BLB Solicitors
  • +01225 755656
  • info@blbsolicitors.co.uk
BLB Solicitors
  • +01225 755656
  • info@blbsolicitors.co.uk
  • Home
  • Services for You
    • Conveyancing Solicitors
    • Leasehold Property Rights
    • Property Dispute Solicitors
    • Divorce, Family Law and Mediation
    • Lifetime Planning and Wills
    • Probate and Estate Administration
    • Personal Injury Compensation
    • Medical Negligence Solicitors
  • Services for Business
    • Commercial Property
    • Commercial Property Dispute Solicitors
    • Corporate & Commercial Legal Advice for Business
    • Estate Management Solicitors
  • BLB Solicitors Locations
    • Almondsbury Solicitors
    • Bath Solicitors
    • Bristol Solicitors
    • Bradford on Avon Solicitors
    • Swindon Solicitors
    • Trowbridge Solicitors
  • About Us
    • Our Team
    • Working for BLB
    • BLB Solicitors – How we work
    • Making Payments to BLB Solicitors
    • Instructing BLB Solicitors
    • Terms of Business
    • Complaints Policy
  • Blog
  • Contact Us

Home » Buying a house at auction: a guide

Conveyancing
Auctioneer's gavel
Oct 19th, 2021

At BLB Solicitors, our goal is simple – to deliver you clear, practical legal advice and cost-effective solutions. We hope you enjoy exploring our Blog. If you can’t find what you’re looking for, please do contact us.

Buying a house at auction: a guide

If you are considering buying a property at auction, first read this helpful guide produced by residential property specialists, Victoria Williams and Kate Lewis.

To discuss your conveyancing requirements, including requesting a conveyancing quote, our conveyancing solicitors are available on 01225 755656. Alternatively, you can contact them by email, or by completing the Contact Form at the foot of this page. Conveyancing quotes are also available online.

Figures suggest that around one in every twenty properties coming on the market is sold at auction. In general terms, two factors can make an auction sale more attractive to a seller.

First, an auction sale may better suit a property that an estate agent will find challenging to market due to its condition, location, or both. That’s why a significant proportion of auction sales are to property developers.

Second, in general, a sale by auction is considerably faster than the more traditional route.

Pros and cons of buying a property at auction

The dream scenario, albeit an unlikely one, is being the only person to spot the potential in a property and bagging yourself a bargain. But auctions are also increasingly attracting buyers who want to avoid the traditional conveyancing chain. As the sale is agreed as soon as the auctioneer’s hammer falls, there’s no chain to break – and no risk of being gazumped.

Of course, if a bidding war ensues and you’re unsuccessful, you will lose any money you have spent carrying out surveys and other investigations on the property. And if you’re really unlucky, after investing time and money scrutinising a property, you may discover it’s been sold before it goes to auction.

How much does it cost to buy a house at auction?

In addition to the usual legal fees and Stamp Duty Land Tax, buying at auction means that in place of estate agent’s commission, you will have to pay a fee to the auctioneer called a ‘buyer’s premium’ or ‘administration fee’. The auctioneer receives this in addition to the fee they receive from the seller. The premium may be a flat fee or a percentage of the purchase price. It’s important to check the auctioneer’s terms before the auction, as you will need to factor this additional cost into your budget.

Preparing to buy at auction

Keep an eye on auctioneers’ catalogues (which will be available online). Once you have found a property you’re interested in, contact the auctioneer to arrange a viewing. Unfortunately, many houses sold at auction are not in the best condition. If that’s the case, before spending money on a survey, it’s worth taking a surveyor or architect for an initial walk around the property. They should be able to identify any of the more obvious problems and give you a broad indication of the cost of remedial work. At that point, you may decide that the likely costs involved are too high. Also, neighbours can be a great source of information on otherwise hard to spot issues.

