The popularity of property auctions has steadily increased in recent years, with dozens of auctions taking place across the country every month.
While property auctions used to be dominated by investors and buyers looking for major projects, they're now attracting more mainstream buyers and sellers, too. Whether you're looking for a bargain or want to sell a property quickly, a property auction could be the answer.
Which? Mortgage Advisers can arrange your mortgage in principle so you're ready to buy at a property auction.
How do property auctions work?
Property auctions are usually planned well in advance, with auction houses publicly releasing a catalogue of 'lots' (properties) to 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 it's expected to sell for. Sometimes the seller will also set a reserve price, which is the lowest price they will accept, but this is usually kept private until the auction has ended.
On the day, potential buyers gather in the auction room to bid. The process is overseen by the auctioneer, who works their way through the catalogue of properties one by one. Immediately after a property auction, successful buyers must sign legal paperwork and pay a deposit, which is usually 10% of the cost of the property.
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'd intended. If you're worried about this, consider asking someone else to go along and bid for you.
Video: how property auctions work
Watch our short video for things you should know about buying a property at auction.
Buying at a property auction: step-by-step
1. Do your research
Use websites such as propertyauctions.com to find upcoming auctions in your area. If you haven't decided which location to buy in, our area comparison tool will show you local info including house prices, happiness scores and the quality of local schools.
2. View the property
Try to see the property more than once and only proceed if you're really sure it's what you want. You can download a checklist of important questions to ask in our guide to viewing a property.
3. Talk to a mortgage adviser
An impartial, whole-of-market broker such as Which? Mortgage Advisers will be able to find the best deal for you and help you get an agreement in principle, so you can be sure you can afford the amount you're bidding. You will need to have a valuation conducted before the day of the auction.
- You can contact Which? Mortgage Advisers by calling 0800 197 8461 or completing the free callback request form at the bottom of the page.
4. Make legal checks
Study the property particulars carefully, reading all of the small print. If you're satisfied, send them to your conveyancer and ask them to carry out the usual searches, enquiries and title checks. Sometimes the seller's solicitor will carry out the searches and send a copy to your solicitor.
5. Arrange a property survey
You should always have a survey done, but this is even more important if you're buying a 'doer-upper' at auction, as the seller may be trying to offload a property with serious structural issues. Check out our guide to house surveys to understand what type to have and how much it will cost.
6. Decide on a price limit before you bid
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 may mean that you lose the money spent on the survey and solicitor, but that's a small loss compared with paying thousands of pounds more than the house is really worth.
- For advice on assessing a property's value, visit how much is your house worth?
Bidding before an 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.
If you do manage to agree a deal before the auction you'll need to work extra fast, as contracts must be exchanged several days before the auction.
Bidding online can be a good way to avoid the stress of an auction, especially if you're new to the game.
To be considered, you'll usually have to send the auctioneer a cheque in advance for 10% of the maximum amount you're willing to bid.
This does mean that you won't be able to make any bids higher than the maximum you decided when writing the cheque. There's also the danger that some auctioneers might take advantage of knowing what you're willing to offer by bumping up the reserve price.
Find out more: making an offer on a house or flat – work out how much to bid
Pros and cons of auctions for buyers
- You might find a great deal: whether it's an undervalued home with planning permission or a renovation project, there are plenty of bargains to be found at property auctions.
- You can move quickly: the entire home-buying process should be complete within 28 days of the auction.
- Property auctions can be a more reliable way to buy: you won't have to worry about being gazumped or things falling through at the last minute, and you'll be able see other bids for yourself rather than having to take an estate agent's word for it.
- Property auctions are risky: if you're outbid, 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 10% deposit on the day, and the remaining 90% of the purchase price within 28 days.
- Auctions can be hit and miss: some catalogues offer little more than commercial properties and complete wrecks that could be long-term money pits.
Property auctions for sellers
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 fees to factor in.
Selling at a property auction: step by step
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 as this will often offer exposure to a wider range of investors.
2. Check the property auction fees
Auctioneers charge an entry fee (often around £300-£400) and commission on the sale, which varies depending on the price and size of the lot. Most auction houses charge around 2.5% plus VAT - higher than the average estate agent fee - and 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 of the details are correct – errors could scupper a sale.
4. Instruct a solicitor
Your conveyancer 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 for 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 around 21-28 days after the auction, so you'll be able to collect your money, minus fees, within a month of the sale.
Pros and cons of auctions for sellers
- You'll get paid quickly: the contract becomes legally binding 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 won't be exposed to the same amount of people as it would be if you were marketing through an estate agent and websites such as Rightmove and Zoopla.
- 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 need to pay an entry fee of around £300-£400 (sometimes more) 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 high street estate-agent average of 1.3%.
Online-only property auctions
In April 2018, Allsop, the UK's largest 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 results in the clock being extended by a minute, and a sale is only complete when there has been 60 seconds of silence.
In theory, these auctions offer greater flexibility for sellers, as they don't need to pay towards room hire and catalogue printing, can more easily reduce their price and can quickly enter their property into another auction if it doesn't sell.
While online-only residential auctions are yet to make a splash in the UK, it's likely that this model will become more popular in the next few years.
Get personalised mortgage advice for buying at auction