Property Auctions Conveyancing Guide: buying or selling a property at auction

What happens when you buy a house at auction? 

Buying a house at auction, particularly for the first time, is likely to be a very different experience to any other property transaction you've been involved in before. It can be quite daunting, but if you've done your research and are aware of the processes involved, it could be very exciting and potentially fruitful too. 

Therefore, it is important that you've done all your due diligence and preparation when buying a house at auction. Ideally, if you do everything correctly, the process - according to Zoopla - should be as simple as: 

• Viewing an auction property you're interested in, before the auction day, perhaps with a surveyor, architect or builder
• Ensuring your finances for the purchase are in order, whether it's an agreed mortgage or cash
• Having a solicitor study the small print and property's legal pack 
• On auction day, being ready with your paperwork (such as your mortgage AIP or proof of cash funds) and being prepared to bid, but only to your set budget. Don't be tempted to go above and beyond. 
• If you win the auction, paying your deposit and completing the purchase in full within a set time (how long to complete after auction and what happens after an auction sale depends on the type of auction)

Please note that it is advisable to get a house survey on the property before completion, bearing in mind you may lose your deposit and still have to pay fees if you decide not to complete.

Do you need a solicitor to buy a house at auction? 

Due to the nature of buying a house at auction, which involves the majority of legal process and paperwork being completed before the hammer falls, it is strongly advised that you get help from an expert, such as a Homeward Legal Auction Conveyancing Solicitor, to assist you with your purchase. 

Additionally, as you are committed by a legally-binding contract to buy any property you win at auction, and therefore committed to pay your deposit straight away and complete within a set time frame,  it pays to ensure all due diligence and research is carried out on the house you're interested in before you bid. This is why it is important to instruct an experienced auction conveyancer ahead of time. 

What legal documentation is involved in buying a property at auction?

The legal documentation involved in the auction conveyancing process is quite similar to the documents required for conventional conveyancing. However, an auction legal pack is slightly different, containing important information about the property going under the hammer, as well as any specific conditions of sale - such as completion date and additional disbursements to be paid - to note. 

Below are a few examples of the information you may find in your auction legal pack. Having access to this before you even consider bidding for a property at auction is vital, and it is highly recommended that you instruct an expert auction conveyancer to take a look, review the details and advise you of anything you need to know. 

Your legal pack may contain: 

• Official Copy of Register of Title (who owns the property)
• Land Registry and Local Searches
• Special Conditions of Sale
• Property Information Form and Fixtures and Fittings Form
• Leasehold, management and tenancy agreements
• Planning Permissions
• Any replies to pre-contract enquiries

What are the fees when buying a house at auction? 

In addition to the deposit and final purchase cost of the property you're interested in, you need to be aware of a few extra fees when buying a house at auction.

Most auctioneers will charge a buyer's premium or admin fee. This fee amount varies, and could either be a flat fee (set by the auctioneer) or a percentage of the purchase price. There may be fees relating to a specific property too, while you'll also need to factor in the cost of obtaining the legal pack, undertaking searches and any other special conditions.

Always make sure you have details of all potential costs before committing yourself to bidding on and purchasing property at auction. 

Who pays the fees at a property auction? 

This bit is simple: whether you're buying or selling a property at auction, you have the responsibility to pay for any applicable property auction fees. 

So, if you're the seller, you'll need to pay similar fees to those required when selling a property through an estate agent. These will likely include an auction entry fee, advertising costs and a final sale fee. 

When buying a property, you will need to pay admin or buyer's premium fees, as well as legal fees and others that may relate to a specific property. 

When are contracts exchanged on a house bought at auction? 

When the hammer falls on a house auction, the exchange of contract between the seller and buyer of the property becomes legally binding. From this point, the buyer is committed to the purchase; the seller committed to the sale. 

The sale completion date will be outlined in the contract, and the parties involved will be required to complete by this date. As a buyer, you are committed to paying the deposit for the property on the date of the auction, followed by the remainder of the full amount by the agreed completion date. 

Can you get out of an auction contract? 

Generally, unless the seller has misrepresented the property you've purchased, which could potentially allow for you to make a legal case against the seller for breach of contract, you are unable to simply get out of a house auction contract. 

