Buying a property at auction: 13 Things you need to know

Before the auction

1. Research properties and types of auctioneers in the area

Decide on the area you’re interested in and contact local property auction houses. They will be able to advise you on any upcoming auctions and add you to a mailing list so that you receive the latest listings.

The traditional method of auction most of us are familiar with is often held in a public room, where the auctioneer invites bids up to the highest price. The highest bidder immediately exchanges contracts and pays a deposit, making the sale legally binding.

Many auctions now use:

Livestream auctions

This is a real-time, auctioneer-led sale where remote bidders watch a live video or listen to an audio feed and compete alongside in-room bidders (if there are any present). It allows registered participants to place bids immediately over the phone, online, or via proxy during a single scheduled session.

Modern method of auction (MMoA) auctions

This is where you made a bid for the house online and if it's successful, you pay a reservation fee immediately. You then have 56 days to complete the purchase. This is broken down into 28 days to exchange contracts, and another 28 days to complete the sale. You need to check with the auctioneer how bids are submitted, and how to register.

2. Arrange viewings and ask questions

Once you have spotted a property (or two) that you like, contact the auction house to arrange a viewing. Make sure to thoroughly inspect it and its surrounding neighbourhood. Consider taking a surveyor, or someone experienced in construction, with you to establish any work that needs doing and the costs. If you have any queries, don't be afraid to ask the auctioneer.

By arranging a survey, checking for structural issues, or confirming planning history, you are reducing the chance of any hidden surprises.

3. Read the legal pack thoroughly and get advice

The particulars will contain key information but you may need to request a separate legal pack to get the full picture. Searches are often included in the legal documents, but if not, ask your solicitor to do them before the auction. Legal documents can vary from one property to another, consider asking a solicitor to look over the legal pack for any hidden covenants or loopholes that could end up costing you more than you bargained for. Things to look out for include:

• Title restrictions
• Mention of leasehold, or superior leases
• Planning enforcement
• Missing building regulation certificates or other certificates for building or electrical work
• Special conditions or restrictive convenants

4. Be prepared to act fast

Catalogues with listings are usually released several weeks before the auction. Allow enough time to review legal documents and arrange finance so you can move quickly when you need to.

5. Ask to be kept informed

You can always ask the auctioneers to keep you informed of any alterations or amendments to the sale conditions, otherwise known as an Addendum. If you're really keen, ask them to inform you if there's any possibility of the property being sold before the auction date, this has been known to happen on occasion.

6. Set your budget, sort your finances

Think about the maximum price you are willing to pay for the property. Some properties are priced to attract more bids, and the final sale price could exceed the guide price. Unless you're lucky enough to be a cash buyer, you'll need finance in place before bidding, so get a mortgage approval in place. There are specialist auction mortgages available.

Make sure you know how much the deposit will be, and check which method of payment is required, so you can arrange for the funds to be available.

As with buying a home any other way, you'll need proof of funds, ID, and mortgage approval.

Don't be surprised by the fees and stamp duty. Check to see if your listing includes any of the below:

• Buyer's premium: A fee, often 1-5% (+VAT) of the hammer price, payable to the auctioneer.
• Administration fee: Non-refundable fee for processing, usually ranging from £195 to over £1,000
• Reservation fee: This can be 1-5% of the purchase price
• Legal pack costs: Costs associated with the property transfer, such as searches or insurance
• Stamp duty: Tax calculated based on the final purchase price.

7. Check the small print and risks

Don't forget to check the terms and conditions of the auction house you choose to use, by entering a bid you are agreeing to them. Make sure to familiarise yourself with the conditions of sale, what needs to be paid and when—you don’t want any surprises on the day.

If you do your homework, familiarise yourself with the lot and the terms and conditions, you're in with a great chance of success. It's important to be aware of the risks of auction properties (which aren't unlike properties sold via private treaty; the standard way homes are sold):

• Short leases
• Unmortgageable properties
• Sitting tenants
• Structural issues

What to do at the auction

7. Be punctual

Arrive well before the start time. Any additional information or changes to the listings will be announced before the auction starts. You need to make an informed decision before you make a decision to buy.

8. Understand the difference between guide and reserve price

Be aware that each auction property is initially offered at a guide price and is also subject to a reserve price.

The guide price is an indication of where the reserve price is, whereas the reserve price is the minimum amount the seller will accept.

The guide price can be a lot lower than the final sale price.

The reserve price is not disclosed to bidders but can be up to ten per cent higher than the guide price so bear that in mind when bidding. 

9. Make sure your bids are clear and concise

When the time comes, make sure your bids are clear; some auction houses will give you a paddle (or something similar) so that the auctioneer may easily identify you when you bid. It's easy to get carried away but try to remain calm and within your set budget. The auctioneer should make it quite apparent where and what the current bid is in the room.

10. If you can’t bid yourself, someone should be able to bid on your behalf

When the time comes, make sure your bids are clear; some auction houses will give you a paddle so that the auctioneer may easily identify you when you bid. It's easy to get carried away but try and remain calm and within your set budget. The auctioneer will make it clear what the current bid is in the room.

11. If successful, you are bound by the terms and conditions of the sale when the gavel falls

If your bid is successful, you will be required to sign the contract and pay the deposit there and then. At the fall of the auctioneer's gavel, you will be bound by the terms and conditions of the sale and liable for the insurance of the property from that moment. Pulling out of the sale after this could result in huge after-costs.

12. Make sure you're prepared for the deposit and payment terms

Most auctions require a ten per cent deposit on the day. Completion usually takes place within 28 days for traditional auctions although some auction formats allow longer. Any outstanding costs and completion details will be clearly stated in the conditions of sale.

13. If a property is unsold, you may be able to buy it privately

In the instance that the property remains unsold, the auctioneer may have the authority to sell it privately in the room immediately after the sale. Make sure to register your interest with the auctioneer prior to the sale and stick around at the end of the auction.