A New Way To Buy: Exploring Properties For Auction In The UK
When picturing the process of buying a home in the UK, most imagine viewing listed properties and then making an offer via an estate agent. However, auctioning has become an increasingly popular alternative method for purchasing and selling property. This article delves into the world of buying properties for auction, outlining what’s involved, the pros and cons, and top tips for securing a successful auction purchase.
What Is A Property Auction?
Residential property auctions involve homes being listed for sale whereby buyers bid publicly against each other during a timed auction event. The property is sold to the highest bidder once the bidding reaches the reserve price set by the seller.
Auctions are usually held by specialist auctioneer companies at dedicated auction venues across the UK. Some allow online and telephone bidding. Properties range from family houses needing modernisation to prime property auctioned for tax or probate purposes.
While perceived as risky, property auctions offer huge potential for buyers able to act quickly with finance ready. Auctions advertise upcoming lot lists available to view before auction day when active bidding takes place. It’s an exciting and cost-effective way to purchase.
Why Sell Or Buy At Auction?
Auctioning a property brings advantages for both sellers and buyers:
- Achieve a quick sale, often within 4-6 weeks from listing to completion.
- Generate competitive bidding between potential buyers that can increase the final sale value.
- Pay lower estate agent fees compared to normal sales routes.
- Often purchase properties below market value as motivated sellers try to offload quickly.
- Avoid being drawn into bidding wars against competing buyers when buying traditionally.
- Discover ‘doer-upper’ properties not widely marketed offering value potential through refurbishment.
Both sellers and buyers should still undertake due diligence around legalities and costs. But auctions provide a fast and more cost-effective sale method when handled correctly.
Researching Auction Opportunities
There are many property auctions held across the UK each week. All publish online catalogues of upcoming lots providing details on the properties available.
Good resources for researching include:
- Large UK auctioneer websites like Savills, Allsop, Barnard Marcus
- Dedicated property auction platforms – BidX1, Auction House UK, McHugh & Co
- National press – The Telegraph, Daily Express and Guardian regularly feature auction property highlight
- Specialist publications – Auction Times, Property Auction News
- Radio – BBC Radio 4’s ‘You and Yours’ frequently covers auctions
- Social media forums – Facebook Groups like UK Property Auctions provide previews
You can shortlist properties of interest and request auction packs with full particulars before attending viewings. Cast the net wide researching all auctions in your target locations.
Viewing And Surveying Auction Properties
While buying at auction promises great value, it carries risks purchasers must mitigate. Viewings and surveys are essential:
- Inspect properties thoroughly before auctions – check for defects, and required repairs and evaluate potential. Go more than once at varied times.
- Take comprehensive photos and videos documenting the property’s current state. These provide evidence if disputes later arise.
- Ask the auctioneer all questions upfront about ownership, leases, planning consents and fixtures/fittings included in the sale.
- Commission full structural surveys identifying issues needing addressing – factor the costs into budgets.
- Evaluate any tenants in situ – check tenancy agreements and implications. Ensure vacant possession is guaranteed.
- Research local area amenities, transport links, schools, demand and comparable values.
In contrast to normal homebuying, auction purchases are final once the gavel falls. So due diligence is vital beforehand to avoid nasty surprises inheriting expensive problems.
Securing Finance Before Bidding
Auction properties require having financing prearranged before bidding:
- Mortgage Agreements in Principle – obtain these from lenders who support auction finance so you can bid confidently.
- Proof of deposit funds – have 10-20% of purchase price accessible in accounts to exchange on the day if successful.
- Survey costs – budget for structural surveys and valuations required by mortgage providers.
- Legal fees – instruct a solicitor experienced in auction conveyancing and provide funds for their work.
- Extra repair funds – set aside contingency budgets to cover renovations needed post-purchase. Keep some funds liquid.
- Cash contingency – have extra cash available during the bidding process itself and for payments needing immediate clearance.
Preapproval gives buyers confidence during frantic auction bidding without worrying whether they can afford what they bid for in the heat of the moment.
Bidding Strategies And Techniques
When bidding at auction, employ tactics to avoid overpaying in the intensity of the moment:
- Research guide prices, local market rates and auctioneer estimates to benchmark your starting bid and ceiling price. Stick within sensible parameters.
