Landlord home Landlords forum Buy to let services Resource centre Buy to let mortgages Landlords insurance Fly to let About this site FREE subscription Contact

Other features: Fire Safety Student Lettings Digital TV Switch Over Health & Safety Landlord Safety Local Housing Allowance Tenancy Deposit schemes Energy Performance Certificates Houses in Multiple Occupation Landlord Regulations Property Auctions Furnishings for Rental property Landlords Insurance Building Contracts Landlord Accreditation Buy to let Investment

It is possible to get a good deal at an auction but you need to know what you are doing.

The best way to get to understand how auctions
work is to go to a few just to see what goes on before getting involved as a bidder.

Buying at auction means you can get the property you want quickly without lots of negotiation. Once
the gavel goes down, that’s it. As long as you are the highest bidder and the property has met the vendor’s minimum - the ‘reserve price’ – then it is yours.

Some auctions quote a ‘guide price’. It is not the same as the ‘reserve price’ but is some indication of the minimum that is expected (auctioneers will tend
to put the guide price low so as to attract buyers. So
if the guide price is £105,000 to £115,000, the reserve price is probably around £110,000.

Prices at auctions may seem low, but there is usually a good reason. Many properties are in poor condition, have subsidence, are blighted by proposed road developments, have been occupied by squatters, have sitting tenants or have defects in the legal title. Or they may just be unique and therefore hard to value.

That is not to say other properties will have nothing wrong with them at all – which often the case with those properties being sold by executors after the death of the owner, repossessions and ‘distress sales’ – where the property is being sold by people who have overstretched themselves financially and need the money quickly.

Look out for properties where the vendor is in a different part of the country to the solicitor – this may indicate a probate sale. These can represent good investments as often the vendors will accept a low price in order to ‘move on’ quickly after the death of a loved one.

Repossessions often have the words ‘for sale by mortgagee in possession’ in the details. These may be in a mess but if structurally sound can be bargains too.

If buying with existing tenants in situ, check whether they are assured tenants or assured shorthold tenants. ‘Rent Act’ tenants will have rents fixed at a low level and it will be virtually impossible to get them out.

To be on the safe side, it is best to get the property surveyed, the mortgage and insurance ready and the legal checks done before the auction. This costs money, of course, but means defects should be spotted so that you know what you are buying and what it will cost to put these right – if indeed they can be put right.

To prepare for an auction ask for the package compiled by the auctioneer which should be available about four weeks before the auction. This will have details on each property and the memorandum of agreement, which is equivalent to the contract, the title documentation, the searches, whether there is any outstanding planning or environment issues and replies to general enquiries. Have this checked over by a conveyancer and have him or her also look out for any special conditions: for example, these may say the buyer has to pay the vendor’s legal fees.

If you are still interested, go and view the property or properties you intend to bid for. Some can only be seen at block viewings, so you will get to see possible fellow bidders.

Once you have found a property you like, recheck with your conveyancer that there are not any legal problems.

Since many properties sold at auction have structural problems, get a fairly thorough survey done. If the property needs work, get a detailed quote from a good builder showing a proper specification of the works to be done and what materials will be used (and ensure these are included in the cost).

Get quotes for buildings insurance cover before the auction but remember many insurers will charge more or will not insure at all where there is subsidence or if the property is unoccupied.

Work out the maximum price you are prepared to bid before the auction starts. If you are the highest bidder and the reserve has been met, you must sign the contract in the auction room and pay a 10 per cent deposit. You have to complete 28 days later, so your solicitor will need to move quickly and get all legal documents ready. If you don’t complete, you will lose not only your deposit, but if the property has to be re-auctioned and it ends up fetching less, you will be liable for the difference. So make sure you use a conveyancer who understands the auction process and who can work fast.

Ensure you have your deposit with you at the auction. Auctions will not take cash due to money laundering regulations, so check beforehand what form of payment is acceptable.

On the day of the auction, arrive early; check the ‘addendum’ and the legal pack in case anything like special conditions have been added. Keep cool and stick to your maximum price. Some auctions will have a reserve price stated. If it isn’t, and the auctioneer says something like ‘it is in the room’ or ‘this property will sell today’ this means the reserve price has been reached and the highest bidder will get it.

If you go with a partner, sit together as it is been known for husband and wife sitting in different corners to bid against each other. Be aware too that the auctioneer, vendor or their agent can bid up to the reserve price without identifying themselves. It is called ‘off the wall’ or ‘imaginary’ bidding and it is perfectly legal.

If the sales details quote ‘unless previously sold’, you should be able to approach the auction house and make a bid in advance of the auction. If it is accepted, you will still need to move fast and ensure finance is ready and conveyancing can be done quickly.

If the property does not meet its reserve, the auctioneer will normally tell you the reserve and say whether he has the vendor’s authority to sell at the reserve price for up to 24 hours after the auction.