Buying at Auction: What First-Timers Should Know Before Bidding

Buying a property at auction can be an exciting prospect, but the process moves quickly and the commitment can be significant. If you’re considering buying a property at auction, here’s what you need to understand about the different methods, the legal paperwork and the costs involved.

Property auctions aren’t just for experienced investors. They can appeal to a wide range of buyers, including those looking for renovation projects, properties with unusual features or homes that may not suit a conventional sale.

However, buying at auction is very different from purchasing through a traditional estate agency. There are important legal and financial commitments to understand, and being unprepared can prove costly.

The fundamental difference from a standard purchase

When buying through a traditional estate agency sale in England and Wales, an accepted offer is not legally binding. Either party can generally withdraw before contracts are exchanged.

At an unconditional auction, things work differently. Once the hammer falls, the successful bidder is usually legally committed to buying the property. Contracts are exchanged at that point, and a deposit – commonly 10% of the purchase price – is normally payable immediately.

Completion then takes place within the period specified in the auction conditions, often around four to six weeks. If the buyer cannot complete on time, they risk losing their deposit and may face further financial liabilities.

In other words, winning the bidding is not simply an agreement to buy later. It creates a binding commitment.

Understanding the two main types of auction

Two common formats are unconditional auctions and the Modern Method of Auction, also known as a conditional auction.

Traditional (unconditional) auction

The successful bidder exchanges contracts when the hammer falls, pays the deposit and is committed to completing within the agreed timescale.

Modern Method of Auction (conditional)

The successful bidder usually pays a reservation fee to secure the property for an agreed period. Contracts are not exchanged immediately; instead, the buyer is given a set period to exchange and complete.

A common arrangement allows 28 days to exchange and a further 28 days to complete, making 56 days in total. However, timescales and reservation fees vary. Fees may be calculated as a percentage of the purchase price, sometimes subject to a minimum, and can represent a significant additional cost.

Always check which method is being used and read the conditions carefully. The fact that a property is being sold online or in an auction room does not, by itself, tell you which contractual arrangement applies.

Why the legal pack matters

Auction properties are generally marketed with a legal pack, although you may need to request access to it from the auctioneer. It contains important information about the property and proposed sale, which may include:

• Title documents and ownership information.
• Local authority and other property searches, where available.
• Special conditions of sale.
• Leasehold information, where relevant.
• Planning and building regulation documentation, where available.

The contents vary, and not every pack will contain everything a buyer might expect. If important searches or documents are missing, discuss this with a solicitor before bidding.

Pay particular attention to the special conditions of sale. These can include additional obligations or costs, such as a buyer’s premium or administration fee, on top of the purchase price.

It is sensible to have a solicitor experienced in auction purchases review the pack before bidding. Also check for any updates or addenda issued before the auction.

Don’t overlook the survey

With an unconditional auction, arranging a survey after the hammer has fallen may be too late. The buyer is already legally committed, so there may be no opportunity to renegotiate or withdraw without financial consequences if problems are subsequently discovered.

With a conditional auction, the contractual position is different, but reservation fees and deadlines can still carry financial consequences. It is therefore important to investigate the property before committing.

Where possible, arrange a suitable inspection in advance. Depending on the property, this might involve a RICS surveyor or another appropriately qualified building professional. A viewing is equally important. Look beyond the photographs, assess the property’s condition and consider practical details such as access, boundaries and any visible signs of structural or maintenance issues. If significant work is needed, make sure you have a realistic idea of the likely costs before deciding what you would be prepared to pay.

Guide prices, reserves and setting a budget

The guide price in an auction listing is an indication, not a guaranteed selling price or valuation. The reserve price is the minimum amount the seller is willing to accept and is usually confidential.

A property may sell above its guide price, depending on demand and competition.

Before bidding, establish a firm maximum budget and stick to it. Remember that the hammer price is not necessarily the total cost. Additional expenses could include:

• Buyer’s premiums, reservation or administration fees.
• Solicitor’s fees and survey costs.
• Stamp Duty Land Tax, if applicable.
• Immediate repairs or renovation work.

If you need a mortgage, discuss and arrange finance well in advance. Auction timescales can make securing finance more challenging, particularly if a property needs work or does not meet a lender’s usual requirements.

Why are some properties sold at auction?

There are many reasons why a property might be offered at auction. Some require substantial renovation, while others may have unusual construction, title arrangements or leasehold issues. Properties may also be sold through auction as part of probate arrangements or by investors.

An auction listing also does not automatically mean there is something wrong with a property. Equally, it should not be assumed to be a bargain simply because it is being sold this way.

The important thing is to understand why it is being sold at auction and investigate any potential issues before making a financial commitment.

Is buying at auction right for you?

Buying at auction can offer opportunities, but it comes with different responsibilities and risks from a conventional purchase.

Preparation is key. Understanding the auction method, reviewing the legal documentation, assessing the property’s condition and knowing the full financial commitment can all help buyers make more informed decisions.

For first-time buyers in particular, taking the time to understand