- Attend every property viewing possible. Knowledge of each home’s positives and flaws helps inform appropriate bids.
- Note down the lot number and target price to avoid mix-ups in the auction room. Decide your maximum and stick to it.
- Ignore what others bid around you. Bidding wars and egos often over-inflate end prices.
- Don’t be scared of making the first bid. You may intimidate other buyers into thinking you have extra insight on value.
- Remember the auctioneer wants prices pushed higher through competitive bidding. Don’t get swept up in the performance.
- Stay calm throughout. Reevaluate if bidding exceeds your ceiling. Be ready to walk away if emotions take over financial logic.
Patience, preparation and sticking steadfastly to a predetermined limit prevent overpaying for properties in the heat and intensity of auction rooms.
Completing Purchases After The Auction
Successfully winning at auction is just the first step – there are legal formalities to wrap up:
- The buyer signs a binding contract and pays a 10% deposit immediately at auction. This exchange makes the purchase legally final.
- The full balance is then due within 28 days in most cases. Your finance must be finalised and a solicitor engaged for conveyancing.
- Your solicitor undertakes all legal due diligence on title deeds, ownership, leases, planning permissions etc. to finalise contracts.
- Only once contracts are signed and the balance payment cleared does ownership fully transfer over. Keys can only be released then.
- Sellers remain responsible for building insurance during this period. Make your arrangements ready for transfer though.
During this period, buyers must adhere to the sale terms and complete them promptly. Delaying risks forfeiting the deposit with no property purchased. Move fast securing funds.
Pros and Cons Of Buying At Auction
Auction purchases offer benefits but also downsides to weigh up:
- Competitive bidding can result in below-market-value purchases.
- Avoid bidding wars when buying traditionally.
- Faster purchase route than usual home buying channels.
- Motivated sellers are serious about quick sales.
- Reduced estate agent fees.
- Limited viewing opportunities to assess properties.
- Research and due diligence are entirely down to the buyer pre-auction.
- Risk of unknown defects uncovered post-purchase. Surveys help reduce but don’t eliminate risk.
- Paying enhanced deposit upfront on the auction day.
- Pressure to complete within 28 days or risk losing the deposit.
- possibility of long-term tenants delaying vacant possession.
Auctions suit buyers happy undertaking their due diligence before committing to fast, binding purchases. Risks exist but value is achievable with care.
Is Auction Right For You?
Auctions make sense for certain buyers but won’t suit everyone:
- Experienced property investors are used to exploiting value and handling refurbishments.
- Cash buyers do not need mortgages.
- Those looking for doer-uppers are open to some risk.
- People can visit properties multiple times for thorough checks.
- Quick decision makers can exchange fast if desired lots arise.
Less suitable for
- First-time buyers are unfamiliar with renovation projects and costs.
- People who need mortgages, which complicates rapid turnarounds.
- Buyers want lots of viewings over months rather than weeks.
- Those uncomfortable undertaking their due diligence without agent support.
- People are unable to commit to exchanges within 28-day timeframes.
Auctions offer exciting opportunities but thorough research into your skills, finances and motivations determines if the process aligns with your resources and temperament.
Property auctions provide an alternative fast-track purchase route for both buyers and sellers. Auctioning a home can achieve a quick sale while bidding at auction enables buyers to potentially secure properties below full market value.
However, limited viewing opportunities, extensive upfront due diligence requirements, and legal commitments to rapid exchange timeframes make auctions unsuitable for everyone. They best suit experienced investors able to buy unconditionally and willing to refurbish properties themselves.
Careful financial planning plus in-depth property inspection ahead of auctions allows buyers to exploit opportunities confidently. For vendors, competitive bidding drives higher-end prices when executed strategically. However, valuing appropriately and legally preparing homes for sale protects against risks.
Overall auctions add an exciting new dimension to the UK property market for those who undertake appropriate preparations. For buyers and sellers ready to move fast and embrace the competitive edge of auctions, big rewards are attainable. However, patience and caution ensure the process delivers success rather than stenosis. Research thoroughly and understand capabilities before attempting to purchase one of the many properties for auction now proliferating across the UK.