Going Once, Going Twice: A Buyer’s Guide To UK Auction House Properties
Auction houses have long been a staple of the UK property market, offering buyers a unique way to purchase residential and commercial real estate often at below-market prices. While auctions present distinct advantages, navigating the process requires an understanding of how auction houses operate, the properties up for auction, and strategies for bidding successfully. This guide will walk potential buyers through everything needed to buy an auction property in the UK.
Overview of UK Auction Houses
Over 300 auction houses currently operate across England, Wales, Scotland, and Northern Ireland. Most focus on real estate auctions, selling residential, commercial, mixed-use, and land properties. Auction houses typically hold in-person sales at set intervals, such as monthly or biweekly.
The UK’s largest auction firms include Allsop, Barnard Marcus, Clive Emson, Countrywide, McHugh & Co, SDL Auctions, and Savills. Many regional auctioneers also operate, like Mark Jenkinson & Son in Sheffield, Cottons in Birmingham, and Clive Emson in Kent.
Auction houses don’t own the properties they sell – they facilitate sales between buyers and sellers. Sellers pay auctioneer fees and commissions when their property successfully sells.
Benefits of Buying at Auction
Purchasing real estate at auction offers several potential advantages:
Below-Market Value: Auctions create a competitive bidding environment that often results in sales below full market value. Properties with defects or in poor condition tend to sell at the steepest discounts.
Speed: Auctions accelerate purchase timelines, with sales often wrapping up in as little as 28 days. There’s no lengthy mortgage process either.
Transparency: Auction conditions reports fully disclose property details, occupants, tenancy details, and other material facts upfront. Bidders know what they’re getting.
Motivated Sellers: Individuals and companies auction properties to liquidate assets quickly. Owners must honour sales, making them highly motivated.
Investment Opportunities: Auctions provide access to repossessed properties, distressed sales, and other deals ideal for investors and developers.
However, there are also risks to understand…
Risks of Buying at Auction
While auctions offer advantages, they come with distinct risks and drawbacks:
Inspections: Buyers typically can’t access properties pre-auction, forcing them to bid based on limited information. Extra due diligence is essential post-sale.
Financing: The accelerated process provides little time to arrange financing. All-cash offers are strongly favoured.
Competition: Popular properties attract multiple bidders, driving up prices. Less desirable assets see little bidding activity.
Upfront Costs: Winning bidders must put down a non-refundable deposit, usually 10% of the purchase price, on auction day.
Contingencies: Auction contracts are binding with no contingencies. You own the property, flaws and all.
Reality vs Marketing: Properties may look better in marketing materials than in real life. Visiting pre-auction can help avoid disappointment.
Other Fees: Beyond the purchase price, buyers pay auction fees, survey costs, stamp duty, and legal fees.
How to Buy at Auction: The Process
Buying real estate at auction follows a tightly defined process:
Step 1: Search Listings
Most auctioneers list upcoming lots four to six weeks ahead online. Browse available properties in your desired locations and price range. Research recent sale prices for similar properties to gauge value. Target auctions with multiple suitable options to give you bidding flexibility.
Step 2: Review Property Information
Auction houses publish property information packets called “legal packs” highlighting lot details. Read the materials thoroughly covering property history, layout, condition, leases, planning permissions, and more. Seek professional advice on conveyancing, survey, and financing needs.
Step 3: Arrange Viewings
In-person viewings are rarely possible before auction day. Some auctioneers offer prearranged visits for seriously interested parties closer to the event. Schedule viewings for your top prospects. Thoroughly inspect properties and take extensive notes.
Step 4: Obtain Financing
With auctions proceeding quickly, financing needs to be lined up in advance if required. Mortgage lenders can approve an amount to bid up to based on the expected winning bid and property valuations. Have your deposit ready as well.
Step 5: Register for Bidding
Register as an approved bidder with the auction house before sale day. Provide identification, and proof of funds, and complete necessary paperwork. Obtain a bidding paddle required to make bids on the day. Proxy and telephone bidding options allow bidding without attending in person.
Step 6: Set Bidding Limit
Thoroughly analyse property information to estimate fair market values and set your maximum bids accordingly. Factor in required repairs and renovations that could influence the price. Stick firmly to limits in the bidding heat.
