How do property auctions work?
Thousands of properties are sold each year at auction. While they can be a popular way for investors and buyers looking for properties to do up and sell, they also attract mainstream buyers and sellers.
Property auctions can be planned months in advance, with auction houses publicly releasing a catalogue of properties, known as lots, to potential bidders ahead of the auction date.
Most auction houses publish their catalogues around a month before the auction, but some leave it until as little as two weeks before.
Each property will be listed with a guide price, which is what the auction house or seller thinks it could be worth. This is different from the reserve price, which is the minimum price the seller will actually accept - this is usually kept confidential.
Guide and reserve prices can change up to, and on the day of, an auction.
While auctions can be exciting, they're not for the faint-hearted, and it's possible to get caught up in the moment and bid more than you intended. If you're worried about this, you could consider asking someone else to go along and bid for you.
Video: how property auctions work
Watch the short video work to find out how property auctions work and what you need to do before buying a home at one.
Buying a property at auction: step-by-step
1. Find an auction
Upcoming auctions can be found by searching online. You can also find properties for sale at auction via online portals, such as Rightmove and Zoopla.
If you haven't yet decided which location to buy in, see our guide to finding the best place to live.
2. View properties
Try to see the properties you’re interested in buying more than once, and only bid if you're really sure it's what you want.
Get tips on viewings and download our checklist of important things to look out for in our guide to viewing a property.
3. Arrange a mortgage
If you successfully bid for a property, you’ll have a set number of days in which to exchange and complete.
If you’ll need a mortgage to buy the property, it’s a good idea to have a mortgage agreement in principle organised in advance.
4. Make legal checks
There’ll usually be a legal pack prepared by the sellers' solicitors for each property being sold at auction. This will normally include documents such as the conditions of the sale and the results of a local authority search of the property.
It’s important to study the particulars carefully and read all the small print. If you’re happy, you should also send the legal pack to your solicitor to look over.
5. Get a property survey
You should always have a survey done, especially if you're buying a 'doer-upper' at auction, as the seller may be trying to offload a property with serious structural issues.
You may also want to get an independent valuation of the property to make sure you don’t pay over the odds, especially if it will require a lot of renovation work.
Check out our guide to house surveys to understand which type to get and how much it could cost.
6. Shop around for buildings insurance
As soon as you exchange contracts, you’re legally bound to buy the property, so it’s important to organise buildings insurance that will be valid from the day you exchange.
Mortgage lenders will require you to have buildings insurance in place as a condition of lending.
- Find out more: how to find the best home insurance
7. Decide on your price limit
Find out what other, similar properties in the same area have recently sold for, so you can make an informed decision on how much you're willing to pay.
Being outbid could mean you lose any money you spent on a survey and a solicitor, but it’s a small loss compared to paying thousands of pounds more than a property is really worth.
- Get advice on deciding how much to bid in our guide to how much a property is worth.
How to bid at a property auction
Depending on the auction, you don’t always have to be in the room in person. There can be several ways to bid, including online, by phone or by proxy.
If you’re bidding by proxy, you’ll need to set your maximum bid in advance, and you’ll usually have to provide 10% of your maximum bid as a deposit before the auction, in case you’re the successful bidder.
It’s worth checking on the day of the auction that the property you want to bid on is still available, as sometimes a property may have been withdrawn or sold before the auction.
Can I make an offer before the auction?
If you've found your ideal property and done the appropriate research, it's not always necessary to wait until the auction to make an offer. However, early bidding can be a gamble because, if your offer is rejected, you'll have already shown your hand to the auctioneer.
You'll need to work extra fast if you do manage to agree a deal before the auction, as contracts must be exchanged before then.
What happens to unsold properties?
If a property hasn't sold at auction, the auctioneer will ask any interested buyers to make an offer afterwards, so it’s still possible to buy and sell a property after an auction.
Exchange and completion at property auctions
There are two ways that exchange and completion can take place at a property auction.
The traditional method of auction
If you successfully bid at an auction that uses the traditional method, you’ll exchange contracts and pay a 10% deposit straight after the auction finishes. You’ll then have 28 days to complete.
The modern method of auction
If you make a successful bid, you don’t have to exchange contracts immediately.
