Inside the world of buying a house at auction – our top tips
THE auctioneer raises his gavel and calls for final bids.
My finger is poised over my mouse – one click and I could be the owner of a three-bedroom house.
Then, to encourage a last offer, the auctioneer drops the amount he is asking for. “I’ll let you have it for another 500 – can I tempt you, internet?” he says.
The winning bid comes in and the gavel falls. The whole thing takes less than six minutes. Welcome to the world of online property auctions.
Here I take a look at all you need to know about buying at auction.
MODERN-DAY AUCTIONS
TODAY I am sitting at my desk, headphones in, watching the monthly SDL Auctions property auction on my computer screen.
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I am one of more than 1,000 people watching to see around 130 lots go up for sale.
But frankly, it’s not as exciting as I’d expected. Almost two hours in and we’re only on Lot 17.
If you had envisaged a crowded room and frantic bidding, you would be very disappointed.
These days the auctioneer is alone, with the bidding war live-streamed online.
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That may dent the atmosphere, but it also means more attendees and properties nationwide rather than local to the auction house.
And the property market is hot.
UK house prices soared by 12.8 per cent in the year to May, says the Land Registry, with the average home now costing £283,000.
Buyers are having to compete at crowded open days and sealed bids are the new norm.
So it’s no wonder buyers are thinking outside the box.
Last month estate agent Savills raised a record £78million across 127 lots at a property auction.
Auctions are well known for run-down fixer-uppers costing a few thousand pounds — but there are some expensive properties too. On that day, 11 lots sold for more than £1million each.
According to auction house Essential Information Group, or EIG, 59 property auctions were held across the UK in June, with 1,849 lots offered for sale. Almost 74 per cent of those sold, fetching a total of £309.5million.
Buying a property at auction is very different from a visit to the local estate agent.
Andrew Parker, auctioneer at SDL Auctions, said: “In an auction, when the gavel falls, it’s sold.”
SHOULD YOU BUY AT AUCTION?
SPEED is one of the great appeals of an auction. For the seller, it means they may have to accept a lower price than if they sold through an estate agent, but they should get the full amount within 28 days.
For a buyer, an auction removes the risk of being gazumped or having to go to sealed bids.
Many buyers think they will get a bargain at auction, but this is not always the case.
EIG founder David Sandeman said: “It’s an aspirational way to buy a property.
“TV shows like Homes Under The Hammer have made it look easy — but it’s not.”
It pays to understand the process and know the jargon.
Many people do not realise the guide price only indicates the reserve (the minimum the seller will accept). It does not tell you how much you can expect to pay.
It’s important to view any fixer-upper too, in case of any hidden problems.
If you don’t fancy a live event, you could look at timed auctions — where you place a bid within a set window, usually 28 days.
A number of sites offer auctions, with some specialising in certain property. Do your research first, read reviews and check fees.
Be wary of lots for sale through social media.
lets you search by location, price and property type.
hosts timed auctions, with lots from a range of estate agencies countrywide.
HOW TO PREPARE
VIEW IT: Viewing the property is Andrew’s first tip. He said: “You’d be amazed at the number of people who buy a property without having seen it.”
If you can’t get to the property, many agents offer virtual tours.
David said: “You can’t smell the damp or see the wallpaper that’s hiding a crack, but it’s better than it used to be.”
DO YOUR HOMEWORK: Be sure to read the legal pack.
Andrew added: “Or even better, pay a solicitor to read it.
“You wouldn’t buy a house without enlisting legal help usually, and this is no different.”
David estimates up to 30 per cent of buyers don’t read the pack. He said: “They just assume everything will be OK. It’s bonkers.”
He recommends reading the Special Conditions of Sale document, which contains terms of the contract, and in a minority of cases will be very onerous.
He said: “I saw someone buy some land for £200, not realising there were several thousand pounds-worth of extra payments to make as part of the contract.”
SET A LIMIT: It is easy to get carried away on the day, so set a budget of what you think the property is worth, and stick to it.
You will need to register in advance. This involves providing basic details and going through an identity verification process.
You will need to input some payment details. It will vary depending on the auction house but SDL Auctions will take £5,000 when the hammer drops if you are the winning bidder.
You will then be asked to pay the rest of the deposit, which is usually ten per cent, that day.
The full amount is typically due within 28 days.
SORT YOUR FINANCES: Sort your finances before the event. Most buyers at auction pay in cash. You might have the money from a property sale or inheritance.
Others use a bridging loan — a property loan for a short term — but these are expensive.
Getting a standard mortgage for an auction purpose is not easy.
Andrew said: “Buyers who have not got their finances in place — it’s not for you.
“And if you are a seller who is not in a rush, it may not be the way to get the best price.”
SELLING AT AUCTION: The main benefit is speed.
Once the lot is sold, completion is typically within 28 days. By comparison, a traditional house sale can take 100 days or more.
You may have to accept a lower price than you could otherwise achieve, although David points out that if you get into a bidding war, that might not be true.
You can also set a reserve price — the minimum you will accept.
Sellers typically pay an entry fee, which can be anything from £200 to around £1,000.
You also pay a commission on the sale price, usually one to two per cent. There may be VAT to pay too.
One alternative offered by some auction houses is the seller pays no fee but the buyer pays a higher commission, around four per cent.
This means no upfront cost to the seller, but may mean the bids don’t go as high, as buyers look to avoid extra charges.
WINNING BID A REAL RUSH
CAROLINE Duddridge and her partner Paul Jones have bought three properties at auction.
They paid £26,500 for a three-bedroom terrace in Wales in 2011. They rented it out for £400 a month then sold it this year for £60,000.
Caroline, 63, a retired teacher said: “You need to do your homework and know what you are buying – we didn’t want anything that was structurally unsound.”
She and retired police officer Paul, 64, from Cardiff, bought two more properties in 2016. They paid £36,000 for a three-bedroom terraced house, and after painting it, putting in new flooring and clearing the garden, it sold for £55,000.
A larger plot was bought for £185,000 and later sold to Transport for Wales for £250,000.
Caroline said: “We are thinking about doing it again but auctions are more popular now and I’m not sure you can get bargains like you used to.
“The auction itself is very exciting. When you are the winning bidder, it’s a real rush.”
It's not like it looks on TV
KATIE Brown quit her job as an English teacher to become a full-time property surveyor after she bought a house at auction.
She and husband Jim, 35, bought the two-bed cottage in Wigan, Greater Manchester, for £40,000 in 2014.
Katie, 34, said: “It’s exciting but nerve-wracking. There is a lot of adrenalin and afterwards you almost can’t believe that you’ve done it.”
The couple rewired it and put in new plumbing, heating and insulation. She estimates it’s now worth £80,000 and they rent it out for £450 a month.
The couple, from Wigan, bought a second property, a two-bed terraced house in 2018 for £65,000.
It was already being rented out and provides an income of £450 a month.
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The couple, who run FJ Brown & Co Chartered Surveyors, hope the properties will provide them with enough money when they retire.
Katie added: “TV programmes romanticise the process. They don’t show the headaches and complexities of it all.”