The Ins and Outs of Property Auctions

Property auctions have been cloaked in myths and misconceptions for years. This method of buying and selling a property is becoming more common place, so we thought it was about time we helped clear things up by explaining the ins and outs of property auctions.

What is a property auction?

A property auction is a public sale event where properties are sold to the highest bidder. These properties may include houses, apartments, flats, HMO’s and any commercial building and plenty more.

The auction is typically conducted by an auctioneer who presents each property to the audience and opens the bidding at a predetermined price. Bidders then have the opportunity to bid on the property, with the highest bidder winning the auction and being obligated to complete the purchase.

The auction process is transparent and straightforward, with all bidders competing on a level playing field. This makes it an attractive option for buyers looking to secure a property quickly and at a fair price.

Additionally, properties sold at auction often come with a fixed completion date, which can provide greater certainty and speed up the buying process. However, it’s important to note that properties sold at auction may require additional due diligence, as they are typically sold “as is” without any warranties or guarantees.

Overall, a property auction can be an efficient and cost-effective way for both buyers and sellers to conduct property transactions in a transparent and competitive environment.

Who buys at property auctions?

The buyers of residential properties at auctions include a wide range of individuals and organisations, each with their own motivations for purchasing at auction. They include:

• Investors who are seeking to purchase properties with the potential for a high return on investment. These could include landlords looking to expand their portfolios, property developers seeking new projects, or property flippers looking to buy and sell quickly for a profit.
• First-time buyers are also known to purchase properties at an auction, attracted by the opportunity to secure a property quickly.
• Individuals looking for a unique or unusual property, such as a converted church or a listed building. These properties can be difficult to sell on the open market but may attract a niche audience at an auction.
• Finally, organisations such as housing associations or local authorities have also been known to purchase properties at auction as part of their social housing programs.

Who sells at property auctions?

There is a wide range of sellers at property auctions. Here are some of the most common types of sellers:

• Executors of deceased estates often sell properties at auction in order to distribute the proceeds of the estate to beneficiaries.
• Property investors, including landlords and developers, often sell properties at auction as part of their investment strategy. This could include selling properties that have reached the end of their rental period or those that need renovation.
• Homeowners who are facing financial difficulty, such as those in arrears on their mortgage payments, may choose to sell their property at auction as a way of avoiding repossession.
• Divorcees may choose to sell their property at auction as part of the settlement process, in order to divide the proceeds of the sale between themselves and their former spouse.
• Public bodies, such as local authorities or housing associations, may choose to sell residential properties at auction as a part of their housing strategies.
• Owners of unique or unusual properties may choose to sell at auction as they can be difficult to market through traditional methods.
• A motivated seller is key

This is just a sample of the types of people that historically have sold properties at an auction. Auctions are fast becoming more common place though so we are seeing sellers who are upsizing or downsizing buying and selling through auction too.

The benefits of buying or selling at a property auction

There are several unique benefits for both buyers at auctions, some of these are:

• Chain free properties usually thus making them attractive to investors and buyers.
• Speed of transaction. Unlike buying through traditional methods, where the process can take several months, properties at auction are sold on the day of the auction, with completion typically within 28 days. This can be attractive to both buyers and sellers who need to move quickly.
• Variety of properties available. Property auctions offer a wide variety of properties, from traditional family homes to unique and unusual properties, such as converted churches or warehouses. This can be appealing to buyers looking for a specific type of property that may not be available on the open market.
• Transparency and competition. Property auctions offer a transparent and competitive environment for buying property. All bids are made in public, and the highest bidder secures the property, eliminating the risk of gazumping/gazundering or a sale falling through.

What is the process of selling a property at an auction? 

Selling a property at an auction can be a fast and effective way to achieve a sale. Here are the typical steps you would take to sell your property at an auction:

• Find a local estate agent that offers an auction service. These will be your people on the ground and very important to the process.
• Set a reserve – between yourself the agent and the auctioneer you will agree on a reserve price, this is the minimum you will walk away with unless you accept an offer.
• Your estate agent will be responsible for marketing the property and they would do this in their normal way, with regards to photos, floorplans etc.
• Provide information – The auctioneer will need legal documentation to produce a legal pack, this can be done by their team, or you can seek independent advice from you solicitor to put this together.
• Viewings – The agent you choose to work with will carry out the viewings on the property for you as part of their obligation.
• Auction day: On the day of the auction, attend the auction if you wish, but a lot are done online now but you can still get the excitement by watching the bids. The auctioneer will present your property and open the bidding at or above the reserve price. Online auctions are becoming increasingly popular due to their accessibility.
• Completion: If your property sells at auction, the buyer will be required to pay a deposit and fees on the day, with the balance due within the agreed timeframe you set out at the start. Once the sale is completed, you will receive the proceeds of the sale.

What is the process of buying a property at an auction?

Buying a property at a UK residential auction requires careful planning and preparation. Here are the typical steps you would take to successfully purchase a property at auction:

• Research the properties: Before the auction, review the catalogue and identify the properties you are interested in. Conduct thorough due diligence on each property, including a physical inspection and research into any potential legal or financial issues.
• Get your finances in order: You will need to have your finances in order before the auction, as you will typically be required to pay a deposit of around 10% of the purchase price on the day of the auction, with the balance due within 28 days. Make sure you have arranged finance and have the necessary funds available.
• Attend the auction: If the auction is a live auction (in person) arrive early and register to bid. Set a maximum bid limit and stick to it.
• Bidding: When the auction begins, wait for the property you are interested in to be presented, and then start bidding. You can bid in person, online, or over the phone. Remember to stay calm and focused, and don’t get caught up in the excitement of the moment.
• Winning the auction: If you are the highest bidder when the auction ends, you will be required to pay the deposit immediately, so make sure you have the funds available. You will then need to complete the purchase within 28 days.
• Completion: After completing the purchase, you will receive the keys to the property and become the new owner. It’s important to note that properties sold at auction are typically sold “as is,” so make sure you are comfortable with the condition of the property before completing the purchase.

In summary, buying a property at an auction requires thorough research, careful planning, and good financial preparation. If you follow these steps and remain focused, you can successfully purchase a property at auction.

Selling your home at an auction with Lovelle

Did you know? You can sell your property at auction with us for free! Our auction department has over 25 years of auction experience and an expansive partner agent network, we can ensure maximum exposure on a national scale for your property all with expert knowledge from your local branch. If you would like to find out more about selling your property through us at auction please click here.