Mastering Property Auctions: Types, Preparation, and Key Considerations

Property auctions can be a great way to buy a property at a potentially lower price, but they also come with their own set of rules and risks. 

Here’s a comprehensive guide on how property auctions work:

1. Understanding Property Auctions

Property auctions involve selling properties through a bidding process, with the highest bid winning the property. Auctions can be conducted in person, online, or through a hybrid approach.

2. Types of Auctions

Traditional Auctions: Held in a physical location where bidders gather to place bids.

Online Auctions: Conducted entirely online, allowing bidders to participate from anywhere.

Modern Method of Auction (Conditional Auction): Combines aspects of traditional auctions and private treaty sales, giving the winning bidder a set period to exchange contracts.

3. Finding Auction Properties

Auction House Websites: Many auction houses list available properties on their websites.

Property Portals: Websites like Rightmove and Zoopla often list auction properties.

Auction Catalogues: Auction houses produce catalogues detailing properties available in upcoming auctions.

4. Preparing for the Auction

Research:

Identify properties of interest.

Visit the property if possible to assess its condition and location.

Review the auction catalogue and property details.

Finance:

Arrange your finances in advance. You’ll need a deposit on the day of the auction (typically 10% of the purchase price) and the remaining balance within 28 days.

Get a mortgage agreement in principle if you plan to finance the purchase through a mortgage.

Legal Checks:

Obtain the legal pack for the property, which includes title deeds, searches, and other important documents.

Have a solicitor review the legal pack to identify any potential issues.

Survey:

Consider commissioning a survey to uncover any structural problems or other issues.

5. Auction Day

Register:

Register to bid, either online or at the auction venue. You’ll need to provide identification and proof of address.

Bidding:

Attend the auction or participate online.

Set a maximum bid before the auction and stick to it to avoid overbidding.

Winning the Bid:

If you have the highest bid and the reserve price is met, the auctioneer will declare the property sold.

You’ll need to sign a contract and pay the deposit immediately.

6. Post-Auction Process

Completion:

The remaining balance is typically due within 28 days. Ensure your finances are in order to meet this deadline.

Your solicitor will handle the transfer of funds and ownership.

Legal Formalities:

Your solicitor will complete the necessary legal paperwork, including the transfer of title and registration with the Land Registry.

7. Key Considerations

Auction Fees: Be aware of additional fees, including the auction house’s buyer’s premium, legal fees, and any other charges.

No Cooling-Off Period: Once the hammer falls, you’re legally committed to the purchase. There is no cooling-off period.

Reserve Price: The seller sets a reserve price, which is the minimum price they are willing to accept. If the highest bid does not meet the reserve price, the property may not be sold.

Guide Price: The guide price is an indication of the property’s value but is not necessarily the final sale price. Properties can sell for significantly more or less than the guide price.

Useful Resources

• Auction House UK

• Allsop Auctions

• EIG Property Auctions

By understanding the auction process and preparing thoroughly, you can navigate property auctions with confidence and potentially secure a great deal on a property.