For anyone who has been to a property auction - or perhaps just tuned in to an episode of Homes Under the Hammer - they are usually associated with a
For anyone who has been to a property auction – or perhaps just tuned in to an episode of Homes Under the Hammer – they are usually associated with a bustling ballroom full of buyers intermittently throwing paddles up in the air, all orchestrated by a wildly gesticulating auctioneer.
Like any group gathering, Covid has put paid to that – so for the last year, budding buyers have been driven online in search of a property bargain instead.
Buying at auction isn’t for everyone, especially novices – the properties on offer are usually ‘projects’, and you do need to have a degree of property know-how, willingness to take on risk and access to quick cash.
Grade II listed Soothill Manor near to Batley in Yorkshire will be up for sale at Strettons’ 17 February online auction. The property has a guide price of £350,000 plus.
The reception room at Soothill Manor, which has five bedrooms and its own private grounds
However, as you effectively exchange contracts when the gavel comes down and complete within 28 days, it can be a good option if you are looking to buy a property quickly and without a chain.
For this reason among others, the popularity of auctions has spiked since the start of the year.
Effectively, it has become the last chance saloon for buyers who are looking to benefit from the stamp duty holiday which is set to end on 31 March.
This includes a large number of buy-to-let landlords, who are looking to get in a final opportunistic purchase before the deadline.
Such is the demand that some auctioneers have even put on extra sales to cope.
What is it like taking part in an online auction – and what do you need to know before you bid?
Although there were a handful of online auctioneers before Covid, the industry has exploded in the past year, with all traditional ballroom auctioneers forced to get up to speed – and fast.
Click to purchase: This is what buyers saw at a Savills auction held in early February
‘Rather than me in a room full of people, it’s me and a tech guy, taking bids by email, proxy and on the phone,’ says Andrew Brown, auctioneer at London auction house Strettons.
‘I had a real trepidation about it – was it going to work, who was going to be there, would the technology work. But it has gone much better than I could have hoped for.’
Strettons sold more property in 2020 than it did in 2019 – a success shared by several auction houses.
‘The first part of lockdown last year saw an increase in demand from the owner occupier market, looking to move out of cities and large towns to get more space to allow for a flexible lifestyle,’ says Richard Adamson, partner and auctioneer at Allsop, one of the country’s largest auction houses.
Allsop is marketing the long leasehold on a fourth-floor flat in this mansion block in West Kensington. It will be up for sale with a guide price of £715,000 on 18 February
Because buyers need access to quick cash, a willingness to take on some risk and a bit of property know-how, auctions are often dominated by buy-to-let investors and small-time developers.
But as prices rose in the mainstream housing market following the first lockdown, auction houses reported more mainstream buyers getting involved in online sales hoping to get a good deal on a ‘fixer upper’.
‘Capital growth for residential property continues to be solid, with Nationwide reporting values to have finished 2020 up 7.3 per cent on 2019, and with this in mind, there are a number of buyers who have been priced out of the market, or who are struggling to upsize,’ said Ian Kitson, director at East Anglia auction house Cheffins.
‘Whilst developers are always keen to acquire residential options at auction, there is definitely an increase in the number of private individuals also heading to the auction room in order to pick up a project.’
Like in the real world, auctions are held roughly every six weeks – but some are squeezing in extras in the next couple of weeks to help those who want to complete before the stamp duty holiday ends. You can find these dates on auctioneers’ websites.
Online auctions work in a variety of different ways. Some have a video live-stream of an auctioneer who receives bids online or by phone, while others have an automated online platform, similar to eBay.
The former will usually take place within a few hours, with the auctioneer running through each property in turn.
This six-bed home in Coulsdon, Surrey has extensive grounds and joins on to Chipstead Golf Club. It is listed for sale at Allsop’s auction on 18 February, guided at £1.75 million.
But online platforms sometimes have the sale open for a few days, with bids needing to come in before a certain cut-off time. As with eBay, there is often a flurry of bids right at the end.
You can’t tell from your sofa, but it is a competitive market at the moment, and virtual auction rooms are busy – which means good properties are regularly exceeding their guide prices.
I’m interested in buying at auction: Where do I start?
Whether real-world or online, auctioneers publish a catalogue a few weeks ahead of the sale, which includes detailed information on the properties, guide prices, images, floor plans and a legal pack.
At residential auctions there are usually lots of buy-to-let properties, homes being sold out of receivership, renovation projects ranging from the slightly dated to the totally dilapidated, and plots of land with or without planning permission.
