Top tips for buying at auction.

Whether it’s for the buzz of bagging a bargain or the relief that no one can come in and gazump you after the hammer has fallen, thousands of bidders throughout the UK bid at auction each month, either in person or online, on a range of different property types… with many making avoidable mistakes.

We asked our expert auction team for their top tips on how to avoid the common errors that even the most seasoned buyers make.

Always read (and understand) the legal pack

When we first started talking about the biggest mistakes that our team had seen, one reoccurring winner emerged; bidders simply don’t read the legal pack.

‘But I didn’t know the house was in a flood zone’ – it was in the legal pack.

‘I didn’t know about the outstanding debts on the property’ – it was in the legal pack.

Essentially, the legal pack is a set of documents prepared by the seller’s solicitor containing all the essential information about the property. It will be available freely to download via the auction’s website, and, if you register with Essential Information Group (EIG), you can get notifications if the pack on your chosen property changes before the auction – even on the day!

Director of Auction Finance at Together, Scott Hendry, points out that, “It’s really important that you understand the legal pack. If there’s anything in it that you may be not 100% confident about, you’re always more than welcome to get your own solicitor to have a look and review. Definitely ensure that you read and review the special conditions of sale, included in the pack, as this contains a variety of important information – in particular any aspects that may see you incur additional costs. If the legal pack is not available, you should certainly consider not buying the property as this could be a red flag.”

Here’s what to look out for in the legal pack.

Find a solicitor who is familiar with auctions

It’s vital that the solicitor you use knows that you’ve got a quick completion period, whether that’s seven, 14 or 28 days. They need the experience and capability to work to those timescales.

Your solicitor should also be Solicitors Regulation Authority (SRA) regulated, and aware they will act as dual representation in most purchases. With that in mind, make sure that you speak to your solicitor to clearly convey your requirements and to ensure that the process is streamlined from beginning to end.

Keep calm

Auctions can be very competitive, with auctioneers skilled in getting the best price possible and lots of properties often going for way over the guide price. It can be easy to get caught up in the action, especially when duelling against another bidder on your preferred property, but this could lead to you agreeing to pay more than you can afford.

Avoid this mistake by keeping calm, and going into the auction with your absolute maximum budget in mind. Remember that every increase over your maximum budget is eating into your potential profit margins or adding extra costs to your mortgage.

And, if you lose out on a property, don’t worry – there are plenty of other fantastic auction opportunities and you may even snag yourself a bargain later down the line.

Get your finance approved before auction

Another thing that can help you keep calm, and focused, is having your finance sorted before entering the auction room. Knowing how much you can borrow, the types of properties that you should focus on and your affordability beforehand will stop you making costly mistakes. No more paying way over the odds and then worrying that you won’t be able to find the funds required to complete the purchase.

When we asked Sue Nicholson, Auction Sales Manager at Together, for her view on this, she said, “Getting a Decision in Principle and doing your research into the products and properties you would like ahead of time will give you the confidence to bid.”

Beware of the “six-month” rule

Auctions are a great way for investors looking to make a profit. Buying and redeveloping – popularly known as “flipping” – is common, as auctions have a shorter completion period and a higher certainty of sale compared to other methods of selling property which can fall through.

However, as the vendor may have only owned the property for six months or less at the point of sale, it can make getting a mortgage on an investment or Buy to Let property harder for the winning bidder, especially when applying for finance with many of the high street providers.

Make sure you do your research before the auction, and, if you find yourself in a situation where the property breaks the six-month rule, suggestions from our team include:

1. Not buying the property at all.

2. Buying with cash.

3. Utilising the services of a specialist finance provider.

Check the completion period

At a conditional auction, you’ll typically get 28 days to complete the purchase. But, if you take out weekends, that is actually only 20 to 21 working days. You can sometimes get completion periods of 14 days and, very rarely, it could be as little as seven.

Getting funds fast can be tricky at the best of times. But buying the types of buildings typically available at auction, like non-standard properties, can add additional complexity to passing lending criteria or prolong processes, making it almost impossible to complete within these time frames through a high street lender.

With a non-conditional auction, you’d get 28 days to exchange and an additional 28 days to complete, giving you a total completion window of 56 days.

If you aren’t able to meet your initial completion date, you would most certainly lose your deposit in addition to further fees, and should the property have to be resold at auction, you could be liable to pay the difference between what you agreed to buy the property for and its new sale price at auction.

Visit the property

Although the legal pack does give a great indication of some of the challenges you might face if you won the bid, you can only really see the condition of the property in person.

If you aren’t allowed to visit the property, you should definitely question why. There may be issues with the building that the vendor doesn’t want you to see. A viewing is also your opportunity to ask questions or assess any known issues, such as the extent of damp.

You should also consider visiting the area around the property at different times of the day to get an accurate feel for the location. You don’t want to find out about early morning traffic or late night noise after you’ve completed your purchase.

Investigate tenancies

Is the property you’re planning to purchase currently being rented out?

Take the time to find out some background information about both the tenant and the tenancy agreement. Assured Shorthold Tenancies can cause issues for finance with some of the big lenders. If you buy a property with a regulated tenant, it may be a long time until that property is vacated, as they will have the right to remain. And, usually, at rents well below the market rate.

Specialist lenders, like Together, take a common-sense approach to funding auction properties. Find out more here.

Get to know your auction house

When we spoke to Amy Schofield, Auction Sales Director at Together, she was eager to encourage bidders to get to know their local auction houses. Some may have more lots on offer for the property type that you are interested in (at better prices), and others may simply make you feel more at ease with their methods or atmosphere.

If you are the type of person that needs to be in room where the action happens, you should definitely go along to a few auctions first. Get a feel for the environment and experience, and get to know the people that work at the auction house also; They’ll be able to advise you on any property that you’re thinking of buying, or could help you with the sale if you are looking to flip it again once refurbished.

Even if you’re predominantly an online buyer, visiting the auction house, connecting with the various personnel and even interacting with their community on online forums or social media can all help build your relationship.

Look for unsold lots

Most lots will have a reserve, which is the minimum price the vendor will accept for the property.

If a reserve price is not met, the auctioneer will withdraw the lot from the auction. However, at the end of the auction the vendor may agree to sell the property at a lower price. Ask the auctioneer if you can register your interest for such properties and you may find yourself with a last-minute win, often at a bargain price.

Bonus Tip!

You won’t find this tip in the video but we just wanted to share one more – Find a lender that works for you.

As we’ve said, buying at auction can be stressful and mistakes can be costly, even if it isn’t you making them. Find a lender that specialises in auction finance who can exhibit the expertise, speed and flexibility that you need, especially when faced with a 28-day deadline.

At Together, we’ve opened the doors to thousands of buyers at auction over the last 20 years, helping them to achieve their property ambitions by being flexible when it comes to property types, income and employment, and credit history.

Funding can be pre-approved in minutes at no upfront cost where we would look to do a free desktop valuation / automated valuation and soft credit search, aiding your confidence to bid.

Ready to explore auction finance from Together? Find out more and get a Decision in Principle today.