Step-by-Step Guide to Buying Property at Auction

Buying a property at auction can be an exciting way to secure real estate at competitive prices. However, it requires careful planning, financial readiness, and thorough research. This step-by-step guide will walk you through the auction process, helping you make informed decisions and avoid common pitfalls.

Step 1: Understand How Property Auctions Work

Before diving into property auctions, it's essential to understand how they function. Property auctions typically take place in physical auction houses or online platforms, with properties sold to the highest bidder. There are two main types of property auctions in the UK:

• Traditional Auctions – The property is sold immediately at the auction, and the winning bidder must pay a 10% deposit on the day, with the balance due within 28 days.
• Modern Method of Auction (MMoA) – This offers more flexibility, allowing buyers 28 days to exchange contracts and up to 56 days to complete the purchase.

Step 2: Research Auction Properties

Not all auction properties are bargains, so research is crucial. Start by checking auction catalogues, which are usually available a few weeks before the auction. Consider:

• Property location and potential value – Compare it with similar properties in the area.
• Auction guide price vs. market value – Guide prices can be misleading; properties often sell for more.
• Reason for sale – Some properties are auctioned due to financial distress or legal issues.

Step 3: Arrange Your Finances

Having your finances in order before bidding is crucial, as auction purchases require quick payments. Your financing options include:

• Cash Purchase – If you have available funds, you can complete the transaction quickly.
• Auction Finance/Bridging Loans – Short-term loans designed for auction buyers, providing fast access to funds.
• Buy-to-Let or Commercial Mortgages – Suitable if you plan to let out the property, though they may take longer to arrange.

Step 4: Conduct Due Diligence

Due diligence is key to avoiding costly surprises. Before the auction:

• View the property – Visit in person or arrange a survey to check for structural issues.
• Check the legal pack – Includes title deeds, searches, special conditions, and tenancy details (if applicable). Consult a solicitor to review this before bidding.
• Understand the costs – Factor in auction fees, legal fees, and any refurbishment costs.

Step 5: Set a Maximum Bid & Stick to It

It's easy to get carried away in a bidding war, so establish a maximum bid limit based on:

• Your budget – Include purchase price, renovation costs, and financing fees.
• Expected return on investment (ROI) – If buying for rental income or resale, ensure the figures stack up.

Step 6: Register for the Auction & Prepare to Bid

To participate in the auction, register beforehand and bring the necessary documents (e.g., ID and proof of funds). On the auction day:

• Attend in person or bid online/by proxy – If you can't attend, some auctions allow proxy bidding where an auctioneer bids on your behalf.
• Stay calm and focused – Stick to your budget and avoid emotional bidding.

Step 7: Winning the Auction – What Happens Next?

If you win the bid:

• Pay the deposit immediately – Usually 10% of the purchase price.
• Sign the contract – This legally commits you to the purchase.
• Arrange remaining funds – Complete payment within the specified timeframe (typically 28 days for traditional auctions).

Step 8: Completion & Taking Possession

Once full payment is made:

• Receive the keys – You officially own the property.
• Register ownership – Ensure the property is registered with the Land Registry.
• Plan your next steps – Whether refurbishing, letting, or reselling, execute your strategy efficiently.

Conclusion

Buying a property at auction can be rewarding, but preparation is key. By understanding the process, conducting due diligence, and securing the right financing, you can successfully invest in auction properties while minimizing risks.

Looking for auction finance? Contact our expert team today for tailored financing solutions to secure your next auction property with confidence!