Buying at auction – Our step-by-step guide
Buying a property at auction can be a great way to bag a bargain. The key is to be fully prepared. Check out our step-by-step guide to the basics.
Get your finances in place
It may seem a little early to be talking mortgages, but unless you intend to fund your purchase with cash (which many auction buyers do), you’ll need to apply well in advance of your first auction. This is because the rules for buying at auction differ to the conventional buying process. If you bid on a property at auction and you win, you’ll be required to pay 10% of the property price there and then, with the remaining 90% following a mere 28 days later. If you’ve ever applied for a mortgage, you’ll know that lenders usually take a good deal longer than that, so you’ll need to get your mortgage agreed at the start of the process. Explain to your lender or mortgage broker that you intend to buy at auction.
Find your local auction houses
With your cash in the bank, or Agreement in Principle (AIP) in place, the next step is to find out what’s out there. Googling property auctions in your area should unearth the local auction houses easily enough, or check the property section in of your local newspaper, as auction houses will often advertise their next auction date there.
If there’s one coming up soon and you’re not ready to bid yet, why not attend anyway? It’s a great way to get a feel for the auction environment – just don’t be tempted to bid on anything just yet!
Once you know where and when the auctions are, get hold of a copy of the latest auction catalogue and identify the properties you may be interested in. Contact the auction house to book viewings as soon as possible. Ideally, you’ll want to take a builder or surveyor with you to each viewing, to give you an idea of how much work may be involved to renovate or develop the property, along with ballpark costs.
Gather local intel
Remember that most auction houses will set their guide prices low to attract more interest. Properties are likely to sell for well above this, so don’t do your calculations based on the guide price. Once you’ve found a property you like (and preferably viewed it more than once) do your own research to get an idea of its value.
Talk to local estate agents and check sites like Zoopla or Rightmove to find out what similar homes in the area are being sold for. That information, combined with your builders’ estimates, should give you a good idea of how much to bid.
Book a seat
If you plan to go ahead and bid on a property, remember to book a place at the auction in advance. The earlier you do this, the better seat you’ll get in the auction house.
Get a survey done
It’s a good idea to have a survey carried out prior to the auction – especially if the property is old or in a state of disrepair. Take a look at our guide to choosing a survey here.
Instruct a conveyancer
Ask the auction house for the legal pack for the property you’re interested in. This will include information like local searches, title deeds and fixtures and fittings.
Have a solicitor or conveyancer check this over in advance of the auction, so you know everything is in order. It’s a good idea to make sure they’re aware of the auction date so they can hit the ground running if your bid is successful.
Before the big day, contact the auction house to see what information you need to take with you. Many will ask for 2 forms of ID, plus proof you can afford the deposit.
On the day
Go into the auction with a clear plan of action – set yourself a bidding limit and don’t go above it. Your bid is legally binding, so if you win and then change your mind, you will lose your 10% deposit and may be charged further admin fees. Even if you lose out this time, you’ll have gained valuable experience which will help you next time around.
For more information and advice on buying a property at auction, contact us.