25. Purchasing at auction
Purchasing a property at auction in the UK involves buying a property through a public auction process conducted by an auctioneer. It is a unique and fast-paced method of buying property that offers both advantages and challenges for buyers.
Here is how it works:
| Listing and catalogue | Properties to be sold at auction are listed in an auction catalogue, which is made available to potential buyers in advance of the auction date. The catalogue contains details about each property, including photographs, descriptions, legal documentation, and any special conditions of sale. |
| Pre-auction preparation | Before attending the auction, potential buyers are encouraged to conduct thorough research on the properties they are interested in. This may include viewing the properties, obtaining legal advice, conducting surveys or valuations, and arranging finance. |
| Auction day | On the day of the auction, potential buyers gather at the auction venue, which is typically a conference centre, hotel, or auction house. The auctioneer conducts the auction, starting with introductory remarks and any announcements regarding the auction process or specific properties. |
| Bidding | Bidding begins when the auctioneer calls for bids on a particular property. Bidders indicate their interest by raising their bidding cards or signalling to the auctioneer. Bidding continues until there is no further interest, and the highest bid is accepted by the auctioneer. |
| Reserve price | Each property at auction has a reserve price, which is the minimum price the seller is willing to accept. If the highest bid does not meet or exceed the reserve price, the property may be withdrawn from the auction, or the seller may negotiate with the highest bidder after the auction. |
| Winning bid | The highest bidder, whose bid meets or exceeds the reserve price, is declared the winning bidder by the auctioneer. The winning bidder is then required to sign the contract for sale and pay a deposit, typically around 10% of the purchase price, immediately after the auction. |
Completion |
Following the auction, the winning bidder has a legally binding contract to purchase the property. The remaining balance of the purchase price is typically due within a specified timeframe, usually 28 days, unless otherwise agreed upon. |
Advantages of purchasing at auction
- Speed: Auctions offer a quick and transparent method of buying property, with a fixed timeline for completion.
- Potential bargains: Properties sold at auction may offer opportunities for buyers to secure properties at below-market prices.
- Certainty: Once the hammer falls, the sale is legally binding, providing certainty to both buyers and sellers.
Challenges of purchasing at auction
- Competition: Auctions can be highly competitive, with multiple bidders vying for the same property.
- Limited due diligence: Buyers must conduct thorough due diligence before the auction, as there may be limited opportunity for surveys or inspections.
- Financial risk: Buyers must have finance in place and be prepared to pay the deposit immediately after the auction, with no opportunity for negotiation on payment terms.
Purchasing a property at auction in the UK can be an exciting but demanding process, requiring careful preparation, strategy, and a willingness to act decisively on auction day.