Buying Property at Auction: Everything You Need to Know

Buying a property at auction can be a minefield – especially if it’s your first time. 

At Stacks, we work with buyers in all situations; we can help and advise on any area of property finding and purchases, including buying property at auction. 

Professional Property Purchaser Rachel Johnston of Stacks Property Search advises new auction bidders…

Why Agents Sell Houses by Auction. 

There are several reasons why a property might be sold at auction. 

Whilst most property is sold by private treaty, estate agents and vendors tend to opt for an auction for one or more of the following reasons;

  • They are confident that there will be huge interest in the property 
  • Where the property is a restoration or rebuilding project
  • Where the property is so unusual, no one can establish a specific value. 

An auction can be a good way of selling a property that will likely throw up many difficult hurdles in the course of a sale, giving a purchaser reasons not to progress. It also focuses the mind and doesn’t allow the purchaser time for the initial enthusiasm to wear off. 

Buying Property at Auction – Things to be aware of 

As stated above – buying property at auction can be tricky to navigate. There are many things to be aware of to make you a savvy purchaser – here are our top considerations: 

Remember the binding contract! 

The first thing to remember when considering buying property at auction is that when the hammer falls, you have entered into a binding contract to purchase the property. 

You will be expected to produce 10% of the price immediately (likely by cheque, banker’s draft or cash, but sometimes bank transfers are now accommodated), and there will be a fixed completion date, stated on the auction particulars and confirmed by the auctioneer, generally in a month’s time.

If your purchase relies on the sale of another property, buying at auction is clearly not an option. 

Before the auction, all purchasers must do their legal and survey homework, although sometimes the vendor will produce documentation.  

Beware of the low guide price. 

A property for sale by auction will generally show a low guide price in order to attract a large audience. This does not mean you can buy the property at that price. 

There will usually be a ‘reserve’, and the auctioneer may indicate when the reserve has been passed by saying, ‘I’m selling’ or ‘the property is in the market’. This means there often is no way the property would have ever sold for the low guide price it was advertised as. 

The best way to move forward with buying a property at auction is to think about what you would pay for the property and give yourself a maximum budget and stick to it. 

You could also enlist the help of a property agent like Stacks; we can advise on guide prices and help you determine your maximum spend. 

Buying Property at Online Auctions 

You can now bid for a property on an online auction, even from the comfort of your sun lounger, but is this a good idea? 

Being away from the saleroom might allow you some space for dispassionate evaluation, or you might subconsciously treat it as playing with Monopoly money. 

Whilst it’s much easier to click away virtual money than it is to write a cheque, a click will have the same binding effect as waving your auction paddle. The same diligence and pre-auction work must happen whether you are in the room or not. 

Ensure you have followed all the rules & guidelines from the auction house on proving your identity, funds, etc. – knowing that the rules may differ significantly if you bid online.

Advice for bidders buying property at auction

At Stacks, we work with our clients to help them get their perfect property at a great price, whether purchased privately or at auction. 

Here’s our advice for buying property at auction. 

  1. Legal Aspects – Make sure you and your solicitor are entirely satisfied with all the legal aspects of the purchase before bidding. Legal packs will be made available before the auction, and you should ensure your solicitor has time to study this document in detail. 
  2. Surveys – Arrange a survey of the property you are considering prior to the auction. It may be a fee that turns out to be lost if you don’t buy the property, but it’s vital that you are made aware of any structural issues that could have a significant impact on the price you’re prepared to pay. 
  3. Know Your Limits – Decide in advance the maximum price you are prepared to pay, and don’t be caught up in the moment and go above this figure.
  4. Make Sure your Finances are in Order – Work out your finances in advance of the auction so you are absolutely sure you will be able to fund your upper limit if you are successful.

Tips if you’re bidding on the room:

  1. Sit where you can see what’s going on and who you are bidding against – knowledge is power; if you can see your competition, you may be able to read their next move.
  2. If the bidding is relatively slow, don’t show your interest too early – see how it pans out to make sure you get the best price.
  3. Make sure that the bids work out so that you are bidding when the price reaches your upper limit; this requires a certain amount of mental agility during the bidding process itself. 

