Boomin logo
Boomin...The Lowdown on Buying a House at Auction
Buying

The Lowdown on Buying a House at Auction

Must-knows for buying a house at auction and how to pay for your new home.

Faye deGavre

|

Jun 14, 2022

|

3 min read

The Lowdown on Buying a House at Auction

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.

How house auctions work

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.

Guide and reserve prices

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.

Bidding

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.

  • Bidding in person: Some auction houses will supply you with a paddle (or something similar) which you hold up to indicate a bid. The auctioneer will make it clear during the bidding process as to where and what the current bid is in the room. If you’re unable to attend, you can have an agent or solicitor bid on your behalf. Some auction houses will accept phone bids.
  • Bidding online: For online auctions, there are two ways to bid: live online bidding and online proxy. With online bidding, you can watch the live auction feed online and place your bids live. If you’re unable to bid, you can submit your highest offer by online proxy ahead of time.

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.

Purchasing

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.

Prep beforehand

  • Always do due diligence on the house you’re bidding on – such as visiting the property, researching the area and potentially organising a survey and valuation.

  • Be sure to always read the legal pack for the house. Legal documents can vary from one property to another, so consider asking a solicitor to look over the pack for any hidden covenants or loopholes that could end up costing you more than what you bargained for.

  • Check the terms and conditions from the auction house. Familiarise yourself with the conditions of sale, what needs to be paid and when.

  • Set your budget and stick to it. While houses at auction can be cheaper than market value, renovations are usually needed. Unless you’re lucky enough to be a cash buyer, you’ll need finances in place before bidding.

  • If your bid is successful, you’ll be required to sign the contract and pay the deposit. Make sure your finances are prepared for the deposit and payment terms. Remember not to forget solicitor fees and other home buying costs.

Selling your house via auction

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.

Find your next home for sale

Are you ready to find a suitable home for sale? Our nifty tools help to refine your search so you can find suitable properties for sale that tick all your boxes.

See something you like? Book viewings 24/7 and receive instant confirmation. Start your search today.

Faye deGavre

Content Writer