Things You Need to Know Before Buying at a Property Auction

Property auctions can be an exciting way to purchase property, often offering opportunities to secure a property below market value. However, buying at auction is very different from purchasing through an estate agent and if you’re not properly prepared, it can also be risky.

If you’re considering buying at auction, here are some key things you need to know to help you navigate the process successfully:

1. Do Your Research in Advance

Before the auction day, a catalogue listing of all available properties will be available. It’s very important to study the catalogue carefully and ‘shortlist’ the properties that interest you, before buying a property. Once you have your list, arrange viewings and conduct thorough due diligence – just as you would with a traditional property purchase.

Investigate the property’s condition, location, and potential resale or rental value. Look out for any issues like structural problems, restrictive covenants, short leasehold terms, or complicated legal matters that could affect the property’s value or your plans for it.

2. Understand the Legal Pack

Every auction property comes with a legal pack, which may include the title deeds, searches, lease details (if applicable), and any special conditions of sale. These documents can be complex, so it’s highly recommended to have a solicitor or legal adviser review the legal pack before the auction.

Missed details could result in unexpected costs or legal issues after you’ve committed to buy, so don’t skip this step.

3. Arrange Your Finances Early

When you win a property at auction, you’ll usually need to pay a 10% deposit immediately and complete the purchase within 28 days (though timelines can vary depending on the auction house and property).

This means you must have your finances in place before bidding. Whether you’re a cash buyer or planning to use auction finance, bridging loans, or a mortgage, ensure everything is ready to move quickly.

4. Set a Budget and Stick to It

It’s easy to get caught up in the competitive atmosphere of an auction. Bidding wars can push prices up fast – and the excitement can lead to overbidding.

Set a maximum price you’re willing to pay, factoring in the cost of renovations, fees, taxes, and finance, and be disciplined enough to walk away if bidding goes beyond your limit.

5. Be Aware of Extra Costs

There are additional costs when buying at auction that you need to budget for, such as:

• Auction house fees
• Solicitor/legal fees
• Stamp duty
• Renovation costs
• Insurance from the date of exchange
• Lease extensions

Some properties also come with seller’s fees or special conditions that require you to cover the seller’s costs – so again, check the legal pack carefully.

6. Practice Makes Perfect

If you’re new to property auctions, it could be a good idea to attend a few as an observer before participating. This will give you a feel for how they operate without the pressure of bidding. You’ll be able to pick up some of the terminology, and tips on strategy and timing.

7. Know What Happens After You Win

If you win at the auction, the property is yours. You’re legally committed to buy it, and if you fail to complete, you could lose your deposit and face further legal action.

So, it is important to be ready to move quickly with insurance, finalise your finance, and meet any obligations outlined in the contract.

We would always recommend that you speak to a broker to confirm that you are able to obtain the finance required to purchase the property by getting a Decision in Principle (DIP) prior to paying a deposit.

Final Thoughts

Buying a property at auction can be a fantastic way to find investment opportunities, but preparation is key.

By doing your research, lining up your finance, setting a clear budget, and understanding the process, you’ll put yourself in the best possible position to make smart, successful auction purchases.

If you’re considering buying at auction and need advice on auction finance or bridging loans, our team is here to help – get in touch today to find out how we can support your property journey.