Instead, you pay a fee to reserve the property, which is non-refundable if you pull out of the purchase. The reservation fee varies but will normally be a percentage of your bid.
You then have 56 days after the auction date to exchange contracts and complete the purchase, which would give you more time to arrange a mortgage.
- Find out more: exchange and completion
Pros and cons of buying at auction
You might find a great deal: whether it's an undervalued home with planning permission or a big renovation project, you could find a bargain at a property auction.
You can move quickly: the entire home-buying process should be complete within a set number of days (often 28) after the auction.
Property auctions can be a more reliable way to buy: as contracts are signed as soon as the auction is over, you won't have to worry about being gazumped or things falling through at the last minute. You'll also be able see other bids for yourself, rather than having to take an estate agent's word for it.
You could be outbid: if someone bids higher than you, you'll have lost time and money viewing the property and having a survey conducted.
You need to have the money ready: if you win the auction you'll have to pay a deposit on the day, and will only have a set number of days after that to pay the total purchase price to the seller.
Auctions can be hit and miss: some catalogues offer little more than commercial properties and complete wrecks that could be long-term money pits.
Selling a house at auction: step-by-step
If you're in need of a quick and easy sale, it's worth considering selling your home at a property auction. However, as with more traditional forms of selling property, you'll need to do plenty of research, and there are still fees to factor in.
1. Find the right auctioneer
The first decision you'll need to make is whether to use a local or national auction house.
If your property is likely to appeal to buy-to-let investors, it's worth considering a London-based auction house even if the property isn't in the capital, as this will offer exposure to a wider range of investors.
2. Check the property auction fees
Auction houses usually charge an entry fee, which can range from a few hundred to a few thousand pounds, to cover costs such as listing your property in the auction catalogue.
There’ll also usually be a commission if your property is sold, which will be a percentage of the sale price. Most auction houses charge around 2.5% plus VAT - higher than the average estate agent fee. If you're selling a particularly low-value lot you may have to pay a flat fee instead.
3. Ensure the catalogue is correct
You should be allowed to check your listing in the catalogue before it goes to print. This is your chance to ensure all the details are correct – errors could scupper a sale.
4. Instruct a solicitor
Your conveyancer or solicitor should prepare the legal pack and contracts before the auction.
5. Set a guide price and reserve price
The guide price is designed to lure buyers in and provides a general idea of what the house is worth.
If you want to set a reserve price (the lowest price at which you're willing to sell), you'll need to get this to the auctioneer at least a few days before the auction.
6. Go to the auction – or wait for the phone to ring
If you're not attending, the auction house will call and tell you the outcome shortly after the auction's been held.
7. Get paid
Completion usually takes place a set number of days after the auction, so you'll be able to collect your money, minus fees, shortly after the sale.
Pros and cons of selling property at auction
You'll get paid quickly: if a legally binding contract is created when the hammer falls, the buyer will have to pay a 10% deposit on the day and the remaining amount within 28 days.
Buyers at auction love projects: if you've got a property in need of significant renovation, you could be in luck as auctions tend to attract buyers in search of big projects.
Property auctions are a great last resort: unique homes or those with legal complications that have hampered previous sales can also be prime candidates for auction – but do bear in mind that you're legally required to be honest about any serious problems that you're aware of.
Marketing can be difficult: while the auction house should promote your property, it might not be exposed to the same amount of people as it would be if you were marketing through an estate agent.
You'll need to move quickly: if you're living in the property, you'll have to vacate it quickly once it's sold.
The fees can add up: you'll usually need to pay an entry fee that can range from a few hundred to a few thousand pounds, even if the property doesn't sell. And if it does, you'll usually pay around 2.5% plus VAT in commission. This is considerably more than the average estate agent fee of 1.42%.
Online property auctions
In April 2018, Allsop, the UK's largest property auction house, held its first online-only property auction - with six out of the seven commercial lots selling.
In an online-only auction, a late bid can result in the clock being extended by a minute, and a sale is only complete when there have been 60 seconds of silence.
In theory, these auctions offer greater flexibility for sellers, as you don't need to pay towards room hire and catalogue printing, can more easily reduce your price and can quickly enter the property into another auction if it doesn't sell.
While online-only residential auctions are yet to make a big splash in the UK, it's likely that this model will become more popular in the next few years.