A Guide to Buying Properties at Auction in the UK in 2020
This comprehensive property auction guide has everything you need to know about purchasing auction properties in the UK.
Arm yourself with the best UK property auction information available.
Welcome To Auction Properties
Our goal is to help you understand everything you need to know about auction properties in the UK.
We’ll cover everything from finding property auctions near you to what happens at an auction, how to bid on auction properties and the legal aspects of buying a property sold at auction.
Our guide is the most comprehensive auction property guide in the UK – compiled by experts with over 50 years experience in the UK property market.
Let’s clear up a couple of misconceptions about buying auction properties
There are a number of common misconceptions about buying auction properties. One is that the properties put up for auction are problematic in some way, or they are mainly repossession properties by banks or finance companies. This is not always the case.
Sellers use property auctions for a huge variety of reasons. Some might be interested in a quick sale while other properties are sold on behalf of a trust or charity. In such circumstances, a property auction is the most open and transparent selling process.
Another common misconception is that buying property at auction is only suitable for investors who are experts in the field. This is not strictly true either. People who attend property auctions come from all walks of life ranging from first-time buyers to property developers.
Having said that, buying auction properties is not for everyone. As buying a house will probably be your most costly financial transaction, you should think the matter through carefully before making the decision to buy any property at auction. In order to be successful, you need to be committed, organised and be prepared to work fast.
This requires you to make a major investment of both time and money, so let’s get started with the information you need to know.
What Are the Pros and Cons of Buying Auction Properties?
Undoubtedly, you need to weigh up the pros and cons before reaching a decision about whether buying auction properties is the right choice for you. Let’s consider the advantages and disadvantages in some depth.
The Advantages of Buying Auction Properties
One of the main advantages of buying in this way is that you might be able to grab an undervalued auction property at a bargain price.
Another benefit of these auctions is the sheer variety of properties available. Whether you are interested in residential, commercial, industrial, agricultural, or mixed-use properties, you will be able to find what you are looking for.
Some of the houses sold at auction are ones which estate agents are reluctant to take on. They might be an unusual conversion or made of non-standard materials. If your dream home is something out of the ordinary, then a property auction is the right place for you.
A further advantage of these auctions is the speed of the sale procedure. While the conventional method of buying property through an estate agent might take months, the time between the property auction and completion is usually 20-30 days.
Buying a property at auction is the most reliable way to purchase property. As soon as the auctioneer’s hammer falls on your winning bid, the house legally belongs to you. You can therefore avoid the common pitfalls of buying a home through an estate agent such as being gazumped or the sale falling through because you are part of a chain.
As far as the bids are concerned, it is a level playing field with timing playing a key role. Unlike estate agents who ask for bids in sealed envelopes, the auction procedure is completely transparent. You can see what other potential buyers are bidding and make an on-the-spot decision about whether to bid higher or drop out.
The Disadvantages of Auction Properties
The speed of completion of the sale of auction properties also has its downside. You have to work fast as you have less than a month to ensure that your auction property financing is in place. Although you avoid estate agent fees, the auction house charges around £200-£300 while a deposit of 10% of the sales price must be paid on the day of the auction.
Another drawback of buying a property at auction is that there is no guarantee that you will call the winning bid. If you are outbid, your investment in time and money such as visiting/inspecting properties and any money paid for surveys will have been wasted. This can be difficult for some buyers especially when this financial commitment has been accompanied by an emotional attachment to the property as their future home.
There are also risks to buying auction properties These concern the condition of the property and legal issues. An auction bargain might not turn out to be such a bargain if it costs you thousands to rectify the problem – whether that is repairing major structural problems or extending a short lease.
How Can You Find UK Auction Properties For Sale?
If you decide that buying a home through an auction is the right choice, you should begin by contacting as many auction houses as you can. London-based property auction houses tend to have properties from all over the UK while smaller provincial houses tend to specialise in properties in their locality. Internet-based property auction houses also sell properties from all over the country.
As a personal safeguard, you should ensure that the auction house is NAVA Propertymark protected. Membership of this scheme includes Client Money Protection, Professional Indemnity Insurance and recourse to a redress scheme if you believe the auctioneers acted fraudulently.
When you contact the property auction houses, you should ask to subscribe to their mailing lists and/or newsletters and request catalogues for any upcoming auctions to get an idea of what is available. These catalogues are published about 3 weeks before the auction and include:
- photos of the property
- a guide price (the auctioneer’s starting price)
- information about the property
- terms of purchase
- information about how to arrange a viewing
- a link to the legal pack (which has information about the title, any restrictions, etc.)
