Guide To Buying Property At Auction
1: Buying property at auction - source future auction property
Buying property at auction starts with identifying all the property lots that interest you, then contacting the auction house for further information. Do this as early as possible, as there is normally only 2-3 weeks between the catalogue being released, and the auction date.
You should allow a minimum of 10 days to carry out all due diligence, including viewing the property, perusing thoroughly the legal pack, arranging finance if required, contacting the auctioneer for any further details requested by your solicitor, and to provide necessary information to the auctioneer in order to register to bid.
2: Viewing the property
Call the auction house to find out about viewing arrangements. The auctioneer will either take a deposit for the keys and allow you to view the property unaccompanied or they will organise for a local agent to show you around. There might also be Virtual Tours available on the auctioneers' websites, if you're unable to visit in person.
3: Register interest with the auctioneer
Once you have viewed the property, register your interest with the auctioneers to ensure you are kept up to date regarding the property, and make sure you register for the legal pack. Ask the auctioneer to contact you should any of the property details change or if the property is sold prior to the auction or if it has been withdrawn.
4: Due diligence and legal packs
Request the legal pack from the auctioneer as soon as it is available, to allow you time to carry out due diligence.
Buying a property at auction is different from buying a property through an Estate Agent. The seller's solicitor prepares the legal packs, which contain articles such as special condition of sale, title deeds, leases, general communications and searches. We strongly advise potential purchasers to arrange legal assistance from a solicitor or licensed conveyancer, to check thoroughly the various legal documents and terms and conditions.
Remember to check how much the auctioneer’s administration fee is. Any additional costs, excluding the administration fee, will normally be listed in the Special Conditions within the legal pack and these costs will be payable on completion. Any stamp duty and/or government taxes are not included within these Special Conditions within the legal pack, and all potential buyers must make their own investigations.
If you are the successful bidder when an auction sale has finished, you will be contacted by a member of the Auction team during the auction to provide the deposit payment. plus any other fees. You’ll need to find out what types of payment the auction house accepts, prior to auction.
Work out how much you can afford i.e. your maximum bid. Estimate your total costs including repairs, decorations, solicitor’s fees, surveys, mortgage, removal charges, furnishings and add this to the amount that you will need to borrow.
If you are the successful bidder, you will be required to pay 10% of the deposit immediately after the auction sale, normally subject to a minimum fee (whichever is greater), and the special conditions. Any other fees will also be taken.
It is important to have secured finance, such as a mortgage, prior to making the bid. In this instance a survey will usually be required. The expected date of completion is usually twenty working days after the auction – please ensure you have checked the special conditions of sale, in case of any variation.
Please note that the guide price excludes any additional fees that the purchaser may incur, to include, but not limited to, Buyers Contract fee, Stamp Duty Land Tax, VAT, legal and search fees etc. Please refer to relevant Auction Legal Packs for details.
To reiterate, ALWAYS check the Legal Pack and General/Special Conditions of Sale, in case a Buyer's Premium applies to the lot you're interested in, as this will mean additional costs for you to pay towards the Seller's fees. If in doubt, phone the auctioneer and ask your solicitor for clarification.
6: AML checks and Buyer's I.D.
Under the Money Laundering Regulations 2017, part of registering to bid is to carry out AML checks (anti money laundering) that are legally required before you can be approved as a bidder. You may be required to complete a remote verification check. To find out which identification documents might be required, you can view on the Government website here
7: Bidding: live streamed auctions
If you would like to bid on a property you will need to register to bid prior to the date of the auction. The approval process may take a few days so please ensure that you give yourself enough time to register if you are interested in bidding on a property. Registration opens typically 5-7 days prior to the auction date.
Following Covid, many of the auctioneers have continued to offer live streamed auctions (remote bidding), rather than in person attendance. You should contact the auctioneer to find out the options available. The majority should offer the below:
Telephone bidding – A member of the auction team will attempt to contact the bidder by telephone, prior to the lot concerned being offered for sale. If contact is made, then the bidder may compete in the bidding through the auctioneer’s staff. If it is impossible to obtain telephone contact, or the link breaks down, the auctioneer is authorised to continue to bid on behalf of the telephone bidder up to the maximum bid stated on the form.
Proxy Bidding – A member of the Auction team will bid in the room for you on auction day.
Internet bidding – Once the form is submitted and payment has been made you will be able to bid alongside the live stream.
8: Bidding: in the auction room
If any auctioneers is holding a live auction at a venue, then make sure you find out the start time, and turn up early to ensure you hear the addendum, just in case there are any price changes, or withdraws/sold prior lots. You can always phone the day before to enquire, so as not make a wasted trip!
When your lot number comes up the auctioneer will announce the address. Double check it’s the lot that you have come to buy before you start bidding. When you registered your initial interest to buy you may have been given a card to wave at the auctioneer, but you can also use your hand to catch the auctioneer's eye as well.
If the auctioneer receives a bid higher than your own he will return to you in case you wish to better it. He will also warn you when the bid is about to be closed, usually three times "for the first time, for the second time, for the third time and final time – sold!" Remember to stick to your maximum price and do not get carried away.
Telephone bidding and proxy bidding are also normally available for all in-room auctions, but you should ask about internet bidding.
9: Successful bidder
Usually a property will have a reserve and if you meet it, the vendor is legally bound to sell to you. You have won if your bid is the highest and the reserve has been met.
If you are the successful bidder, you should then be contacted by a member of the Auction team during the auction to provide the deposit payment. When funds have been received, you should receive a Memorandum of Sale with the special conditions of sale (if any) attached.
The auctioneers will advise of necessary next steps to take, but we would suggest finding out about this prior to the auction taking place, so that you are fully prepared.
Once the gavel comes down the property becomes your responsibility. Again, the auction house or your solicitor should be able to advise you as to what insurance needs to be arranged from the get go.
11: Balance of payments
The balance of payment usually needs to be transferred within 28 days of the auction or the timescale set by the vendor. Remember, if this is not achieved you will forfeit your 10% deposit.
A GUIDE PRICE is an indication of the seller’s current minimum acceptable price at auction. The guide price or range of guide prices is given to assist consumers in deciding whether or not to pursue a purchase. It is usual, but not always the case, that a provisional reserve range is agreed between the seller and the auctioneer at the start of marketing. As the reserve is not fixed at this stage and can be adjusted by the seller at any time up to the day of the auction in the light of interest shown during the marketing period, a guide price is issued. This guide price can be shown in the form of a minimum and maximum price range within which an acceptable sale price (reserve) would fall, or as a single price figure within 10% of which the minimum acceptable price (reserve) would fall. A guide price is different to a reserve price (see separate definition). Both the guide price and the reserve price can be subject to change up to and including the day of the auction.