Property auctions are increasingly popular among UK property hunters looking for a great buy. Although social distancing has impacted the industry, auctions remain a viable route to buying property. Online property auctions have also become more common as a result of restrictions, but we’ll cover those in an upcoming post. In this guide, we answer the most commonly-asked questions on property auctions, explaining how they work and helping you decide whether an auction might work for you.
FAQs
How do property auctions work in the UK?
UK auction houses sell thousands of properties each year by offering them to the general public to bid on. All properties sold by the auction house on the day will be listed in their catalogue. These catalogues are usually distributed (online and in print) about one month before auction day, but smaller gaps are common.
Each listed property has a guide price. This is the auction house’s way of telling the bidders how much they think it’s worth. Often they will also set what’s called a ‘reserve price’ – the minimum amount acceptable as a successful bid.
On the day, the auction house will introduce each property from the catalogue and invite the audience to bid. Like any other type of auction, the auctioneer controls the process, accepting offers until only one bidder is left. Once the gavel comes down, that’s it, the property is sold.
After that, the successful bidder is legally required to pay a 10% deposit immediately. They then have 20 working days to pay the remaining 90%.
Who goes to property auctions?
Property auctions used to mainly attract investors, but now all kinds of people attend them. They can be useful for house hunters looking to get on the property ladder, or simply for finding a bargain!
Why do houses sell at auction?
Houses are often sold at auction because the seller is motivated and needs a quick sale. Another reason could be that they’ve had problems selling the property through more standard methods.
Another motivation for sellers to choose the auction route is the prospect of a guaranteed sale. If they’ve had problems with buyers pulling out, this can be an attractive alternative. Other (far less common) reasons for properties selling at auction include properties being seized by the state, or owners passing away without legal beneficiaries in their will.
Is it a good idea to buy a house at auction?
If you’re careful and diligent, buying property at auction can be a great way to get a bargain. However, there are risks. Houses sold at auction often have issues and you should carefully consider any extra time and money you might need to remedy those issues.
Another benefit to buying a house at auction is that you can usually move in or start renovations right away, with no chain involved. Finally, all final bids are legally binding, so there’s zero chance of the seller pulling out or upping the price.
Our tips to make the most of property auctions are:
- Physically view the property you’re interested in if at all possible.
- Always get a property survey done if you are serious about bidding.
- Double check that you are can commit to any bid you make.
- Set a firm bidding budget and stick to it on the day – don’t get carried away!
How much commission do property auctions take?
While auctioneer fees do vary, The Home Owners’ Alliance says that 2.5% commission on the final sale price is normal. Make sure you check for extra fees attached for things like advertising.
Who pays auction fees: buyer or seller?
At most property auctions the seller is expected to pay the agreed sales commission plus advertising costs and any legal fees involved in setting up the auction sale. The buyer usually pays an administration fee that covers the costs of finalising the auction and transfer. This can be a flat fee or a percentage of the sale price.
Sometimes property auctions include a ‘buyer’s premium’. This is an additional form of admin fee that goes directly to the auction house, not the seller. Always be sure that you understand the full range of fees that will apply, whether you’re buying or selling.
What happens if no one bids at a house auction?
If no one bids at a house auction, or if the top bid is below the reserve price, then the property becomes ‘passed-in’. This means that it has not successfully sold at auction. However, the top bidder (or any interested parties if there was no bid) can now negotiate directly with the seller.
This usually happens on the same day as the auction, immediately afterwards. If both parties can agree on a price, the auction house then helps finalise the sale.
Can a first-time buyer buy at auction?
You are perfectly entitled to make bids at property auctions even if you are a first-time buyer. More first-time buyers are choosing this route to home ownership. As long as you have your finances in place and can meet the payment schedule, being a first-time buyer is no barrier.
Do banks give loans for auction homes?
Banks will often provide mortgages for homes bought at auction, as long as they meet the lender’s criteria. If you’re looking to buy property at auction and aren’t a cash buyer, you can secure what’s known as a mortgage in principle. This means that the bank will agree to lend you enough money to cover your bid, up to a certain amount.
Like a regular mortgage, you will have to provide the lender with proof of income. Also, it’s a good idea to have a mortgage valuation done on the property before you make the bid. This lets the bank better understand the condition of the property and helps clarify their decision to lend.
Do auction properties go through conveyancing?
As soon as you’ve successfully bid on a house at auction, you enter into a legally binding contract to purchase the home. As such, it’s usually a good idea to have a conveyancing solicitor look into the property before you decide to bid on it at auction. This could include arranging for surveys and the usual property searches.
Can you view a property before it goes to auction?
It’s common practice for property auctioneers to allow viewings of properties before the date of the auction. Auctioneers tend to provide auction packs for the properties that are featuring in an upcoming auction. If you find one that you’re interested in bidding on, contact the auctioneer to see if you can arrange a viewing.
How do I find out about property auctions UK-wide?
You can find property auctions happening across the UK with a simple online search. You can use dedicated auction websites, or search via estate agencies and other property sites. Alternatively, you can check your local paper, as the law requires all property auctions to be publicly listed.
Property auctions: London listings and auction houses
London has a thriving property auction scene with 13 residential and 2 commercial auctioneers. Each auction house puts on between 6-10 listings per year and they are one of the best ways to find entirely unique properties at knockdown prices. If you’re struggling to find the right homes in London, then an auction might just be the answer.
For more information on the legal side of purchasing property, we have guides covering solicitor details, conveyancing, transfer of equity and more.
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