Buying at property at auction - the process explained.
Auctions are a quick way to buy property and if you do your research, you could land a bargain. For sellers, the relative ease of selling at auction can be appealing, especially if a property is unique, has problems, or personal circumstances necessitate a faster sale.
Types of property auction
Traditional auctions
A traditional auction, sometimes referred to as a standard auction, is where a buyer pays a 10% deposit and exchanges contracts as soon as the gavel falls. Buyers are then committed to complete, usually within 28 days of the successful bid.
Modern auctions
With a modern auction, buyers pay a reservation fee of around 5% when their winning bid is accepted. The buyer must then exchange contracts 28 days later, and must complete 28 days after that (56 days on total).
Buying at auction
The following are the key steps involved in buying a property at auction:
Step 1: Research
Properties being sold at auction are usually advertised on property portals like Rightmove and Zoopla around a month before the day of the auction. You can also find upcoming auctions via dedicated websites, auction houses, or estate agents.
Step 2: Inspect the property
Arrange a viewing of the property as soon as possible. You may have to attend pre-arranged viewings. Consider taking a builder or surveyor with you to identify any potential structural issues.
Step 3: Market analysis
Look into recent sales of similar properties in the area to help you set a realistic budget.
Check the latest HM Land Registry sold house price data
Step 4: Due diligence
It is not uncommon for properties sold at auction to have serious legal defects, structural problems, or other issues.
When you make the winning bid at a traditional property auction, you 'exchange contracts' with the seller the moment the gavel falls. Exchange of contracts is the point in the process where both buyer and seller are legally bound to complete the transaction. Therefore, auction buyers must complete their legal due diligence on the property before the auction.
Auctioneers will make available an auction legal pack, containing key documents like the title deeds, local authority searches, property forms and the conditions of sale. This helps identify any potential legal issues, such as restrictions, defective leases, missing consents and other legal issues that could affect the property's value or future use.
Make sure you ask a solicitor to complete an pre-auction legal pack review, which will advise you on any potentially serious legal issues.
It is usually a good idea to use the same solicitor to complete the auction conveyancing, if you win the auction. The solicitor wil have set you up as a client and already have a file open, helping save time after the auction.
How do I get an Auction Legal Pack Review?
Step 5: Arrange your finances
You must have the funding required in place before you agree to the purchase. If you need a mortgage, you can get a decision in principle from your lender. Not all lenders offer mortgages on auction properties, and some offer special auction finance products.
If you're bidding at a standard auction, make sure you will have immediate access to the deposit (usually 10%) if you're the winning bidder. At a modern auction, you will need to pay the 5% reservation fee.
There may be other fees to pay to the auctioneer when you make the winning bid.
Step 6: Confirm that your solicitor can act for your lender
If you are buying with the help of a mortgage, your solicitor must also complete the legal work for the bank.
If your property lawyer isn't a member of your chosen lender's panel, the solicitor would have to outsource this work to another solicitor, resulting in potential delays.
Over 100 banks and building societies have approved our chosen panel solicitors, so we can help you complete your auction purchase without delay.
Find out if our panel solicitors can act for your mortgage lender
Approved by over 100 more
Compare Council Tax across the UK
Find out how your Council Tax band compares with other areas across the country.
Compare UK Council Tax bands 2023/23
Step 7: Register for the auction
Usually a straightforward process - you may have to pay a fee or refundable deposit.
Step 8: Bidding
Depending on the auction, or your preference, you may be able to attend the auction in person, by phone, or you can give the auctioneer your maximum bid, and they will bid on your behalf (proxy bidding) budget.
Step 9: Winning bid
If yours is the winning bid, the next stages will depend on the type of auction:
| Stage | Traditional Auction | Modern Auction |
|---|---|---|
| Winning bid accepted |
Non-refundable 10% deposit is paid. Any other auction costs are paid. |
Non-refundable reservation fee (around 5%) is paid |
| Exchange of contracts | Contracts exchanged immediately on winning bid | Contracts exchanged 28 days after winning bid |
| Completion | Completion must happen within 28 days of the winning bid | Completion must happen within 28 days of exchange of contracts. |
During this period your solicitor will need to complete the mortgage formalities (if applicable), transfer the remaining funds to the seller and pay the Stamp Duty Land Tax.
Step 10: Conveyancing
If you win the auction, your solicitor will need to act swiftly to meet the typically tight completion deadline (usually 28 days), as specified in the auction’s conditions of sale.
Your solicitor will receive the sales details from the auctioneers, exchange contracts, draft and submit the transfer deed, raise enquiries with the seller’s solicitor, carry out pre-completion searches, complete the mortgage formalities (if applicable), transfer the funds to the seller’s solicitor, and complete the transaction.
Following completion, the solicitor pays any Stamp Duty Land Tax (SDLT) due.
Once the sale is complete, you'll receive the keys and the property is yours. Your solicitor will then need to register you as the new owner at HM Land Registry.
4.8 out of 5
They hit all the deadlines... so satisfied with the service