- special conditions of sale such as ‘unless previously sold’. This means that the seller is prepared to accept offers before the auction
Top property auction tip: Be careful not to get carried away when bidding on a property auction. It is easy to do and difficult to back out of. Make sure you can afford to pay what you are bidding, including all the property auction fees.
Preparing to Buy Auction Properties
If you feel unsure about how to buy a property at an auction, an important part of your preparation should be to attend one in person. You are under no obligation to bid for anything, but this experience would show you what to expect when buying and give you an insight about how the auction works.
You must also decide where you would like to buy property. Once you have chosen, you should put in the hours of research as you would for any property purchase. Visit the neighbourhoods and towns and tick off the things on your shortlist – whether this is easy access to a good school or proximity to sports facilities.
As well as investigating the facilities in the area, you should also use your visit as an opportunity to research local house prices. Have a look to see how much previously sold properties have gone for. This will give you a yardstick to judge whether a property put up for auction is a good bargain or not.
Once you feel ready to take the plunge, you should start looking at the property auction catalogues in more depth. Concentrate on the neighbourhoods you have chosen but be flexible. You should also be patient. It might take some searching before you find a suitable property.
Once you have found what you are looking for, you should arrange a viewing. Try to visit properties at different times of the day as this will give you an idea of any problems which might not be apparent from one visit.
Popular UK Property Auction Questions
How Do Property Auctions Work?
Auction properties are usually introduced by their lot number in the order which they are listed in the catalogue. By raising a hand or their catalogue, auction attendees signal their bid and bidding continues until the highest bid is reached.
How Do I Buy a Property at Auction?
After registering your interest with the auction house, you can buy auction properties by attending the auction in person. Bids can also be given by proxy, over the phone or online in the case of online property auctions.
Are Auction Properties Cheaper?
Repossessed homes might have a guide price of 60% cheaper than the price set by an estate agent. However, the winning bid might be significantly higher. This depends on factors such as the condition of the property and how many other bidders show an interest.
Where Can I Find Auction Properties?
Each auction house publishes a catalogue prior to the auction with a list of all auction properties. There are also online property auction portals which list all upcoming auctions, and which allow you to refine your search by choosing your key criteria.
Can I Finance an Auction Property?
Mortgage providers are willing to grant loans for auction properties, but you need to be prepared and apply for a MIP beforehand. Short-term bridging loans (also called auction loans) can help while you are waiting for a final decision from your lender.
Carrying out a Survey of Auction Properties
Although there is no legal requirement to carry out a survey of the property beforehand, it is wise to do so for your own peace of mind. A survey can reveal any problems which might end up costing you money in the long run. It will pinpoint any major structural issues including:
- problems like rising damp
- the condition of the drainage and insulation
- any underlying timber damage such as woodworm
- the condition of the doors and/or windows
- the estimated cost of any repairs and/or alterations
Property surveys vary in their thoroughness which in turn will affect their price. They range from the cheapest, a property condition report (about £300) which goes into less detail to a full building survey (£500-£2,000) which is carried out by a RICS chartered surveyor.
Whatever you decide, remember that the cost of the survey comes out of your own pocket. If you are outbid in the auction, this money has been spent and cannot be recovered.
The type of survey you decide on will depend on the age and condition of the auction property you are interested in. In the case of listed or badly maintained older buildings, a complete building survey would probably be your best option.
Even if the property survey is negative, don’t be disappointed. Ask for more details about how serious the problems are. For example, are they urgent or can any repairs wait? Consult an expert such as a builder to arrange an estimated quote for any recommended renovations.
When Do You Instruct a Solicitor for Auction Properties?
Despite the fast and sometimes hectic pace of a property sale by auction, this is no excuse not to exercise due diligence when researching auction properties. Apart from the condition of the building, you need to find out about any problems with the building’s paperwork such as a short lease or defective legal title.
Each property put up for auction has a legal pack which pinpoints any special conditions of the sale or whether the property has any legal issues such as a disputed boundary fence. It is a good idea to instruct a conveyancing solicitor as soon as you have decided to purchase a property at auction. In this way, they will be able to go through the fine print of the legal pack and inform you of any potential problems.
Instructing a solicitor in plenty of time is highly recommended because of the speed of the house buying process by auction. You will be expected to hand over their details to the auction house as soon as your bid has been successful. With only 28 days to finalise all the paperwork, instructing a solicitor beforehand will save you valuable time.
