Tips for buying a property at auction

Buying a property at auction can be a thrilling and nerve-wracking experience all at once.

It's a unique opportunity to purchase a property at a potentially lower price than market value, but it also requires careful planning, research, and strategy.

Whether you're a first-time bidder or an experienced investor, there are many factors to consider. Let’s take a look at a few.

Understanding the auction process 

To participate in an auction, you'll need to register with the auction house in advance. You'll then be given a bidding number, which you'll use during the auction.

The auctioneer will start the bidding at a predetermined price, known as the reserve price. If no one bids at the reserve price, the property won't be sold. If there's interest, the bidding will continue until there's only one bidder left. This person will be the successful buyer, and they'll need to pay a deposit immediately. The remaining balance will need to be paid within a set timeframe – usually around 28 days.

It's important to remember that buying a property at auction is legally binding, so it's crucial that you do your research and understand what you're bidding for. If you're unsure about anything, it's recommended that you seek legal advice beforehand.

Researching and evaluating the property

Research is a crucial step to make sure you’re making an informed decision.

First, try to get an idea of the property's market value. Evaluate the property based on its location and historical sales data. You can work with an estate agent to get a better understanding of the market value of the property.

Then, inspect the property in person to determine its condition. You can get a survey done to confirm its structural soundness.

Once you have inspected and researched the property, it's time to evaluate your budget and analyse how much you're willing to spend. Make sure you have a pre-approved budget, so you only bid on properties that you can afford.

Securing financing for the purchase 

You don’t need to be a cash buyer to purchase a property at auction. One option is to secure a pre-approved loan from a bank or lender before attending the auction. You can apply for a ‘mortgage in principle’ before the auction so it’s ready as soon as you own the property. This allows you to know how much you can afford to bid and gives you a competitive advantage over other bidders who may not have secured financing.

However you must pay 10% as soon as you win the auction and if you don’t pay the remaining 90% within the month, you’ll lose the 10% as well as the chance of buying the house. If you’re very unlucky you may also have to cover the costs of reselling the property.

It’s a good idea to have your solicitor or conveyancer on board prior to auction so that everything can be actioned as soon as you’re successful.

Bidding strategy and tactics

Bidding at an auction can be an exciting and nerve-wracking experience. It’s important to have a clear strategy in place to ensure you don’t overpay for a property.

Firstly, it’s important to arrive at the auction early to observe the competition. Take note of who else is interested in the property, how much they are willing to bid and their bidding style. This can help you determine your own approach, whether it’s bidding confidently and aggressively or waiting until the end and striking with a quick bid.

One important tactic is to bid in odd increments, instead of rounding up to the nearest thousand. This can throw off your competition and make them think you have more flexibility in your budget than you actually do.

Overall, stay composed and stick to your predetermined bidding strategy. Don’t let your emotions control the bidding process and avoid getting into a bidding war that could leave you with a property that you overpaid for.

Post-auction steps and considerations

Once the hammer falls and you've won the auction, the steps you take next are crucial to ensure that the purchase goes smoothly. The first step is to pay the deposit immediately. You’ll also need to sign the contract and provide proof of identification.

After paying the deposit, you will then need to arrange for the remainder of the purchase price to be paid within the time frame specified in the contract.

You should also obtain legal advice from a conveyancer or solicitor to ensure that you understand the contract and any potential issues with the property.

In short, buying a property at auction can be a thrilling experience. It requires a certain level of preparation and research to make the best decisions. However, it can also be hugely rewarding, with the potential for finding a dream home or investing in a valuable asset.