Location

Think about the geographical area you are hoping to buy a property in, understand the popular areas, locations that are not so sought after and areas that are improving. This will make a difference to the value of the property. Understand property values in your chosen area so you don’t over bid.

Contact the local auction houses covering your chosen area and ask to go on an auction catalogue mailing list. Make sure you mark the domain name of the auction house as friendly, or the catalogue may end up in your spam box. Usually there are only around 2-6 weeks between the catalogue being released and auction day so you will need to act fast if you spot a property you are interested in.

Budget and Borrowing

Think about your maximum budget: the guide price (as a minimum) plus purchase costs and any renovations or property improvements. If yours is the winning bid, you will need to have 10% purchase price available as a deposit on the day plus any other auction costs such as Administration Charge, Buyers Premium, Stamp Duty and disbursements on completion. These will vary so ask the auction house what their additional costs are.

If you are not a cash buyer and need a mortgage you can still buy some properties at auction, if the property is habitable. You will need to contact your mortgage advisor and ask them to find a lender who can work quickly to have your mortgage offer ready. Take this offer with you to the auction because you will exchange contracts on the day if your bid is successful. Mortgage lenders will only lend the amount the property has been valued at, so don’t over bid.

The full purchase price is payable anything between 20 and 56 days, make sure your lender and conveyancer can complete within these timescales and you will also need to check with the auction which of these timescales apply.

Commercial mortgages or bridging loans can be used to purchase uninhabitable properties but these can be expensive. As soon as the property is habitable, a standard mortgage can be applied for.

Repairs and Renovation

View the property yourself and make a list of any work that you think that needs doing to make the property suitable for your needs whether you are selling on, letting or going to live in it yourself. You may need to commission a building surveyor, structural engineer, or other specialist for advice about the condition of the building and if it is suitable for your needs. A builder may be able to give you some renovation budget guidance. Get advice on how much the property is worth. You’ll need to consider all of these when calculating what your maximum bid can be.

Due Diligence

The auction property will have a legal pack. This contains all the documents your conveyancer usually gathers for a property purchase such as local authority searches, Energy Performance Certificates, etc but they are produced in a pack in advance for prospective purchasers to view ahead of the auction. Ask your Conveyancer to look through the legal pack and make sure nothing is missing and if there are any issues you need to be aware of.

Buildings Insurance

Have this arranged in advance of the auction date so if you are successful the building is insured. Mortgage companies are likely request this.

Registering and Bidding

Before bidding, most auctions will require you to register, expressing which properties you are interested in, for some auctions this is possible on the day so turn up early to allow time, others prefer registration in advance. Registration forms are often found in the legal pack and on the auction house website. Photographic ID and proof of residency will be required.

Bidding online is available during some auctions, but internet speeds can vary and connections lost so this is not a very reliable method of bidding if you can’t be at the auction in person.

Bidding by proxy is where you lodge your best bid with the auctioneer who bids on your behalf. There is likely to be a Bidding Form in the legal pack and on the auction’s website, you will need to register and fill in this form. 

For telephone bidding, a member of the auction team will take bidding instructions direct from you but sometimes phone signals are fickle.

Bidding in person is perhaps the most exciting but resist the temptation to bid over your budget in the thrill of the moment. Listen carefully for your lot, when the auctioneer starts, if there are no bids wait and see if the auctioneer will lower the starting value before raising your hand to attract the auctioneer’s attention, when your bid is accepted.   

Making an offer before can be successful. Complete due diligence, visit the property, undertake surveys and obtain your mortgage agreement just as you would if you were planning to bid. Ask the auction if the seller would accept an offer and if they will, put forward your very best which will need to be close to, or over the asking price. The same auction rules apply if you are successful, so there is still the Administration Charge and Buyers Premium plus any disbursements on completion to pay. Exchange will happen before the auction date.

If a property does not reach the reserve price it will be removed from the auction but there may still be an opportunity to purchase it afterwards. Contact the auction – it is likely you will be invited to put in an offer, which if accepted, is binding and contracts will exchange with immediate effect just like a winning auction bid. Similarly there is also the Administration Charge and Buyers Premium, plus any disbursements on completion to pay.

Finally … Why not visit an auction so you can see how it works? Investigate potential properties, do your research and find out the facts. Properties are sold at auction for a variety of reasons, some need a lot of work, others are un-mortgageable, a few are in good condition and the seller needs a quick sale. Snapping up a ‘good deal’ is not easy but with careful planning and a bit of luck, you may just grab yourself a bargain.