How Much Do Auction Properties Cost?
Like any conventional property sale using an estate agent, the cost of auction properties depends on a number of factors such as their age, condition and locality.
When you receive the auction catalogue, you will see that all houses sold at auction have a guide price. This is the starting bid for the auction. You should not confuse this price with the reserve price which is the lowest price that the seller is willing to accept (and which remains confidential between the auctioneer and the seller).
The guide price at a property auction
The guide price is not final and you may find that this price goes up in the weeks before the auction is held. It may even increase on the actual day of the auction. As the auction date approaches, you should keep an eye on the guide price.
A rising price is a clear sign that other buyers are interested in the auction property. Being aware of this fact will help you avoid disappointment on the day of the auction. It will also help you to keep your budget on track.
When planning how much you can afford to spend, you should factor in all the other costs associated with buying a property at auction in the UK. These include:
- conveyancing fees, valuation fees and/or costs of surveys
- stamp duty
- administrative fees to the auction house (£200-£300)
- building insurance (which you are liable for as soon as you buy the house)
- removal costs
- costs of selling old home (if applicable)
- any repair or renovation work on your purchased property
As far as auction property financing is concerned, you should also remember that you must pay 10% of the purchase price on the day of the auction as a deposit. This money will be lost if you are unable to pay the balance within 28 days. In such a situation, you might also be liable for the administrative costs of reselling the property at a later auction. If the seller feels that they had to resell the property at a lower price because your sale fell through, then you could also be sued for any perceived financial losses.
Can You Get Mortgages to Buy an Auction Property?
It is possible to get mortgages for auction properties. However, applying for a mortgage can be a long-drawn-out procedure because lenders are required by law to do a thorough affordability and credit check before approving a loan. With speed being an important factor in buying property at auction, you can save time by applying for a Mortgage in Principle (MIP) beforehand.
A mortgage in principle specifies that you could afford to borrow the set sum, but is not a guarantee that your mortgage will be approved. Before final approval, a mortgage survey and valuation will need to be carried out for you to borrow money to buy that specific property.
There are certain conditions when a mortgage lender will turn down a loan application for an auction property. This is most commonly in cases when the lender believes that the property is not worth the asking price and/or when the property is in a dilapidated condition. Mortgages are usually granted for properties which are immediately habitable.
Therefore, if the auction property does not have a working bathroom and kitchen, then your application will probably be rejected. This is because the lender believes that the renovation costs will make it difficult – if not impossible – for you to repay your loan.
You will also find it difficult to get a mortgage for auction properties of non-standard construction which covers any materials apart from bricks and mortar.
If you encounter any difficulties with High Street mortgage providers, an alternative solution is to consult a mortgage broker who specialises in auction property financing. They will have an in-depth knowledge of the market and will be able to put you in touch with lenders who have experience of lending money for less conventional or unusual buildings. Their contacts will be invaluable especially as you have less than a month to come up with the balance of the money owed on your winning bid.
UK Mortgage Calculator
Calculate your UK property mortgage
If you need to raise finance in order to buy a property at auction, use our handy UK mortgage calculator to get an idea of what the repayments will be.
Simply enter the auction property mortgage amount, the number of years you wish to have the mortgage, the interest applicable to your mortgage (available from your mortgage provider) and the type of mortgage you wish to use.
Press calculate to see your UK mortgage repayments.
This UK mortgage calculator is for guidance purposes only, please speak to your mortgage or loan provider for exact details of interest rates and repayments.
What Loans or Mortgages Are Available for Auction Properties?
If your mortgage approval might be delayed or you are waiting to sell your old home, one solution is to apply for specialist auction finance. This type of short-term bridging loan is ideal for auction properties. The loan application can be made before or after the auction. Notification of the loan approval can be as quick as the same day while funds become available in 7-10 days.
As the property will be collateral for the loan, auction loan providers are more flexible in their lending criteria. They do not base their decision on employment history or business records and will even lend to those with a poor credit history. They are also prepared to lend money for a wider range of property types including those of a non-standard construction.
The main disadvantage of auction loans is that their administrative and legal fees tend to be higher than mainstream mortgage providers. They also charge a higher interest rate. Because of their costs, this type of loan is only suitable for the short term and as long as you have a concrete repayment strategy in place. For example, you are waiting to complete the sale of your old home.
How to Buy Auction Property
Once you have done the necessary research and preparation about a property up for auction, you are ready for the next step which is to attend an auction and to bid on your property of interest.
