It may not be the standard way of buying a first home, but if you have the cash and nerves of steel, then buying at auction can be an exhilarating and rewarding experience. For many, it is an excellent way of bagging a property quickly and, sometimes at a bargain price, in your desired postcode. That said, it is risky and there is a lot of information to take on board before you step foot in an auction room.
What happens at an auction?
Before the pandemic, auctions were often held in bustling venues where buyers could sit and freely bid amongst others. As times have changed, auctions have increasingly moved online. In fact, since this movement, property auctions have had a surge in popularity, as they have become easily accessible for potential buyers, resulting in a broader market.
After registering, buyers will have the option to ‘live bid’ or ‘online proxy bid’. A live bid enables you to watch the auctioneer countdown in real-time and witness other bids, giving you the option to adjust yours accordingly. An ‘online proxy bid’ is often utilised by a buyer who cannot attend and is a bid that is put forward before the auction takes place. This will be the highest amount that the buyer is prepared to buy the property for. The auction house will bid on your behalf, up to your maximum proxy bid.
Once the winning bid is accepted, the offer is binding and the buyer is committed to its sale. The buyer then must pay the deposit.
In order to buy a property at auction, the owner needs to have readily available funds for payment, usually within 28 days of winning the bid. In some cases, the time limit may be longer, but it is always quicker compared to a standard property purchase.
Tips for buying at auction
Auctions are a speedy way of buying a property. This can mean that vital details are overlooked. In order to make your buy a successful one, you must:
- Consider the payment
The rapid movement of an auction property purchase is often why it is so attractive to cash buyers. However, if you plan to use a mortgage, be prepared to take a risk. The offer needs to be approved before the bid, to ensure funds are released on time. Failure to do so will mean the loss of your 10% deposit paid on the day.
- View the property before the auction date
Always view the property, if possible, and take along a building surveyor to access any structural issues, if you are serious about bidding.
- Review the legal pack
Every home will come with a legal pack and it should be accessible before the auction. If you have seen a property that you aim to bid for, then it is imperative that you look at this pack closely with a conveyancer. There can be many hidden costs or complications in a legal pack and a conveyancer will be able to spot these.
- Remember stamp duty tax
Always factor stamp duty into your budget, if it is applicable. Stamp duty tax is required within 14 days of completion.
- Carry out a survey
Most properties will not come with a survey, so if you want to uncover any hidden structural problems get one carried out beforehand.
On the day there are several do’s and don’ts associated with bidding such as:
- Do stick to your budget. As tempting as it is, always stick to your planned maximum bid and be ready to pass on a property once this is exceeded.
- Don’t bid first. Take time to gauge interest among other buyers.
- Do prepare yourself for the experience. Either attend an earlier auction or watch one online.
- Do sit at the back (if you are attending in person). This will enable you to watch the room and see all other bids clearly.
- Do be confident with your bids.
- Don’t bid on anything you have not prepared for. You may be tempted by another property, especially if other bids are low but resist the temptation.
There are some fantastic opportunities to be had at an auction and, so long as you do your homework it can be a great option. Have you ever attended or bought at an auction? We would love to hear your top tips below.