Photos of an auctioneer's hammer, auctioneer and property

Learn how YOU can find property at up to 40% below market value

PROPERTY AUCTIONS BEGINNERS GUIDE

New to property auctions? Wondering what the process is, what to do, what not to do, how to compete with more experienced bidders? We’ve got tips and information to help you know exactly what you’re doing and how to get a competitive edge.

Do not even think about bidding before you are 100% sure of all the costs involved. Get our FREE! and easy to use Property Auction Calculator which takes out the guess work. There are many important costs you need to consider when buying a property at a auction. Our free calculator is simple to use - just fill in the figures and everything is calculated for you. We believe an educated bidder is a smart bidder.

Do not be one of the many people who pay too much as auction. It's well documented on television programmes that cover property auctions such as "Under the Hammer" that people lose thousands because they have not structured their thinking to consider all the costs involved.

What kind of property is sold at property auctions?

People buy property at auctions because the price will sometimes be discounted up to 40%, or even more, from the market value of the property. And whether your objective is to fix up and sell your new property at a profit, or to make a buy-to-let investment, getting the property at a bargain price can create an excellent return on your investment.

Why do properties sell for less at auctions in the UK? Limited time.

Normally a seller will decide the worth of his property and offer it at that price. Eventually a buyer will enter the market looking for exactly such a property at the seller’s price.

But sometimes mortgage lenders, local authorities, housing associations, or even the Ministry of Defence have taken possession of a property. These organizations don’t wish to be owners. They want to sell as quickly as possible.

To make sure the sale happens immediately many are sold at auction with very low “reserve” prices. Since there may not be a buyer in the market for that property at the maximum price, you are in the position to buy a bargain.

Many investors have picked up property at a bargain, added value by renovating or refurbishing, and sold the property for short-term profit, or rented the property out for long-term capital gain.

To have a competitive advantage over other bidders, you must know exactly how much you can afford to pay for the property without paying too much to make a profit. You need to know every single cost. Our free calculator will prepare you with all of the costs already listed out and explained for you.

How to choose the property

About three weeks before the sale, the auction houses can send you an auction catalogue, which will give basic details on all of the properties being offered for sale. You’ll have to move fast, because there are a lot of things to organize before the day of the auction.

When you have selected the property at the real estate auction you wish to bid on, you should arrange to view that property as soon as possible with the auctioneer. You can submit an offer at any time before the auction, if you wish. If the seller finds your offer suitable, you will exchange contracts with the seller and the property will be withdrawn from the auction.

No one should ever bid or make an offer on a property without knowing all of the numbers inside out. Using our FREE! and easy to use Property Auction Calculator you’ll have a massive competitive advantage just in knowing what your price ceiling (maximum bid) should be.

Find out more about how to select the right property at a real estate auction.

Costs you must know to show a profit

Whether you are buying at auction to renovate and sell your new property at a profit, or to refurbish and rent out there are many categories of costs that you must know before you bid.

When the auction hammer falls, the highest bidder has to pay a 10% deposit there and then. You’ll need this much available the day of the sale. Also, the buyer normally is required to complete the sale within 28 days, so it is essential that you have arranged financing before hand. Make sure you have a formal agreement with your lender on the property concerned so that you will be able to complete in time.

Three most used methods of financing a property

The most common ways to finance your property auction investment are:

Mortgage
Bridging loan
Business loan

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Make sure that you know all of the costs involved with each method of financing. In addition to interest rates, you need to be aware of other charges, such as lenders’ fees and arrangement fees. Budget for these as well.

Confirm that the lender can guarantee your funds before completion.

Learn more about how to determine which financing is best for you.

Negotiating the complexities of property law

UK Property law can be extremely complex, so get legal advice from your solicitor regarding the property you’ll be bidding on. You’ll want assurance there are no legal problems, such as bad title of ownership.

Your solicitor will want as much advance notice as possible before the auction. The auctioneer has copies of the legal documents for each property, known as the “legal pack.” This will contain local authority searches and other searches and the “Special Conditions of Sale.”

Your solicitor will examine both the “General Conditions of Sale” found normally in the back of the auction catalogue, and the “Special Conditions of Sale” in the legal pack which relate to just the property you’re interested in.

The property auction catalogue forms part of the contract between you and the seller. The legal pack will outline such issues as very short completion times. (You will want to know if the seller expects you to complete the sale in 14 days rather than the more customary 28, won’t you)?

Just as you’ve arranged the financing with your lender in advance, you may need to arrange your buildings insurance policy to begin the minute the hammer falls. Ask your solicitor for a recommendation on a property that you are interested in.

There will be some costs you have to pay for before the auction, and you may not even win the bidding.

Make sure the property has been surveyed. If you’re financing your purchase with a mortgage, your lender will require it. If you’re paying cash you’ll still want to ensure the property is structurally sound and isn’t going to drain your resources.

Unless you are an expert in both property law and surveying, heed your solicitor’s advice. Paying your solicitor for information that prevents you from bidding on an expensive mistake can be your least expensive insurance.

On auction day

If you plan to bid on auction day, you’ll need to bring:

2 forms of identification
your auction catalogue
your solicitor’s details
your deposit

Check before you get to the auction so that you’re aware of any specific requirements.

The auction may provide you with a paddle that has a number you’ll bid with.

If you can’t attend in person, some auction houses will allow you to bid by telephone, or even via the Internet. Ask the property auction house if they offer this service.

Before bidding begins the auctioneer will check that everybody has a copy of the “Addendum or Announcement” sheet. He will also read out any last-minute alterations to the catalogue details. These announcements and the Addendum are also part of the contract between you and the vendor.

The Guide price is the vendor’s minimum expectation on price. It is often found in the auction catalogue. This is not a reserve price and is pitched to attract buyers.

The Reserve price is the minimum amount that the property will sell for and is set by the vendor. It is often below the guide price. It is common for the property to sell above the reserve.

Never forget that the auctioneer works for the auction house. His job is to get the bids as high as possible.

See our Real Estate Auction Bidding Tips section for advice and insight on successful bidding.

Remember that everyone also interested in the property you wish to bid on is your competition. It’s probably not a good idea to tell the people in the room of your plans.

More important information:

Don't pay too much for a piece of property at auction. Get a complete checklist of all the costs involved and how to calculate them with our FREE and easy to use Property Auction Calculator. We've done all the work for you. You'll know exactly what price you can bid up to at the property auction.