The Pros and Cons of Buying a Property at Auction

Buying a home at auction can be a tempting way to snap up a bargain, but it’s not for the faint-hearted. 

The fast pace, upfront costs, and potential competition mean you need to be fully prepared before placing a bid. 

Whether you’re a first-time buyer or an investor, here’s what you need to know before stepping into the auction world.

Why Buy a Property at Auction?

The traditional house-buying process can be slow and frustrating, often taking months from making an offer to getting the keys. Auctions on the other hand, are designed for speed. 

If you win a bid, you’ll need to pay a deposit immediately and complete the purchase within 28 to 56 days.

It’s a common misconception that only run-down properties end up at auction. While some houses need serious work, you can also find probate sales, repossessions, and landlords looking for a quick sale. 

In some cases, properties sell for less than their market value, which is why auctions have a reputation for bargains.

However, competition can be fierce. In London and other major cities, properties sometimes sell for more than they would through an estate agent.

The Risks of Buying at Auction

While auctions can be a great way to find a property quickly, there are risks involved:

• Limited time for due diligence - Unlike buying through an estate agent, you may only get one opportunity to view the property. This makes it harder to spot any issues.
• Non-refundable deposit – If you win a bid, you’ll need to pay a deposit immediately (usually 10% of the sale price). If you can’t complete the purchase, you’ll lose this money.
• Mortgage complications – If you need a mortgage, your lender must complete their valuation and approval process within a strict deadline, often as little as 28 days. If they don’t, you risk losing the property and your deposit.
• Potential hidden costs – Structural problems, legal disputes, or short leases aren’t always obvious. You need to thoroughly check the legal pack and ideally get a survey done before bidding.

How Auctions Differ from Estate Agent Sales

Buying at auction is nothing like the back-and-forth of negotiating with an estate agent. Once the hammer falls, the sale is legally binding. 

You’ll need to have your finances ready to go and complete within a set timeframe.

Unlike estate agent sales, where you might view a property multiple times and take weeks to decide, auction listings appear shortly before the event, sometimes with only a few weeks to do your research. 

You’ll also be competing with other buyers in real-time, which can lead to bidding wars.

How to Get the Finances for an Auction Purchase

One of the biggest hurdles for auction buyers is getting the money together quickly. If you’re paying in cash, the process is easy. But if you need finance, you need a plan in place before bidding. Here are your main options:

Get a Mortgage

You can buy at auction with a mortgage, but it needs careful planning. Most mortgage lenders will only approve loans for properties that are in a liveable condition, meaning they must have a kitchen, bathroom, and central heating. 

If you’re considering a renovation project, securing a mortgage could be tricky.

Use Auction Finance

Auction finance, also known as bridging finance, is a short-term loan designed for buyers who need quick access to funds. This can be useful if you’re buying a property that’s not mortgageable or if your mortgage lender can’t complete in time.

Re-Mortgage Another Property

If you already own a home or investment property, you could raise funds by remortgaging or taking out a secured loan. 

This can be a good option if you want to avoid the high interest rates of auction finance.

Cash Savings and Investors

If you have enough savings, buying in cash is the easiest way to secure an auction property. 

Alternatively, some buyers team up with investors who provide the funds in exchange for a share of the profits when the property is sold or rented out.

Where to Find Auction Properties

If you’re interested in buying at auction, there are several places to start your search:

• Auction house websites - SDL, Allsop, John Pye, and Savills are some of the UK’s biggest auction houses.
• Rightmove and Zoopla - Both list auction properties alongside traditional sales.
• Essential Information Group (EIG) - A property auction database where you can search by area and price.

Is Buying At Auction Worth It?

Buying a property at auction can be exciting and, in some cases, a smart way to find a bargain. But it’s not without risks. The speed of the process, the financial commitments, and the competition mean it’s important to be well-prepared.

If you’re serious about buying at auction, do your research, get your finances in order, and make sure you understand the risks before raising your hand. 

A bargain property isn’t a bargain if it comes with unexpected costs or legal headaches.