Know your market
Properties are sold at auction all over the UK by a variety of people and bodies, including receivers, local councils and investors.
First, identify the area where you want to live, then register with local property auction houses and sign up to their mailing lists to receive the latest catalogues.
Essential Information Group is the market leader in auction information. If you sign up for its service, you can set alerts for your desired postcode or area and receive information relating to all properties being sold as well as historical prices.
This is particularly useful now that many auction houses are mainly online, because some properties may be sold by one that is outside the area.
EIG’s prices start at £175 plus VAT for three months; the site offers a free trial.
Some run timed auctions, a bit like eBay, and others are held live online, similar to how it used to be in the auction room. It is best to familiarise yourself with the different styles beforehand. However, the same principles apply to both.
Assemble your team
Buying a property at auction is different from buying through an estate agent because there is no waiting around for searches and conveyancing. The auction house will have all of this information in the legal pack.
Before you even think about bidding, you will need a trusted solicitor who is familiar with the auction process. Most properties sold this way have a 28-day completion date.
If you bid successfully and win, it is contractually binding, and you will need to pay the 10% deposit straight away. Mortgages can be arranged for auction properties but, again, speed is of the essence.
A good broker will be able to arrange finance and suggest lenders that can meet the deadlines. However, it is important to note that not all properties will be suitable for a mortgage.
If, for example, a house does not have a kitchen, this will be deemed uninhabitable and you probably will not be able to get a mortgage. Seeking out good tradespeople will also stand you in good stead for the sale.
Do your research
If you bid and win, the property is yours and there is no going back. Winning means you will exchange contracts – the same as if you buy on the open market, so you need to do your research before the auction.
The legal pack and special conditions are the most important documents. They will usually be available on the auctioneer’s website three weeks before the auction.
Make sure these are checked by your solicitor to avoid any nasty surprises. Most will have searches included but you may have to conduct some of your own (for example, flood risk) for a comprehensive overview.
Arrange to view the property before the auction and take the opportunity to talk to neighbours – they are a goldmine of local information. Don’t be afraid to knock on doors and start a conversation to get to know the history of a property.
Properties sold at auction are usually there for a reason, whether it’s because they need renovating, have a short lease or perhaps a troubled past.
Many will be sold by companies and organisations that have never lived in them, so it is useful to obtain local knowledge about any potential problems, such as disputes with neighbours.
If you haven’t taken part in an auction before, watch a few to get a feel for how they operate before you get involved.
Set your budget
Buying at auction does not automatically mean you are getting a bargain. Such properties will often require some level of work. How ambitious your plans are will be down to you, but it is important to understand that renovation costs have soared in recent years.
If you are undertaking extensive chnges, ask a builder to come to a viewing so they can quote for the work.
When setting your budget for bidding, research the resale price you could achieve. Rightmove features sold prices from HM Land Registry that can be looked up under “sold house prices”.
Talk to local estate agents and calculate a rough value for the property in its current condition, then factor in the cost of any work. Remember that guide prices are exactly that – the final sale price will depend on the number of interested bidders, and it is the highest bid that wins. If you are the winner, a 10% deposit will usually be due immediately.
Buying at auction normally comes with a discount, typically about 10%, because of the speed and certainty the process offers the seller – but this is not always possible, especially in desirable areas.
The main thing to keep in mind is how long you want to live in the property. Costs go down the longer you live somewhere, and a potential saving now may seem very little in 10 years, especially if you did not bid that little bit extra to bag your dream home.
Act quickly
Most properties are listed for only three to four weeks before the sale day, leaving limited time for a visit, research and checks.
You will need to register with the auction house before bidding, and it will need to carry out identity checks as a standard procedure.
Buying a property involves a huge amount of work and running around, and will pay off only if you are the successful bidder.
Don’t lose your head
It is hard sometimes not to get carried away when your heart is beating so fast and your dreams appear to be within reach, but try to keep a cool head.
You may not win the first property you bid on but with time, patience and a bit of luck, you will be successful.
The best thing about buying at auction is that there is no gazumping, gazundering, lengthy chains or endless uncertainty. Once the hammer falls and the property is yours, you can start planning a life in your new home.