15 November 2017

The pros and cons of buying a house at auction

As anyone that has ever watched Homes Under The Hammer will tell you, a property auction is a brilliant opportunity to pick up a bargain. But if you're considering trying to buy a house at one there are plenty of potential hazards to be on your guard against too.

What kind of properties can I buy at an auction?

From the outset, it's important to realise that the lots at a property auction are often not in the best condition. You'll most likely be putting your money into a project - a property with potential, not something you can move into immediately.

That said, you can find all sorts of different properties available, from flats to converted commercial buildings.

Finding an auction

Property auctions are held all across the UK, and you can find one by using sites like  (This link will open in a new window)UK Auction List. But there are also online property auctioneers, such as Clive Emson and John Pye, so you could buy a new home at auction without leaving your sofa.

A catalogue of available properties will be issued a few weeks in advance of the auction, so be sure to register your interest so that you can have a good look at the lots before the auction day itself.

The importance of research

It's a good idea to approach buying a property at an auction in the same way as buying in the traditional way. Doing research on the property itself is crucial. Go through the auction catalogue well in advance and select which properties you're interested in. You should be able to arrange a viewing to get a real feel for the property, rather than judging it just from a few photos.

It might also be worth arranging a survey so you're really clear on what you might be buying. Getting your solicitor to have a good look through the legal pack is important too.

The downside here is that you might end up spending a fair bit of money only to miss out on getting hold of the property on auction day. But it's better to be prepared and spend money up front than having to pay much more to fix problems with the property later on.

The bidding process

With any auction, it's easy to get caught up in the moment. To prepare yourself, you could go down to a couple of auctions where you don't plan on bidding on any properties, just to get a feel of how the process works and what the atmosphere is like.

Set yourself an absolute budget, and stick to it. Yes, that could mean having to let a couple of properties that you fancy go to other buyers, but it's crucial that you know your limits and don't push beyond them.

If you tend to get nervous, then you might prefer to opt for an online auction; the bidding works in much the same way, except that you do it through your computer rather than in person at the auction house. Make sure you read through the exact details on your online auction house of choice, so you're comfortable with how it will work.

Paying for the property

You usually have to pay 10% of the purchase price within 24 hours of the auction, and settle up the rest within a month. That isn't very long, which is why many auction buyers pay up in cash.

Depending on the property, you might be able to arrange a short-term property loan (called a bridging loan) to complete the purchase, before remortgaging to a traditional deal later on - but it's crucial to investigate your options early on.

Remember to bring ID with you too. You won't be able to bid or buy at the auction without registering first, and you'll need your ID to do that.

The pros and cons

There are plenty of positives to buying a property at an auction. The speed of the transaction is likely to be much faster than going down the traditional route, and things are also more transparent — there's no chance of being gazumped. An auction can be a great place to grab a bargain too.

But it's important to go into it with your eyes wide open. Any property you do buy will almost certainly need more investment to bring it up to standard. You'll need to be able to deliver the funds for the purchase swiftly too.

You'll also have to spend money up front to fully research the properties you're interested in, even if you don't end up buying them.

So even if you're buying online, you probably won't be taking care of everything just from your sofa.

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About the author

John Fitzsimons

John Fitzsimons is an award-winning financial journalist who has written for publications including the Sunday Times, The Mirror, Forbes, Moneywise and loveMONEY.

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