Buying a house or flat in this country can take a very long time, even if it’s chain free, and if you want to speed things up, buying at auction could be the answer.
Auctions enable you to pick up property quickly and cheaply, but you have to do your research and know what you’re getting into.
The first step is finding auction houses that sell properties in the area you’re looking in. Once you’ve found an auction house, get on its mailing list, either for paper or online catalogues. The catalogue will be available a few weeks before the auction, usually with a schedule of viewing for the properties being sold. The catalogue/website will also have the guide prices and conditions of sale.
Legal documents for each lot should be available to download from the website. Read them carefully and send them to your solicitor, as they could affect your bid (if you have to contribute to seller’s legal fees, for example) or if you bid at all (if there are restrictive covenants, for example).
Searches are often included in the legal documents, but if they’re not, you may want your solicitor to do them before the auction, although this could, of course, be a waste of time and money.
As with any property you’re interested in buying, it pays to view it at least twice so you can take everything in. If you miss some cracks and they turn out to be subsidence, you could have a big and expensive problem you weren’t expecting. Having a survey done before the auction is a good idea, or ask a surveyor or builder to view the property with you.
Research the local housing market before the auction so you know how much the property is worth, and decide on your maximum bid accordingly. The temptation at auctions is to get carried away and bid higher than your maximum. If you’re worried about this, get someone to bid for you, or bid by proxy, where you authorise the auction house to bid on your behalf, up to a specified limit. Always bear in mind stamp-duty thresholds, as stamp duty can add considerably to your buying costs.
Before the auction, check what ID you need to take with you on the day to register to bid and what methods of payment are accepted for the deposit.
If you’re the successful bidder, you have to insure the property, exchange contracts and pay a 10% (or minimum) deposit and a fee to the auction house immediately.
The completion date is usually four weeks from the date of the auction, but it can vary. If you fail to complete on that date, you may lose your deposit and even be sued by the seller. For this reason, paying cash for an auction property is by far the safest option, but it’s not one available to many of us. If you’ll need a mortgage, get it agreed in principle in advance. Some mortgage lenders will value the property before the auction, while others will wait until after.
If the lender hasn’t valued the property beforehand, it may not value it as high as the price you paid or may put a retention on the funds if, for example, it’s in a bad state (many auction properties require modernisation).
The lender will have to act quickly to meet the completion deadline, so buying auction properties with a mortgage is risky. Some finance companies and solicitors are auction specialists - they may have representatives at the auction.
The guide price is the price the auction house expects the property to sell for, but it’s not necessarily realistic - properties often fetch much more.
Most lots will have a reserve price and only the auction house knows what it is. If the bidding doesn’t reach the reserve, it may be possible to do a deal with the seller, via the auction house, on the day.
You can check online after the auction to see which properties didn’t sell - it usually says the price they’re available for. You may also be able to buy a property before the auction, but be prepared for the seller to refuse because they know that prices can leap up in the heat of the moment.