With stamp duty poised to revert to its previous rates from April 1, 2021, if you’re a buyer looking to complete in time to make a saving, you’ll need your purchase to go through quickly to meet that deadline.
One way to speed up the property buying process is to buy at auction.
But many buyers are put off due to a lack of knowledge about how the auction process works.
This guide will explain everything, from what happens in the auction room to the timescales you can expect as a buyer…
Buying a house at auction: Everything you need to know
Auctions can be a great way to buy a property quickly, avoid costly breakdowns in chains and, sometimes, secure yourself a property at lower than market value.
But auctions are very different to buying on the open market, so knowing what to expect in advance of heading to the auction room is crucial.
How do house auctions work?
Once you’ve established the area you want to buy in and looked at auctioneers in that area, you should join their mailing lists.
Browse the auction house catalogue
The auction houses will send you a catalogue of the properties coming up for auction so you can arrange viewings for any that catch your eye.
On a viewing
It’s always important to fully inspect a property when searching for your next home and buying at auction is no different.
If you want a second opinion on the condition of an auction property, it can pay to take along a builder who will be able to point out work that needs to be done and assess the costs involved.
All of this can help you decide if you want to pursue the property when it goes under the hammer.
Read the legal pack
Each property that comes up for auction should have a legal pack, which contains local authority searches and other key information on the property.
If you’re unsure of anything in the legal pack, have your solicitor run their eye over it, as they’ll be able to point out any clauses or covenants that may be cause for concern.
There are usually only a few weeks between the auction catalogue being published and the auction itself, so you need to be prepared to make decisions on properties quickly.
Set and stick to your budget
Once you’ve established the property, or properties, you’re keen to bid on, make sure you set yourself a realistic budget and do your best to stick to it.
It’s easy to get carried away by the buzz of a live auction, but by having several properties that you’re keen on, you can walk away if one starts to drive up a big price.
Guide price and reserve price
On the auction day itself, all the properties going up for sale will have a guide price and a reserve price.
The guide price is usually the starting price for bids, although this can sometimes be lower, and the reserve price is the minimum amount the seller will accept for the property.
The reserve price remains unknown to bidders and if that price is not met, the property goes unsold.
How to bid at the auction
You might be given a paddle with a number on before the auction begins and if so, you should raise this clearly so the auctioneer can see when you wish to lodge a bid.
If you don’t have a paddle, raise your arm clearly.
A successful bid
If the hammer falls following your bid, you are immediately bound by the terms of the sale.
You’ll be required to pay your deposit, which is usually 10% of the purchase price, and sign the sale contract at the auction house.
Can you get a mortgage on an auction property?
You can buy an auction property with a mortgage, just as you might when buying a property on the open market.
However, as you exchange contracts and pay your deposit when the hammer falls, you’ll need to have your mortgage offer in place before the auction begins.
How long does it take to buy a house at auction?
When you buy a property at auction via what’s known as the Traditional Method, you exchange contracts immediately, pay your deposit and then have between two and six weeks, usually 28 days, to complete the purchase.
So, buying at auction is usually considerably quicker than on the open market.
The Modern Method of Auction, however, takes slightly longer, but does allow buyers to arrange their mortgage finance after the hammer falls.
With this method, you’ll pay a non-refundable reservation fee within two hours of your bid being successful. This is paid in addition to the agreed purchase price.
You then have to exchange contracts and complete within 56 days, which provides time to source finance and is still much quicker than most property transactions on the open market.
Can a first-time buyer buy at auction?
First-time buyers can buy at auction.
But you’ll need to have your mortgage agreement in place before bidding, unless the auction house is selling under the Modern Method of Auction, and your 10% deposit ready to pay if or when your bid is successful.
Buying at auction with Parkers
Here at Parkers, we’ve partnered with auction company iamsold to offer both Traditional and Modern Methods of Auction to both buyers and sellers.
The Traditional Method of Auction gives buyers and sellers the security of exchanging contracts instantly, as well as the quickest route to completion
The Modern Method of Auction, meanwhile, has opened up the market to buyers who need more time to source their mortgage, with a timeline of 56 days to exchange and complete.
Through iamsold, we also offer online auctions with bidding 24/7, meaning you’ll never miss the chance to buy your next home at auction.
If you’re thinking of buying your first home, whether at auction or on the open market, take a look at our guide outlining everything you need to know as a first-time buyer.