Step 7: Bid at Auction
Arrive early and grab a seat toward the front. When your desired lot comes up, Listen closely to the auctioneer and bid clearly when ready. Don’t let the competitive energy push you over your predetermined limit.
Step 8: Pay the Deposit
If you succeed with the winning bid, you’ll pay a deposit of generally 10% of the purchase price immediately. Deposits are typically non-refundable, so only bid what you can afford to lose.
Step 9: Sign Contracts
The buyer and seller sign a binding sale contract post-auction. This outlines the sale price, timings for completion, and other terms and conditions. Review carefully before signing.
Step 10: Complete Due Diligence
You’ll have a limited window to conduct surveys, valuations, title reviews, and inspections to confirm the property’s legal standing and condition. Back out at this stage if issues arise.
Step 11: Close Sale & Complete Purchase
With finance lined up and surveys satisfactory, proceed to complete the purchase. This involves exchanging contracts, paying stamp duty and outstanding funds, and registering the title transfer.
Guide to Researching & Viewing Auction Properties
Success at auction relies heavily on thorough upfront research and property viewings. Use these tips to analyse auction offerings:
Study Online Listings – Browse upcoming auction property particulars including descriptions, floor plans, and photo galleries. Virtual tours are sometimes offered too.
Check Sales Histories – Review records of previous listings and sales prices for the property and comparable area homes to gauge value.
Read the Legal Pack – Legal packs contain detailed particulars on the property, title, occupancy status, planning issues, and more. Read thoroughly.
Assess Condition – Scan photos and materials closely for signs of defects, damage, or required repairs that could impact price.
Clarify Tenancies – Review leases to understand occupancy statuses, rental arrangements, and income-generation potentials.
Visit the Area – Tour the neighbourhood to get a sense of location, amenities, schools, crime rates, and other factors impacting appeal.
Have Reports Conducted – Commission survey and valuation reports to provide in-depth insights on building conditions and pricing.
Attend Viewings – Don’t skip in-person viewings to inspect properties and identify issues not apparent online. Take comprehensive notes.
Bring Professionals – Bring along knowledgeable inspectors, builders, or architects to provide their insights on properties at viewings.
Ask Questions – Don’t hesitate to request clarification from auctioneers on points requiring more detail.
Putting in this legwork is vital for determining fair bidding ranges and uncovering potential red flags.
7 Tips for Bidding Successfully at Auction
When auction day arrives, bid strategically by following these tips:
Set Your Limit – Establish a firm maximum bid price for each property based on thorough research and factoring in contingencies. Stick to it.
Know the Reserve – The reserve is the minimum sale price set by the seller. Bid close to or above this level to have a chance. Ask the auctioneer if it’s not published.
Bid Confidently – Project confidence with clear hand gestures and bid amounts. Hesitation can be seen as a weakness. Bid decisively.
Bid Early – Don’t wait too long to jump in or you risk losing out. But don’t bid against yourself either.
Don’t Get Swept Away – Auction fever can lead to overpaying. Stick to rational valuations, not emotions. Have a bidding partner to keep you in check.
Watch for Guidance – Listen for subtle suggestions from the auctioneer on vendor expectations and willingness to accept certain prices.
Know When to Walk Away – If bidding exceeds your limit, walk away. Don’t overpay in the heat of the moment.
Stick to your guns and bid smartly, and you’ll come away with a successful purchase.
Financing Auction Purchases
The accelerated auction process makes arranging financing difficult but not impossible. Here are some options for funding:
Cash – Paying the full amount at completion in cash is ideal. It signals serious buying power.
Quick Mortgage – Mortgage lenders like Together, Enness, and LDG offer loans within as little as 14 days, fast enough to use at auction.
Bridge Loans – Short-term loans that can close quickly and be repaid later through refinancing or sale. Useful for small investors.
Pre-Approval – Seek written pre-approval from mainstream lenders for an amount you can bid up to based on expected property values and your finances.
Joint Purchase – Team up with other investors to pool your funds. Useful for larger commercial properties.
Deposit Loans – Specialist lenders provide loans specifically to cover the deposit amount due on auction day.
With the right financing strategy, you can fund auction buys while maintaining your budget and cash flow.
Key Questions for Researching Auction Properties
Conducting comprehensive due diligence is mandatory when bidding at an auction. Use this list of key questions to guide your research on each property:
- What is the reserve price set by the seller, if disclosed?
