Preparing for the Property Auction

Every so often when browsing property sites, you come across a great-looking place that’s advertised not for sale - but for auction.

The idea of buying a property at auction can be daunting, and you might ask yourself "What's the point? Would it even be worth it?". Before considering purchasing a property at auction, it’s important to know how an auction works and whether it could be right for your circumstances.

Prior to auction

Before the auction itself comes the preparation period. This period is used to accomplish everything you would normally do before buying a house. Examining the property at least once (but preferably more than once) allows you to get to know the neighborhood and get a survey done. If the property needs some ‘doing up’ it’s especially important to check you’re not buying a place with serious structural problems.

Each property at auction will be advertised with a legal pack. We can’t stress enough how important it is to read through this thoroughly. The legal pack is essential documentation prepared by a solicitor that includes a copy of the Register of Title, Special Conditions of Sale, Property Information Forms, Leases, Tenancy Agreements, etc.

Decide on a price limit before you get to the auction.

In the heat of the moment it can be easy to feel pressured, or get carried away  and bid beyond what is affordable for you or your family.

If you set a firm limit for your bidding you’ll avoid overpaying for the property.

During the auction

If you’re going to the auction house to bid for a property for the first time, don’t panic! It’s probably easier than you thought.

Here’s how it works:

After arriving at the auction house you must register to bid. You’ll have to put down your name, address and a telephone number. You’ll also need a piece of ID or proof of address - the exact documents you need will vary according to the auction house, so check beforehand. The auction house will give you a paddle, which is what you’ll use to indicate your bid. The auctioneer will begin by noting any changes to the catalogue, so pay attention from the beginning! You don’t want to miss any changes in  property values or conditions.

Then the bidding starts!
Remember a few points of etiquette - don’t try to drive up the price before dropping out of bidding, don’t bring your children, and be quiet and respectful at all times during the auction.

And if you can’t make it to the auction in person? Showing up isn’t the only way of bidding. There might also be an opportunity to bid online, by phone, or by proxy.

After the auction

Once the hammer comes down the highest bidder is legally obliged to buy the property. Before you leave the auction house you’ll pay a deposit - usually 10% of the asking price - plus any other charges associated with the property. This could include things like an administrator’s fee or buyer’s premium. You then sign a memorandum of sale.

After leaving the auction you’ll have a completion deadline. You might be given anything between 10 days and a month to carry out all of the necessary transactions to finish the sale.

After that, the property is yours!

So…

Is it worth it?

Pros

Speed. Property auctions are fast-moving and usually require you to close on the property quickly, meaning that the whole process will be over within 28 days of the auction.

Reliability. The speed of an auction can make it a more reliable way of purchasing property. When the hammer goes down the purchase is legally binding. There will be no gazumping, gazundering or falling through.

Transparency. If someone has outbid you at auction, you’ll know about it. You won’t be relying on the word of your estate agent to know whether or not the price is being pushed up by a competitor.

Savings. You can get a really good deal. According to Which?, property at auction can be up to 30% cheaper than if it was obtained through a regular sale. That’s a massive amount saved.

Cons

Auction bust. The flip side of the possibility of getting a good deal is that you could also find nothing at all. Often property auctions have very little in the way of viable homes and you might find yourself disappointed by the offering.

Preparation. Property auctions require a bit of risk preparation. A property auction is not for the faint-hearted, and if you lose the bid you’ll also lose the money you invested in the survey and legal fees. There are some significant pros though - it could save you lots of money and the stress of buying a property with a chain. If you don’t win the property you’ll lose the money you spent on the survey and on legal advice. If you’re not happy with this as a possible outcome then maybe property auctions aren’t the best way for you to look for a home.

Cash deposit. You might need to pay in cash. If you have to complete within 12 days of the auction that could be too fast to secure a mortgage, in which case you’d have to pay in cash. Remember you’ll also have to pay a 10% cash deposit on the day.

If you’re looking to save money on property mortgage once you've found your dream home, find out if Dashly can help you.

Good luck, and happy bidding!

Related Content

Interest Rates

To long-term fix or not to long-term fix? That is the question

Following November’s rate rise, a number of articles ran urging people to consider long-term fixed rate mortgages, of 5, 7 or even 10 years. But while long-term fixes can be perfect for some, they can be a disaster for others.

Getting Started

Discovering the Power of an AIP

The chances are that if you’re in the market for a property you will have heard someone mention an AIP, or “agreement in principle.”

Property

5 home renovations to make your property value skyrocket

Did you know that increasing the value of your home makes you eligible for a cheaper mortgage deal? Or that increasing the value of your home actually could shave up to 0.5% off your interest rate?