You must have a clear budget in mind to ensure you don’t pay over the odds. Never rely on the auctioneer’s guide price. It’s also not unusual for the guide price to increase before the auction. If it does, it usually means there’s been a lot of interest. Research similar properties on the market in the area and speak to local estate agents to gauge their opinion on valuation.

If you’re still interested, arrange a survey. Depending upon the condition of the property and any issues uncovered by your surveyor, you may need to arrange more than one type of survey or investigation. Remember, this is likely to be your first significant outlay in the process, and you won’t recover the cost if you’re unsuccessful at auction.

Auction legal pack

The seller will have prepared a package of documents, usually referred to as a ‘legal pack’. At the very least it should include:

  • the title deeds for the property;
  • the contract, which may show the fees you are required to pay (e.g. the seller’s legal fees and reimbursing the cost of the searches – which can surprise many purchasers);
  • a local authority, environmental and other relevant searches;
  • a list of fixtures and fittings;
  • a seller’s information form; and
  • any relevant leasehold information.

The legal pack will be available from the auctioneer. You should instruct your solicitor at the earliest possible opportunity before the auction, to ensure there’s sufficient time to review these documents properly and take any necessary action. The auction will proceed whether or not you’re ready, so time is very much of the essence.

As with any conveyancing transaction, your solicitor will inevitably need to raise further questions with the seller or their solicitor. This is to ensure that you are fully aware of what you’re buying from a legal perspective.

Buying a house at auction with a mortgage

The falling of the auctioneer’s hammer is akin to the exchange of contracts; you are committed to buying the property with completion typically fixed for 28 days later – sometimes even sooner. You’ll have to pay 10% of the hammer price immediately, with the balance on completion. This means that if you’re buying with a mortgage, you will need to ensure the mortgage is agreed in principle before the auction.

Crucially, if you cannot complete, you will lose the property and your deposit. You may also have to cover the costs of re-selling the property and any shortfall between the price you agreed to pay and the final selling price. You may even find yourself liable for daily interest until the property is sold.

The auction

If you’ve never been to an auction before, it’s advisable to attend a few and observe the proceedings to get a good idea of how they work.

On the day of the auction, stay calm! You’ll have done a lot of preparatory work and will know your budget. Never get carried away and exceed it. If you’re unsuccessful this time, other opportunities will come along.

It’s best to get there early and find a good spot where the auctioneer can see you easily. Check with the auctioneer in advance exactly what you’ll need to bring along. In most cases, you will need at least two forms of identification and proof that you can pay the 10% deposit.

Reserve price

The reserve price is different to the auctioneer’s guide price. It refers to a confidential figure set between the seller and the auctioneer. Where a reserve price is set, the bidding must reach that price before the auctioneer can sell the property. It’s worth remembering that if the property doesn’t reach the reserve price, on reflection, the seller may still decide to go with the highest bid, particularly if it was pretty close to the reserve price. If you were the highest bidder, you have nothing to lose by approaching the seller at the end of the auction.

Victoria Williams
Request a Call Back

Recent Articles

  • The advantage of meeting your conveyancer
  • Bank of Mum and Dad: protecting gifted deposit monies
  • New build conveyancing: a guide
  • Selling without an estate agent
  • Types of survey when buying a house

Newsletter Sign-up

* indicates required

Share this article

You may also like...
  • Mar 10th, 2022
    Can I exchange and complete on the same day?
    Read Article
  • Mar 22nd, 2022
    Selling without an estate agent
    Read Article
View All Related Articles
Get in-touch today
Contact Form

Left Column

Right Column

Centre

 
Sending
  • Bristol Solicitors

    0117 905 5308
  • Bath Solicitors

    01225 462871
  • Bradford on Avon Solicitors

    01225 866541
  • Swindon Solicitors

    01793 615011
  • Trowbridge Solicitors

    01225 755656
  • Almondsbury Solicitors

    0117 905 5308
Authorised & Regulated by Solicitors Regulation Authority (No. 636644)
©2022 BLB Solicitors | Terms | Privacy | Legal