Tips for buying at auction property
(Last Updated: 07/12/2023)
09/02/2023
6
6 min read
Buying at auction can save you or cost you thousands of pounds, so here are our top tips for buying at auction property.
Tips for buying at auction property
- 1
Review the Auction Legal Pack
This is probably on of the top tips for buying a house at auction. An Auction Legal Pack is prepared by the seller and includes the following documents:
- Contract of Sale. Confirms who the seller is, so you can see if the property is being sold under probate or as a repossession.
- Title Deeds. Check to see what easements, restrictive covenants, restrictions and charges are on the title.
- Property Information and Fittings and Contents Forms. What information does the seller tell you about the property you're buying? There's often very limited information.
- Property Searches. These are crucial for answering whether you can get a mortgage over the property, due to entries at the council/water board/environment agency, however, sellers often don't provide these.
The auction legal pack is often only released 2 to 5 working days prior to the auction, with limited information. You are advised to get a solicitor to inspect the pack and identify risks from what is provided. Read more - What are the risks of buying at auction?
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Freehold Pre-Auction Report Review
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£299 INC VAT
2 working day turnaround* | Completed by our panel solicitor.
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Leasehold Pre-Auction Report Review
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£480 INC VAT
5 working day turnaround* | Completed by our panel solicitor.
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- 2
Check for defects at the property
Having a qualified builder or RICS surveyor attend the property is a must. They'll be able to spot issues with the property that could either:
- Cost more to repair after completion; or
- Make the property not mortgageable until works have been completed, such as part concrete build, steel frame, damp or subsidence.
- 3
Watch out for the Auction Costs
When you buy at auction, there are additional costs that go on top of your winning bid and they can be considerable. They'll be listed within the Auction Terms of Sale or Special Conditions of Sale and could include:
- Seller's Property Searches. The searches provided in the pack will need to be paid for by you. You'll normally see something like this in the special conditions "On or before completion the Buyer shall pay the Seller the full cost of any local search, drainage search, Land Registry official copies, proposed plans, planning costs or any other search provided by the Seller in the auction."
- Auctioneer Admin Fee. Ranging from £300 to £2,000, this is a payment to the auction house so look for "pay £600 plus vat towards the seller’s auctioneers administration fee."
- Enquiries Post Completion. Ranging from £300 to £1,000, this is a payment to the seller's solicitor for post auction replies to enquiries, however there is often very little replies of value, "In the event of the Buyer requiring enquiries to be answered after exchange of the contract a minimum fee of £500.00 plus VAT is payable to the seller’s solicitors."
- 4
Have your financing ready
Whilst the majority of auction purchases are paid for by cash, if you are getting bridging finance or a mortgage, then you need to be prepared to move quickly. You'll need a valuation, offer and independent legal advice if buying through a company or bridging. This advice is separate to the solicitor handling your Auction Conveyancing.
- 5
Buy using a budget
Another one of the top tips for buying a house at auction is to make sure you factor in all the costs and work out what the sale price would be once you own it. Here's a simple example:
Description | £ |
What is the property worth post work? | £300,000 |
How much did you pay at auction? | £200,000 |
Gross Margin | £100,000 |
What were the auction costs? | £3,000 |
What were the purchase costs? (SDLT, LR, Legal fees) | £7,500 |
What were the costs for works to the property? | £30,000 |
Pre-Sale Margin | £40,500 |
Total Costs | £40,500 |
What were the sale costs? (Agents, Legal fees) | £8,200 |
Pre-Tax Profit | £32,300 |
- 6
Factor your own time into the costs of purchase
If this is your primary job, then spending 12 months on one auction purchase, making a profit of £32,300 means this is your salary for the year. Your time should be factored into the cost to see how much of a return the purchase at auction really was.
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Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