If you were to change your mind on your purchase, or were unable to pay for the property you have committed to buy, you may be able to withdraw from the auction. However, by doing so you would forfeit the deposit for the property and incur additional penalties which could be very costly.

Can the seller pull out of an auction sale? 

A seller is entitled to withdraw a property from an auction before it goes under the hammer, or even during the auction itself. But once the hammer has dropped on a house auction, the seller is - just like the buyer - committed to a legally binding contract. 

Therefore, similar rules apply to sellers as they do for buyers. If a seller pulls out of an auction sale and breaches the contract, they will incur penalties for doing so, and likely be expected to cover any costs paid by the buyer during the house auction process.

What happens if a property doesn't sell at auction in the UK? 

In the UK, if a property doesn't sell at auction the property will be moved into a ‘post-auction sale' in which interested parties will be invited to make their highest offer on the property and the seller will decide if they wish to still sell. 

If so, any post-auction sale will be agreed under auction conditions, with the same rules, agreements and fees applied as if the house sold during the original auction. 

Therefore, if a house fails to sell at auction initially, it doesn't mean that it's time for the seller, nor potential buyer, to give up hope.

Is it cheaper to buy a house at auction? 

It is widely considered that buying a house at auction is cheaper than purchasing a property via an estate agent. 

Often this is because auction houses will only accept properties if they're to be sold for less than they otherwise might have been, or because they've advised the seller to list their property's reserve price lower than the price they'd expect to sell for through an estate agent. Therefore, buyers do have the potential to buy a house for less than it may have normally been worth, or perhaps buy a bigger property for the price of a smaller one being sold traditionally. 

As a buyer, you must be aware that not all auction houses are bargains though. And the ones that are bargains may not be as they seem on the surface. So do your homework, make sure you know what you're getting into before bidding, and never bid beyond your set budget.

Do houses usually sell for the guide price at auction? 

Houses sold at auction frequently sell for their guide price. In fact, and this is good news for sellers in particular, auction properties will often sell above their guide price. 

Of course this cannot be guaranteed, and is dependent on a number of factors including the number of bidders, the housing market at the time of sale, the auctioneer's efforts, and how well a house has been marketed. 

Buyers will need to bear this in mind when bidding on a property, taking into account their set budget and how much they can afford to pay for a property and the fees involved.

How much deposit do I need to pay at auction? 

Usually the deposit that a successful house auction bidder is expected to pay is 10% of the final sale price. In some cases, for example when the property bought is a low value lot, the deposit required will be a set amount as stated in the auction documentation. 

Either way, the deposit will need to be paid immediately after the hammer has dropped, confirming that the buyer and seller have entered into their legally binding contract.

What is the property auction conveyancing process? 

While different to conventional conveyancing that's involved with ‘traditional' house purchases made via estate agent, the property auction conveyancing process is simple - especially if you enlist the help of an experienced auction conveyancing solicitor.

When you buy a property at auction, you are committed to a legally binding contract with the seller from the moment the hammer falls on the auction. Therefore, the majority of process and paperwork is completed ahead of the auction itself. 

Before the auction, you'll need to ensure all due diligence and research on the property you're interested in is carried out. Your auction conveyancing solicitor will be able to assist with searches and the property's legal pack, which contains important information about the property, and any specific conditions of sale, such as completion date and additional disbursements to be paid.

On the day of the auction, you'll need to be ready with proof of a mortgage agreed in principle or of cash funds, just in case you win your auction. If you win, you'll be required to pay your deposit immediately, and be committed to completing the full purchase within the amount of time agreed in your contract. How long to complete after auction and what happens after an auction sale depends on the type of auction.

How long do I have to complete after an auction?

The completion date is normally four weeks from the date of the sale, but it is not uncommon for an earlier date to be specified. Auction bidders should therefore make sure they have the necessary finance available by that date.

Many bidders make the mistake of assuming they can arrange a mortgage between the auction sale and the completion date. Lenders will only make a definite offer in respect of a particular property, so any agreement in principle will be subject to a formal application being made. Normally this can only be done after the auction, when the buyer knows their bid has been successful.