However, in recent years it has become more common for private sellers to put their homes up for auction too.
Each property has a guide price, which is an estimate for how much it might sell for. Bids usually start slightly below this price and work up.
It is important to check that you are comfortable with the property’s condition before the gavel comes down at an online property auction, in order to avoid any nasty surprises
Once the gavel comes down on a property, the buyer is committed – so it is assumed that buyers turn up having done their due diligence on anything they are interested in and taken any relevant legal or financial advice.
There may be a pandemic on, but viewing a property is still crucial in order to avoid a potentially very expensive mistake.
One perpetual auction market legend concerns a person who bought a property, only to walk through the door and realise it didn’t have any floors.
Not having a functioning kitchen or bathroom might not seem like a problem if you were planning to gut them anyway – but in a bank’s eyes this means the property is uninhabitable, and they won’t give you a mortgage on it.
A lower ground floor flat in this property in Peckham, South London is up for sale at Allsop’s next auction on 18 February. It is currently rented out and is for sale for £375,000 plus.
‘A lot of the properties that tend to go to auction are in poor condition and if there are fixtures or amenities not in place – like a kitchen and/ or bathroom – a mortgage lender will not lend on them, as the property is deemed uninhabitable,’ says Rosie Fish, mortgage expert at Habito.
‘We don’t recommend auction purchases unless you have the time and money to pay for a survey before the auction to make sure you know what you’re bidding on.’
Most auction houses are offering in-person viewings by appointment, and some are still going ahead with open houses too.
Historically known for being quite low-tech, they have also been forced to move with the times since the start of the pandemic and most now offer virtual property viewings on their websites. These have improved in quality over the past year.
Adamson says: ‘Due to government guidance, there have been periods of time when the message was to stay at home.
‘This issue was partially resolved thanks to virtual tours, which have become very sophisticated, allowing someone to view a property from their couch.’
It is also a good idea to have an architect or builder look at the property if you are hoping to renovate. Auctioneers will happily talk you through a property, but remember they are being paid by the vendor.
‘Doing one’s homework is more important now than ever,’ says Brown.
I bought a house from my sofa
Two property investors tell us what it’s really like to buy a property online
Darren Mould, a property investor
Darren Mould, founder of Domus Developments
There are certainly pros and cons of buying a property via an online auction rather than in the room. When you bid in the room, you can judge the buyers you are up against.
Often the speed in which they bid or the increments they go up in can give you an idea of how much they really want the property, their experience and how professional they are.
For example, you might be able to tell that a buyer is someone who really wants something, perhaps as their forever home – and the chances of outbidding them can be pretty slim.
Also, I like the drama and experience of bidding in the room. It’s certainly more exciting than bidding online.
However, online sales seem to run faster, with a quicker bidding process, and it was also great to be bidding on properties from my sofa with a cup of tea in hand.’
Navtej Singh, managing director at CH Real Estates
The first online auction I attended was when we had just gone into lockdown in March 2020. It was a video format with the auctioneer going through lots.
The biggest issue I had was that I had to give a bidder security, which was between £5,000 and £10,000 depending on the lot. I’ve become more comfortable with that though, as they do come back in quickly.
Navtej Singh has bought several properties at online auctions
In this particular auction you had to submit your highest bid beforehand, and me being cautious I went in fairly low. I bid £100,000 on a two-bed house in Chatham, Kent, guided at £90,000. It went for £103,000, so that was that.
Later in the year, I successfully bought a ground-floor leasehold flat in Liverpool at an Allsop auction, which was guided at £55,000.
Nobody bid on it during the auction itself, so I called the auctioneer and negotiated a sale.
I have also bought a three-bed terraced house for £197,500 through I Am Sold. That was an eBay-style auction, and the bidding was concentrated in the last 20 minutes.
If there was a bid with less than three minutes to go on the timer, it was extended by an extra three minutes – which was a bit frustrating as I was also trying to keep my eye on another property.
I was sceptical about online auctions at first, but I’ll do most of my bidding online now. Before the pandemic I would travel to London and sit in a room for an hour, and maybe come away with nothing. Now, you can avoid that.
How do I prepare to make a bid?
At real-world auctions, buyers could simply turn up on the day with ID and be able to bid.
Online, though, the process is a bit more involved. You will have to register with the auction house ahead of time and submit information so that anti-money-laundering checks can be carried out.
‘Buyers have to be a bit more organised buying at online auction than they would at auction pre-Covid,’ says Amadeus Wilson, director at mortgage broker SPF Private Clients.