Tips if you’re buying a property in an online auction:

  1. Check your connection & its reliability – you don’t want to miss out on a property because your internet goes down.
  2. Allow for timezone changes

And finally, it is worth saying it again:

  1. DON’T get carried away and exceed your set limit.   

Benefits of Buying Property at Auction 

So, why do people buy at auction? What’s the benefit to the buyer? 

Buying property at auction is a good way of assessing the level of competition.

If you hate the feeling you may have paid over the odds, knowing that you have paid only one bid more than the competition can be comforting. 

Some other advantages of buying property at auction include; 

Potential Bargains: Auctions have the potential to present opportunities to purchase properties at prices below their market value. However, this all depends on what is available and how strict you are with yourself.

Transparent Process: Auctions follow a transparent and public process, where buyers can see and compete with other bidders in real time. This transparency can provide confidence that the property was sold fairly and at the market price.

Speed: Auctions can be a quick way to purchase property since the completion date is often given following the bidding process. This can be beneficial for buyers who want to close the deal quickly.

Reduced Negotiation: Auctions eliminate lengthy negotiation periods, which is advantageous for buyers who prefer a straightforward buying process.

Diverse Inventory: Auctions offer various properties, from residential homes to commercial buildings and land. This variety provides buyers with many choices to find a property that suits their needs.

Potential Investment Opportunities: For property investors, auctions can be a great place to find investment properties with potential for high returns, especially when targeting distressed or undervalued properties.

However, it’s essential to proceed with caution when buying property at auction. And also, remember that the most hardened bargain hunter can prefer to lose at the auction itself as if the property fails to sell, a deal can often be secured immediately afterwards, and the necessary paperwork signed there and then.  

If you are able to resist being swept up in the thrill of the chase, then bargains may be available.

Disadvantages of Buying Property at Auction 

Remember that it’s highly unlikely that *only* you have spotted the potential of a property, so be prepared for reality to strike when you’re the one who has agreed to pay the most for the lot.

Do not be bamboozled by the mad hatters on Homes Under the Hammer who just turn up for a laugh and buy a property! It’s not like that in real life – make sure you are buying with a clear head for the right reason. 

Post-Purchase Worry – Many people who buy at auction find that, after the initial euphoria, there is a period of post-purchase depression, a result of things happening so quickly. ‘Buyers’ Remorse’ is a risk, especially if you are under-prepared, and there is no opportunity for the clarification of thought that often happens between offer and exchange. Without this window, you need to trust that you can make a good decision and stick to it. Be prepared for a portion of post-purchase worry, and – if you’ve followed our advice above – you need not panic that you’ve done the wrong thing

Emotional Bidding – The competitive nature of auctions can lead to emotional bidding, where buyers may get caught up in the excitement and end up paying more than they originally intended for the property.

Competition – Popular properties can attract a significant number of bidders, increasing the competition and reducing the chances of securing the property at a favourable price or even at all.

Auction Fees – Buyers may be responsible for paying various fees, including auction registration fees, buyer’s premium, and other charges, which can add to the overall cost of the property.

Limited Information – Auction catalogues may not provide all the necessary information about the property, potentially leading to surprises or misunderstandings about the property’s condition or legal status. It’s up to you to do your homework on the property you’re interested in and make sure you know all the facts.

Valuing – Assessing the value of a one-off property with no comparable is not easy. In the country house market, it is never easy to be sure you have secured the purchase of your chosen property at the right price. At auction, it is even more challenging. The help of a relocation agent who is familiar with values and who will bid on behalf of a purchaser at auction can be invaluable. Make sure you contact Stacks for help and advice. 

Is buying a property at auction the right thing for you?

Do you have what it takes to buy a property at auction? When purchasing a property this way, it’s important to make sure you do your research and be well-organised on the day. 

If you are thinking about buying a property at auction and require further information and support, then contact Stacks today.  

 

 

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