- Does the property have any tenancy agreements or occupational leases? What are the terms?
- What specific repairs or upgrades are immediately necessary based on the condition?
- Are there risks like flooding, subsidence, or other environmental factors?
- Are there any unusual title issues, access rights, or planning restrictions?
- What are potential renovation and modernisation costs for improvements?
- What is a realistic resale or rental value after repairs and upgrades?
- Are there any latent defects not immediately apparent upon inspection?
- Does the property violate any codes or have any unusual zoning limitations?
- Can required insurance be secured?
- Are there any doubts about the integrity of the structure?
- Are ground rent, service charges, and other associated fees within normal ranges?
- Are there any environmental concerns like asbestos or lead paint?
- How does the location impact value based on schools, crime, amenities, etc?
Asking these questions will uncover issues that may significantly impact property value, saleability, costs, and desirability.
Protecting Yourself as a Buyer
While auctions offer opportunity, you must take steps to protect your interests:
Review Contracts Thoroughly – Understand all terms and liabilities before entering a binding agreement.
Conduct Thorough Surveys – Inspection reports safeguard against inheriting unknown defects and costs.
Insure the Property Quickly – Insurance coverage is vital once you exchange contracts and assume liability.
Monitor Timeframes Closely – Don’t let completion deadlines lapse as penalties can be severe.
Consult Professionals – Seek guidance from property lawyers, surveyors, and finance brokers when unsure.
Keep Records – Maintain detailed files on property information, contract terms, declarations, etc.
Understand Dispute Resolution – Know options if issues later arise, like mediation and court proceedings.
Check Your Emotions – Don’t let enthusiasm or the auction environment overwhelm reason.
Staying diligent before, during, and after the sale will help avoid nasty surprises.
Opportunities for Developers & Investors
From run-down fixer-uppers to commercial conversions, auction houses offer ample investment potential. Buyers willing to take on risk and put in work can capitalise.
Residential Purchases – Investors can purchase and renovate homes for resale or rental income. Distressed sales often need extensive upgrades.
Land Development – Assemble adjacent land parcels for residential or commercial development. Auctions provide opportunities to buy at scale.
Commercial Conversions – Convert offices, hotels, and other properties to more valuable residential use through planning applications.
Quick Flips – Minor upgrades to certain properties allow fast resale at a profit without long investment timelines.
Buy-To-Let – Letting agency tenants offer turnkey rental income. Manage costs and target young professional tenants for steady demand.
HMO Conversions – Convert larger homes into licenced high-yield HMOs with multiple bedrooms and tenants.
Increase Density – Add extensions like dormers and converted garages to expand usable space and rents or sale prices.
Subdivide Plots – Separate buildings and land into multiple parcels for individual sale at increased values.
Auctions provide a consistent pipeline of deals for enterprising developers and investors willing to put in the work.
Keys to Successful Property Auction Investment
Investing profitably in auction properties requires a focus on several key areas:
- Target properties below market value that show strong rental demand or resale potential after improvement. Look for hidden value.
- Conduct thorough due diligence to identify any issues impacting costs and saleability. Forewarned is forearmed.
- Make conservative assumptions around timelines and budgets. Build in contingencies for surprises and overruns.
- Have all funding secured before bidding without contingencies. Speed is critical.
- Know your maximum bid limits and don’t get caught up in bidding wars that lead to overpayment.
- Have a clear post-purchase plan for any repairs, renovations, and enhancing value. Move quickly.
- Understand regulations for safety upgrades, permitted uses, and required licences to operate rentals.
- Research the optimal sales or rental price points for the local market when setting asking prices.
- Work with trustworthy builders, agents, and property managers if outsourcing aspects of the project.
- Time the project completion and listing to match peak buyer and tenant demand for maximum interest.
With the right property, funding, and strategy, auctions can lead to lucrative investments.
