Buying a property at auction
Property auctions can be an amazing opportunity to bag a bargain. But what are the pitfalls of buying a house at auction? And how do you even go about it? Here’s what you need to know.
Property auctions can be an amazing opportunity to bag a bargain. But what are the pitfalls of buying a house at auction? And how do you even go about it? Here’s what you need to know.
What are the advantages of buying a property at auction?
There can be lots of advantages of getting a house at auction.
- Auction properties are often much cheaper than those you’ll see in estate agents’ windows.
- As soon as the hammer falls, you and the seller are usually legally committed to going ahead with the deal depending on the conditions of the auction house.
- Because it all happens there and then, you needn’t worry about the sale falling through.
What are the disadvantages of buying a property at auction?
Buying property at auction also comes with its fair share of downsides and issues to be aware of.
- You need to have your finances in place. A 10% deposit is usually due on the day of the auction itself, then you’ll need to pay the remaining balance within 28 days.
- If you’ve paid for a survey and solicitor, you could find yourself out of pocket if you’re outbid and don’t get the property.
- Sellers often use auctions to get rid of problem properties. You’ll often find repossessed property for sale, and auction properties can be in serious disrepair. As with buying a property in the conventional way, it’s down to you to do your homework and make sure you know exactly what you’re buying.
I want to buy a house at auction. How do I go about it?
If you’re looking to buy at an auction, here’s what you need to do:
- Research the market and the area
If you’re on the hunt for a bargain, you’ll need to know how much similar properties usually go for. Research what other properties in the street are selling for – this will help you decide how much you should pay. And remember, if the price looks too good to be true, it probably is.
If you don’t know the area well, local residents and estate agents can tell you more. It’s also worth getting advice from a solicitor and chartered surveyor. - Get an idea of how much work needs to be done
Before getting a survey, you could take a builder along to a viewing. They can tell you roughly how much it will cost to revamp the property, so you can work out if it’s worth proceeding. - Read the small print
Read the auction catalogue carefully so you know what you’re committing to. If in doubt, again it’s worth getting professional advice from a solicitor and chartered surveyor.
Can I get a mortgage to buy a house at auction?
Yes, you can. But you may need to find a specialist mortgage provider, and there may well be conditions attached.
For instance, mortgage providers don’t usually lend on houses with major structural defects or issues such as damp or dry rot. Homes without a kitchen or bathroom pose a problem too.
But if you’re planning to bid on an auction property, you’ll need to have your mortgage agreed and in place as you’ll have to pay for the house in just 28 days.
How do I exchange and complete if I buy a house at auction?
Traditionally, if you buy a house at auction, you’ll pay a 10% deposit there and then. The remaining amount is due 28 days later.
But some auctions will ask you to pay a reservation fee (normally a percentage of the bid price). You’ll then have 56 days to exchange and complete, giving you more time to firm up your mortgage.
Do I need to get a survey done on an auction property?
As with buying a property in any other way, it’s always wise to get a survey done. Without one, you’ll have no idea of what you’re committing yourself to. There could be serious issues with the property and the owner might be asking far too much for it.
Don’t forget, once that hammer goes down, you’re committed to buying the property, so it’s important to get your survey done before you start bidding.
See our guide to different types of property surveys.
Buying a repossessed property at auction
Auctions are a good way to get hold of repossessed properties, which can be a good deal.
Where do I find repossessed houses for sale?
Some auction houses deal specifically with property. Find one local to you and ask them to send you a catalogue. There should also be a mailing list you can subscribe to.
Property websites such as Rightmove and Zoopla also list repossessed houses that are selling at auction.
I’ve never been to an auction. How does it work?
Each property in the catalogue should have a guide price – this is how much the auction house or seller thinks it’s worth. Don’t confuse this with the reserve price, which is the minimum price the seller will accept.
If you can’t make the auction itself, you should be able to bid over the phone or online.
Check whether you need to register with the auction house before bidding.
You may need ID, so take some along, just in case.
Want to buy a house at auction? Here are our top tips
- Never been to an auction? Go to one just to watch and find out how it works.
- Go and view the property you’re interested in, so you can be sure it’s right for you.
- Get a survey done. Auction properties often need a huge amount of work, so you’ll need to know exactly what you’re getting into.
- Have your money, or mortgage, already in place before you bid.
- Remember that buying at auction is a legal commitment – once your bid is accepted, you can’t change your mind.
- If the house you want doesn’t reach its reserve price, leave your details with the auctioneer to see if the seller will accept your offer.
- Set yourself a maximum bid and don’t go over that. Being outbid may well mean you lose the money you paid for your survey and solicitor, but this will be peanuts compared to overpaying for the wrong house. And, remember, there will always be other properties…
- Get buildings insurance in place immediately. As soon as you exchange contracts, the property is your responsibility. If the property is going to be unoccupied until it’s renovated, you may need specialist insurance.
The Editorial Team - Compare the Market
Experts in personal finance, insurance and utilities
Compare the Market’s Editorial Team is made up of industry experts with decades of experience in personal finance, insurance and utilities. Each of our authors has an area of expertise, where they can share their extensive experience to help you get a better deal, by finding the right product and saving money.