Jun 14, 2022
3 min read
With fuss-free sales, bargains and online platforms, buying a house at auction has become increasingly popular over the last few years. But in order to buy a property at auction and for the purchase to run smoothly, the buyer needs to do their research, have legal representation as well as have the finances in place to be ready to exchange and complete within days of winning a bid.
When a house goes up for sale via auction, it’ll be listed online either by an Estate Agent or auction house. A traditional auction is hosted in an auction house at a specific time and day. A modern auction is hosted online and you can submit bids until a final time and date. If the reserve price is met (more on that below) and you’re the highest bidder, you’ll usually have to pay a deposit or reservation fee.
Auction properties tend to look so attractive because their guide price is so low, but don’t go in there thinking that’s always going to be the final price. The guide price is an indicator of where the bidding will begin, and the reserve price is the minimum the seller will accept.
Each property will be listed with a guide price. The seller will have a reserve price, kept confidential, outlining the minimum they’re willing to accept.
If a property doesn’t reach the reserve price during bidding, the property won’t be sold. If you’re still interested in buying, you could negotiate with the seller after the auction has taken place.
The traditional way of buying a house at auction is where, once the gavel falls, the highest bidder wins (if the reserve price is met) and has to exchange contracts and pay a 10% deposit straight away. They then have 28 days to complete the sale.
By the modern auction method (online only), you don’t have to exchange contracts immediately. The buyer pays a reservation fee (non-refundable). You then have 56 days to exchange contracts and complete the purchase.
While auctions used to only appeal to cash buyers and investors, these days, it’s much easier to buy a home at auction with a mortgage. Be aware that there are criteria that need to be met and not all auction properties are eligible for a mortgage. For the rest, you’ll need to secure a mortgage-in-principle and it’s a good idea to have an independent mortgage valuation done on the property to make sure your lender is willing to lend on the property.
Selling your house via auction is a great alternative to the traditional way, especially if you have a particular need for a quick sale. Auctions aren’t just for properties that need a lot of work either – all kinds of homes, such as family homes, may be suitable for auction depending on your circumstances.
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