How To Buy a House at Auction

PropertyGuides

Sep 29

A room packed full of people, paddles, adrenaline – and a wooden hammer. For some, the allure of property auctions remains fierce, and it’s easy to see why. Compared to traditional buying routes, which can be plagued by deliberation and broken chains, auctions offer an edge-of-your-seat, guaranteed-sale experience.

But just because auctions can provide a more no-thrills buying process, does that mean it’s the right option for you versus the more traditional way of buying property?

Why Buy Property at Auction?
We’ve already broached the subject of why property auctions can be effective, but let’s explore a few other reasons.

A house tends to arrive at auction because it’s a little ‘out there’. In other words, there’s something about it that has caused an estate agent to take a considered pass.

That doesn’t necessarily mean, however, that the property is some black sheep pariah with no future. Contrarily, it may be packing potential for a healthy or even serious return upon a developer’s investment – and if it’s at a bargain price to boot, this could be one lucrative opportunity indeed.

While houses are almost always in need of some work (ranging from the cosmetic, to structural, to total overhaul), the complication-free nature of ‘bid high and it’s yours’ buying is mightily convenient. This route could theoretically save you months – and even years – versus the more conventional estate agent route. Because: No chains.

Who Buys Properties at Auctions?
Sure, auctions may be bustling with investment/developer aficionados, but they’re also frequented by, for instance, first-time buyers hoping to simply put a more permanent roof over their heads.

How Much Does it Cost to Buy at Auction?

Auction houses will charge an administration fee, which is typically between £200 to £300.
There will be stamp duty to take into consideration.
Fees for solicitor or conveyancer.
Upon purchase of the property, you’ll be responsible for insurance

What Do I Need to do Before the Auction?
Since buying property should never be taken lightly, it goes without saying that no one should set foot into a house auction without being fully prepared. But how exactly should you go about preparing?

Arrange Viewings - Properties are available to be viewed ahead of sale. So it’s beneficial to highlight any house’s you’re interested in from the catalogue, and then get in touch with the relevant auctioneers to arrange visits to each property.
Upon your visit you may initially feel taken aback by the house’s condition, so do keep in mind that this is to be expected from an auction property.
Unless you happen to be a builder or architect – or both – you’ll need to ideally take one of these professionals with you to better understand the workload ahead. Bear in mind that the more extensive the work, the higher the cost of renovation will be. So this will need to be considered when you are bidding on the day, to make sure you don’t go over budget.
By viewing the house, you’ll be able to start deciding how much you’d be willing to pay for it at auction. But don’t use the firm’s Guide Price as an indicator. Instead, come up with your own based on the opinions of estate agents and neighbours (you’ll of course have to fetch these yourself). You can also go online to compare similar past sale prices in the house’s area (including past auctions).
Consider a survey - To ensure that you are not caught out, arranging a property survey gives you peace of mind during the auction. A homebuyers report will cost approximately £600, and more if you wish to have a structural survey as well. This cost will is not refundable if you decide to not buy the property, or your bid is unsuccessful at auction.
Auctioneers will often provide a legal pack including the relevant details for the property. Ensure that you ask for this information and consider asking a solicitor to look over the information prior to purchase.
If you require a mortgage, get a mortgage in principle agreed before the auction. If you are then successful at purchasing a property, 10% of the sale price, as well as the auction fee will be required at the time of purchase, and then you’ll be given approximately 30 days to pay the remaining 90%. If you can’t pay, you will lose the property, the 10% purchase price, as well as incur charges for the re-sale of the property.

What Do I Need To Bring to The Auction?
You will need two forms of identification, such as a passport, driving license or utility bill. It is also helpful to have documentation to show that you have the funds for the 10% deposit, as well as 90% purchase price, either through bank statements or a mortgage in principle agreement letter.

What Happens If The Property Doesn’t Reach The Reserve Price?
If the property isn’t sold as the reserve price was not met, don’t despair as the seller might decide to accept the highest bid that was presented. So it is worth sticking around and making enquiries afterwards.

How Does Onyx Help With Auction Finance?
Auction Finance from Onyx allows you to head to an auction confidently knowing that your finances are secured. Property Developers who will not be using a mortgage to assist with the purchase at auction can apply for Auction Finance with Onyx.