‘You often have to register the day before to take part, as opposed to the old days when you could turn up at whichever hotel they were hosting the auction in and flash your ID.’
You might also need to pay a registration fee – one of the drawbacks of online auctions compared to the real thing – although they are refunded at the end of the day.
‘There is also a higher entry level to an online auction with a £5,000 refundable deposit increasingly the norm to sit in the virtual auction room,’ Wilson adds.
How can I pay for an auction property?
Lots of people who buy properties at auction pay in cash. It is possible to get a mortgage, but there are fewer options available to you than if you were buying a home on the open market.
For example, lenders will typically only give you a maximum loan of 75 per cent of the property value.
A first floor leasehold flat in this block in Highgate, North London, is being sold at Allsop’s 18 February online auction with a guide price of £250,000
‘Remember that auction finance loan-to-values are a bit more conservative than standard mortgages, so you will need a bigger downpayment – you can borrow up to 70 to 75 per cent on the auction side, compared with 85 to 90 per cent on the high street,’ says Wilson.
You get your mortgage after you have exchanged on the property and paid a deposit – usually 10 per cent of its value – which is obviously risky.
Fish issues a stark warning for anyone who doesn’t know exactly what they’re getting themselves into.
‘A lot of the customer enquiries we see asking about auction homes, are from buyers who are not experienced in this area, who might see a low guide price, look to bid and then get the mortgage afterwards,’ she says.
‘If, post-auction the mortgage lender’s survey picks up any issues, values the property for less money, or simply won’t offer you a mortgage, you’ll be unable to complete on time, and will stand to lose your deposit – which could amount to all your savings you’d put aside for a new home.’
The vendor can then take you to court for losses, if they put the property up for auction again and it sells for less.
Provided everything does go smoothly, the post-auction process happens like this: ‘Generally speaking, the first week after exchange the valuation is done, the offer is issued in the second week, the legals are done in week three and in week four you complete,’ says Wilson.
What happens on the day?
So you’ve picked your property, checked it out and have your finances in order. All that’s left now is to make the winning bid.
At the moment, high demand means properties can climb high above their original guide price.
‘Any decent property is going for 15 to 20 per cent over guide price, depending on how low-ball the auction house sets the guide price, so be prepared for this,’ says Wilson.
You also need to be aware that every property has a reserve price – a figure agreed between the vendor and the auctioneer which is the minimum the vendor is prepared to sell for.
Dairy Farm House near Ely is a former 19th century farmhouse with 1.11 acres of gardens. It is up for sale at Cheffins’ 2 March online auction with a guide price of £250,000 – £275,000
If bids don’t reach that level, the property doesn’t sell – although you can contact the auction house afterwards and try to make a deal.
Although bidding online or by phone is straightforward, it is a relatively unremarkable affair, unlike the buzz of a real-world auction.
Auctioneers say that this is the one part of the process that doesn’t match up to pre-pandemic.
‘You don’t have that feel of the marketplace – and people do like that,’ says Brown.
After paying your deposit, you will be expected to provide the rest of the funds and complete within 28 days.
If you don’t complete for any reason, you will most likely lose your deposit.
Top tips for online auctions
Oliver Childs of auction house BidX1 offers his tips for successful bidding
Oliver Childs says sticking to your budget is key at an online property auction
1. Get in touch with the auctioneer to register your interest. They will be able to answer questions and bring you up to speed with everything about the sale.
2. Make sure you understand whether the sale is conditional or unconditional, and exactly what that means for you. It’s important to understand the level of commitment that you’re making if you’re the winning bidder.
3. Know when you need to register. What does the process entail? Is there a cut-off point, or can you register at any time before bidding opens?
4. Find out when bidding will open and close. Some auctioneers offer lots one after the other, so you have to wait for your property to come up. This is different to the online auctions we run at BidX1, where bidding opens on all properties at the same time, with a set closing time specified beforehand.
5. Find out how the bidding works. For example, you can place bids manually on the BidX1 platform, but you can also set a maximum bid and bids will automatically be placed on your behalf. It’s a popular option for investors.
6. You may be able to ‘practice’ if the firm provides a demo option, which can be really helpful for first-timers.
7. Make sure you have a good internet connection. You don’t want to lose the home of your dreams or your next investment because your WiFi cuts out.
8. Decide on the maximum amount that you’re willing to spend on the property beforehand – and stick to that budget. This will give you confidence in your decisions on the day, rather than getting caught up in the moment.