Before attending one, you should consult the auction house to find out what paperwork you should have with you. Auction houses usually ask you to bring a photo ID (such as a passport) and proof of your residence (for example, a utility bill). You should also bring the contact details of your solicitor and a means of payment (for the auction house fees and the 10% deposit). This deposit should be in the form of a cheque, debit card or banker’s draft because cash and credit cards are generally not accepted.
What happens when you register at an auction?
When you officially register, you should be given an addendum of any last-minute changes in the houses sold at auction. Check that the guide price of the property you are interested in has not risen overnight and that the conditions of sale remain unchanged. At registration, you will sometimes be given a numbered card or paddle which you raise to notify the auctioneer of your bid. If you are not given one, you should raise your hand or the catalogue.
You should make sure that you arrive in plenty of time so that you can get a good seat which allows you both to see and be seen. A seat at the back and to the side is the best choice since it allows a clear view of the auctioneer as well as rival bidders. This means you can easily follow the biding and know where and how much the current bid is.
You should have already set the maximum you can afford to pay when calculating your auction property financing. Throughout the biding process, you should keep a clear head and keep this figure fixed in your mind. It is very easy to get carried away as someone bids against you for your ideal home and the price slowly rises. If you feel that you might be tempted to go over budget, you should take someone with you to keep you in check.
When being outbid on the property they want, another mistake that some people make at property auctions is to bid on a different property on impulse. This is because they do not want to leave the auction room empty-handed. You should never bid on property which you have not inspected or had its legal pack reviewed. You might be lucky, but it can be a risky and above all, costly mistake.
Proxy bidding at a property auction
You do not have to be physically present to bid for auction properties. If you feel that you might be tempted to make a larger bid than you can afford or might bid for a property on impulse, then you do not have to attend. Bids can also be made by proxy with someone biding on your behalf.
You will have to contact the auction house beforehand to arrange a bid by proxy. You will need to complete the necessary paperwork and name the maximum bid for your budget. You will also have to provide 10% of this figure as a deposit beforehand. Apart from proxy bids, arrangements can also be made for you to bid by phone.
Online property auctions in the UK
Since the first online property auction in 2018, online auctions are becoming increasingly common. These auctions work in exactly the same way as ‘real’ auctions attended by bidders. After the last bid, the auctioneer extends the clock by one minute to allow for any late bidders. Only after 60 seconds of silence does the hammer fall and the sale is completed.
The Legalities of Buying Auction Properties
You must make sure that you are 100% sure about buying a property for sale at an auction because, unlike other purchases, it is not a situation where you can change your mind. Once the auctioneer’s gavel falls, the highest bidders become the new owners of the auction properties. These bids are considered as legally binding as a signed contract. You are now liable for paying both the deposit and then arranging auction property financing for the balance within approximately 28 days.
Online property auctions are exempt from the 2014 Consumer Contract Regulations which are intended to protect consumers when they purchase something over the internet or by phone.
This is because an important aspect of property auctions is that you can arrange viewings and inspect the building’s paperwork beforehand. If you later find any major structural or legal problems, you cannot demand a refund as the seller provided full disclosure beforehand.
Finalising the Purchase of an Auction Property
If you make the winning bid, you need to deal with all the administrative and financial details of buying a property at auction. You will have to sign the memorandum of sale and pay the fees to the auction house. You will also have to hand over 10% of your winning bid as a deposit. You should inform them of the contact details of your solicitor as well.
As soon as you become the legal owner of property, you become liable for building insurance even if the property is empty. This type of policy covers you for any damage to the bricks and mortar of the property such as in cases of flood, fire, etc. If you have spoken to your insurer beforehand, this can be arranged quickly.
Although your bid has been successful, you still need to ensure that there are no last-minute hitches in your auction property financing. If you have prepared and researched well, then things should slot into place. However, it is imperative that you remain in regular contact with all parties involved (solicitor, mortgage provider, etc.) to ensure that everything stays on track within the tight time frame of a month.
If a property does not reach its reserve price, then it might remain unsold. In such cases, the auction house might have been given the authority to sell the property afterwards in a private sale. In such a situation, you should register your interest with the auctioneers and wait until the end of the sale.
Unfortunately, there is no guarantee of success at property auctions. If you leave the auction house empty-handed, you need to start the process all over again. Don’t be disheartened as the process of buying a property for sale at auction requires commitment, patience and perseverance.