Everything You Need to Know About Buying a House at Auction in the UK
If you want to avoid the delays and complications that often go hand in hand with buying property on the open market, buying a house at auction may be the solution. Buying at auction takes away a lot of the uncertainty involved in traditional property transactions — but any successful bid you make is legally binding.
Whether you’re about to make your first foray into an estate auction or you’re just assessing your options, it’s essential to understand what buying a house at auction entails.
Why is buying a house at auction a good idea?
There are several reasons why people choose to purchase a house at auction. First, auctions offer many people an opportunity to snap up great homes that aren’t typically available on the open market. These homes include the likes of converted barns, old industrial buildings, lighthouses and Churches. Also, hidden gems are often available at auction for considerably less than their market value. While these homes usually need work, they represent a fantastic investment.
Increasingly, house buyers are turning to auctions because of the speed, convenience and simplicity they offer. They don’t include property chains, protracted negotiations over price or so-called gazumping. In addition, buying a house at auction gives you certain protections, as well as a precise timetable for the transaction.
Are there any drawbacks to buying a home from an auction?
Unfortunately, buying houses at auction is never a guarantee of picking up a bargain. You are bidding against other interested parties during an auction, and a bidding war could send the purchase price way above your budget.
If you have spent time and money on having a property checked, you stand to lose your investment if you price yourself out of the bidding. Also, there’s a chance that the house you’re interested in sells before the auction begins, which means you’ve lost any money you’ve spent on surveys and professional opinions.
How much does it cost to buy a house at auction?
All auction houses charge an administration fee, which is payable immediately after the hammer comes down. This fee is often between £200 and £300. Also, you will still need to pay all the general conveyancing and legal fees, as well as stamp duty. When you sign the contract to buy the house, you will be directly responsible for insurance.
Where can I find property auctions in the UK?
Once you have decided where you want to buy your home, contact all the local auction houses in the area and ask for their catalogues. You will find your nearest auction houses with a quick Internet search. In addition, you can get a list of forthcoming property auctions by accessing the Essential Information Group and ‘Auction List’ websites.
If you find a property that catches your eye during your initial search, it’s important not to wait around. Some auction houses list their properties for sale just four weeks before the event, so you need to act swiftly.
Quick tips on how to buy a house at auction
Do your homework
Take your time in studying the auction catalogues carefully. Whittle your favourite properties down to create a shortlist, and arrange to view each one. But before you start searching, commit to keeping an open mind. If you’re flexible about the type of property you’re willing to bid on, you might catch yourself a fantastic bargain.
When you visit each property, make sure you take a building professional or an architect along with you. You need to know how much money will be necessary to get your purchase up to scratch, and this will only be possible with an expert’s opinion. And don’t rely on the guide price, as this is often proven to be way off the mark by the time the hammer comes down.
Order a survey
Although relatively expensive, a survey will uncover any severe issues with a property that might affect its market value. So buyers at an auction should order a property survey before bidding starts. However, a homebuyer’s report costs around £600, and additional charges apply if a structural report is required. But beware, this expense will be for nothing if you don’t win the auction.
Study the legal pack carefully.
Most auction houses will provide you with a legal pack before the bidding starts. The legal pack includes title deeds, environmental searches, a list of the fixtures and fittings included and any relevant leaseholder information. Study every document carefully. And if you want to protect your interests, have a solicitor go over it.
Arrange your finances in advance
If the hammer comes down on your bid, you are legally obligated to proceed with the purchase. If you haven’t got the cash needed to buy the property, plan your finances and make sure you have a “mortgage in principle” beforehand. However, you must pay at least 10% of the final sale price immediately before leaving the auction house.
Stay calm during the bidding process.
Don’t let your emotions control your actions once the bidding begins. Set yourself a maximum purchase price, and don’t go over it. If you see your hopes of buying a property starting to fade, then take a deep breath, and prepare yourself for disappointment. If you start chasing a property at a price you can’t afford, you could live to regret it.
On the day of the auction, make sure you have everything you need, including proof that you have the funds for the 10% deposit and at least two forms of ID. Take a couple of utility bills and your passport or driving licence.
A lot of property auctions result in the reserve price not being met. If your highest bid doesn’t meet the reserve price, approach the auctioneer and ask if the vendor is prepared to accept the offer. Then, you could negotiate the purchase on a one-to-one basis.
Be prepared, stay calm and set a maximum purchase price. Buying a house at auction should be a complete success. For selling a home at auction see our blog post here.