Snap up a bargain at a property auction

It's a buyer’s market at today's property auctions. But you still need to do your due diligence before bidding.

A property auction © Alamy
Buying at a property auction means you can close the deal much faster

You might not realise it from the popularity of shows such as Homes Under the Hammer, but property auctions are suffering a slowdown. In the last year, £2.7bn-worth of residential property was sold through auctions in the UK a sizeable figure, but down almost 14% on the previous 12 months due to fears about Brexit and other economic uncertainties. That downturn means it's very much a buyer's market right now, says Chris Coleman-Smith, head of auctions at property company Savills. Three or four years ago, the boot was on the other foot.

Still, if you're a potential buyer considering bidding at auction for the first time in the hope of getting a good deal, there are a few tricks to learn before bidding. If you're attracted to auctions solely because the guide price looks like a steal, you may well be disappointed when a property sells for much more. It's not necessarily a trick to get people along but it is an example of why you need to understand the subtleties of the process. "The guide price should really be seen as a guide to the reserve the lowest price the seller will accept," says veteran auctioneer Clive Emson. "There's a protocol among auction houses that the reserve price should be within the parameters of the guide price, or if the guide is a single figure it should be no more than 10% above it."

In fact, while bidders are generally looking for a bargain when they venture into the auction room, there is a more compelling reason for being there. "You can go in and walk out a couple of hours later with a contract," says Coleman-Smith. "That's something you can't do in an estate agent. When you buy through private treaty, the owner can change their mind a couple of months down the road and decide they don't want to sell."

Be ready before you bid

There are usually viewing days before the auction when you can see a property you've decided to target. There will also be a legal pack containing all the key documents, such as searches and the title deeds. Studying this in detail is crucial it could alert you to major potential problems. "I had one property I was interested in, a flat in Brixton," says property investor Samantha Collett. "But when I examined the documents I found there was no right of way over the communal stairway, so I decided not to go ahead."

Many properties in an auction catalogue will be there because they are difficult to sell, so make sure you're aware of any problems. Taking a friendly builder along to look at your prospective purchase is a good idea, since they can highlight any glaring issues, such as subsidence, and how much it will cost to fix.

If your bid is successful, you will need to have a 10% deposit available that you can transfer on the spot (you should also bring two sets of ID to prove who you are, for anti-money-laundering purposes). From that point, you will typically have around four weeks until completion, when the rest of the price is due. So you should already have these funds secured before your bid whether in the form of cash, a solid mortgage offer or a bridging loan.

Recommended

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
It's not just the UK – we're seeing pandemic housing booms across the globe
Property

It's not just the UK – we're seeing pandemic housing booms across the globe

Soaring house prices aren’t just a UK thing, they’re a worldwide phenomenon. And it’s no coincidence – the underlying cause is much the same. John Ste…
18 Jan 2021
Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021
Frisby’s forecasts – what does 2021 have in store for investors?
Stockmarkets

Frisby’s forecasts – what does 2021 have in store for investors?

Dominic Frisby gazes into his crystal ball and makes his predictions for the markets in the year ahead.
6 Jan 2021

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021