your lender know you're buying at auction because the timeline is tight. Most major lenders are familiar with the auction process and can sometimes expedite the paperwork to speed things along. 

What are the risks of buying a house at auction?

Buying at auction comes with several risks. Firstly, once the hammer falls, the sale is legally binding, and there's no backing out, so you need to be absolutely sure about your decision. 

Secondly, there might be hidden issues with the property that aren't immediately apparent. Without a thorough inspection and legal review beforehand, you could end up with costly repairs or legal problems. Lastly, securing finance within the tight auction timelines can be challenging, and if you fail to do so, you risk losing your deposit. 

Being well-prepared and doing your homework is crucial to avoid these risks.

Why GloverPriest?

Buying a house at auction can be a stressful process, particularly if it's your first. At GloverPriest, our experienced Auction Solicitors will make your purchase as straightforward and calm as possible.

GloverPriest Solicitors is fully accredited by the Conveyancing Quality Scheme (CQS) - the recognised quality mark for legal experts - so you know our residential conveyancing standards are set high.

If you need help buying a house at auction, our specialist property lawyers are here to help. Get in touch today.