Buying Property at Auction: Your Guide
Buying a property at an auction can be an intimidating thought – but it doesn’t have to be.
It can be a more affordable way of buying a property, making it a realistic option for first-time buyers. Investors are also often seen at auctions, as they can be cost-effective ways of adding to their portfolios.
Buying an auction property can also reduce the length of time you spend on completing a purchase.
There’s also no chance of being gazumped when buying through an auction. This makes the purchase of a property more straightforward, giving you less to worry about.
Auction methods
You could buy your property through an auction in one of two ways:
- Modern method
You may have noticed on property sites that some homes are up for sale via the modern method of auction. This is different to the traditional auctions seen on home renovation programmes.
Modern method of auction is a hybrid of the auction and a typical house sale. The property is advertised on estate agent and property portal sites and you can go to view it. If you’re interested, you can place a bid online for the home.
In a similar fashion to online auction sites like eBay, prospective buyers increase their bids for the property until one ends up successful.
The winner will usually have to pay a reservation fee of around 5% of the sale price. You’ll then have 28 days to exchange contracts and a further 28 days to complete.
- Traditional method
You might be more familiar with the traditional method of auction. This happens at a physical auction, where you might bid with a paddle or other identifying object.
If you’re successful, you’ll have to pay a 10% deposit to secure the property. You’ll also have a certain period to complete the purchase, which will be set out in the auction contract.
If you can’t complete by that time, you’ll lose the deposit you paid on the day. This makes it essential to work efficiently to complete.
At a traditional auction, you’ll usually need two forms of ID, and proof you can afford a 10% deposit. You should also ensure you know the methods of payment accepted by the auction house.
Can you get a mortgage on auction properties?
You might not be able to afford the total cost of an auction property outright. You might then need a mortgage for an auction property.
It’s important to get your agreement in principle before you place a bid on a property. Knowing what you’ll be offered as a mortgage will help you finalise your budget for the auction property.
This will give you a maximum amount to bid. And it’s important not to go higher than this because if you’re successful, you’ll be tied into a purchase.
Tips for buying a house at auction
Make your purchase simpler with our top tips:
- Research is vital
A property is one of the biggest purchases you’ll ever make. So don’t just turn up at the auction and bid on something without doing your research. Visit the house and carry out surveys, scope out the area and look at property values nearby.
- Get the best legal team
Auction property purchases aren’t necessarily more complicated, but they are out of the ordinary. As a result, the best conveyancing team can help make the process of purchasing straightforward and less stressful.
- Learn by doing
To learn how traditional auctions work, you could consider going to a few before you commit to bidding on a property. You’ll see how fast-paced the auction is and how many properties generally sell on the day.
- Understand guide price vs reserve price
At an auction, a property’s guide price is what it will initially be offered at. It then has to meet the reserve price, or it won’t be sold at that auction. You won’t know what the reserve price is, which means you could be surprised when a property doesn’t sell.
For legal help with your auction property purchase, just get in touch with the team at First4Lawyers.