Popular Auction Houses by UK Region
While large national auction chains operate countrywide, small regional auctioneers also thrive across the UK’s counties and metro areas. These are some of the top local auction houses for sale by area:
London – Allsop, Barnard Marcus, McHugh & Co, SDL Auctions
South East – Clive Emson, Fox & Sons, Hern & Crabtree, Pearson & Armitage
East Anglia – Brown & Co, Durrants, William H Brown
South West – Clive Emson, Greenslade Taylor Hunt, Symonds & Sampson
West Midlands – Cottons, Coundons, Loveitts, SDL Auctions
East Midlands – Bagshaws, Gildings, SDL Auctions, Savills
North West – Pugh Auctions, Sutton Kersh, Venmore
North East – Agents Property Auction, Auction House North East, Regional Property Auction
Yorkshire & The Humber – Mark Jenkinson & Son, Pugh Auctions, William H Brown
Scotland – Auction House Scotland, Bidwells, Future Property Auctions
Wales – Astleys, Seel & Co, John Francis
Every area has reputable local auction experts worth consulting when buying in the vicinity. They offer market insights and relationships that national chains may lack.
Choosing the Right Auction House
When selecting an auction firm, assess these factors:
- Years in business and a reputation for honest dealings
- Frequency and scheduling of auction events
- Number of lots and diversity of offerings
- Digital content like 3D scans, drone footage, live streams
- Online bidding and purchasing capabilities
- Reserve pricing disclosure policy
- Bidder registration and buyer verification process
- Professionalism and knowledge of auctioneers
- Commission rates and buyer fees
- Post-sale support and communication procedures
- Payment terms and deposit policies
- Contracts providing adequate protections for buyers
- Willingness to partner with investors for portfolio sales
The right auction house becomes a trusted partner for accessing deals and growing your portfolio. Do your due diligence.
Alternatives to Traditional Auctions
While in-person auctions remain the norm, technology is enabling new models:
Online Auctions – Bids take place remotely in real-time over the internet via live and silent sales. Many traditional houses now offer this.
Hybrid Events – Auction houses live stream in-person sales remotely to reach more bidders digitally.
Timed Auctions – Sellers list properties for a defined period with a countdown clock. The highest bidder at expiration wins.
Exclusive Listings – Some platforms pre-vet buyers and allow bidding on exclusive off-market inventory not released widely.
Reverse Auctions – Sellers list a desired price and buyers undercut each other with lower bids, the inverse of a traditional model.
New alternatives open auctions to more participants and introduce efficiencies like standardised contracts. But risks like limited inspection access remain.
Ensuring Successful Auction Bidding
Follow these tips when preparing your auction bidding strategy:
- Set Absolute Maximums – Determine the non-negotiable highest price you can justify for each property and stick to it, even if it means losing out.
- Research Comparable Sales – Look at prices obtained for similar nearby properties to gauge current market values and bidding ranges.
- Attend Viewings – Don’t skip in-person viewings before auction day. They provide vital insights into true property conditions.
- Examine Auction Trends – Review results from recent sales to determine if properties generally sell above, at, or below market value.
- Check Financing Terms – Understand and start the financing process early. Avoid bids dependent on financing that may ultimately fall through.
- Read All Materials – Thoroughly review particulars, disclosures, lease details, restrictions, and all paperwork to identify red flags.
- Consult Professionals – Hire inspectors, valuers, lawyers, and other experts to provide second opinions on properties.
- Have Repair Estimates – Get contractor quotes for expected upgrade costs to factor into bid prices.
- Watch Reserve Prices – Note whether reserves are published. If not disclosed, bid cautiously in case it’s set above market value.
- Set Proxy Limits – If bidding remotely, ensure your proxy bidder understands your maximums and bidding increments.
Follow these steps, and you’ll be well-positioned for auction success.
Final Tips for Auction Buyers
Keep these final tips in mind:
- Attend a few auctions first to observe processes before bidding yourself. Experience is valuable.
- For hot properties, consider partnering with other investors to pool resources and bid higher through joint purchasing.
- Don’t assume you’ll negotiate down after winning. Auction bids are typically binding contracts. Bid your best price.
- If required work far exceeds expectations upon further inspection, negotiate fixes with the seller or back out before completing purchases.
- Understand all required post-auction paperwork like contracts, deeds, surveys, and insurance and complete them quickly. Late paperwork risks forfeiting deposits.
- Keep emotions in check. Successful auction buyers use data-driven logic over feelings to avoid overpaying in the heat of the moment.
- Hire experienced auction solicitors. Their expertise can prove invaluable in navigating the process and documentation.
Buying at auction has risks but also offers opportunities unavailable through traditional listings. With proper diligence and planning, auctions can help savvy buyers access deals and grow their portfolios. Do your homework and happy bidding.