Buying a property at auction can be a great way to purchase a home.
The process is quick, you could secure a bargain that you can make your own and it can be great fun, too.
Online, or ‘Modern’ auctions, also mean you can bid to buy your dream property from the comfort of your own home.
However, buying at auction can also be stressful and if you don’t know what you’re doing, you could end up buying the wrong property for the wrong price.
Our guide explains everything you need to know about the Modern auction process and includes some great tips to get you started…
What does Modern auction mean when buying a house?
The Modern Method of Auction refers mainly to online auction events where bidders submit their offers before a deadline.
The winning bidder then pays a reservation fee, which is usually a percentage of the property’s purchase price, to secure it.
Most Modern auctions then give the buyer 56 days to exchange contracts and complete the purchase with the seller.
What are the differences between Modern and Traditional auctions?
You may also have heard of the Traditional Method of Auction, as well as the Modern method.
While both methods can be used to bid on property, there are some key differences:
Traditional Method |
Modern Method |
You’ll exchange contracts when the auction ends and pay a 10% deposit |
You’ll pay a reservation fee to secure the property when the auction ends |
You’ll have 28 days to complete your purchase |
You’ll have 56 days to exchange contracts and complete your purchase |
Because the Modern Method of Auction has a longer timescale to completion, it opens the auction process up to buyers purchasing with a mortgage.
This makes Modern auctions hugely popular with all buyers.
How do you buy a house through a Modern auction?
Buying a property at auction is very different to buying on the open market.
So, it’s hugely important to be prepared and understand the process before you commit to buying.
Here’s the process you can expect:
Register with online auction house
Search for auction properties online
View properties you’re interested in
Research the legal and buyer information packs
Bid online or over the phone
Pay reservation fee and provide evidence of funding if you’re the winning bidder
Exchange and complete purchase within 56 days of contracts being drafted
10 great tips for buying property at a Modern auction
Here are our top-10 tips for buying through the Modern Method of Auction…
1. Research your preferred area
When you’re buying a property on the open market, you should always fully research the area you want to buy in.
And you should do the same when buying at a Modern auction.
Speak to your local agent and find out more about house prices in the area and how the property market is performing.
2. Register with online auction houses
To get the best view of the properties available via auction in your area, register your details with a range of online auction houses.
Here at Martin & Co, we work with iamsold, who offer a host of online auctions with bidding available 24/7.
3. Understand guide prices and reserve prices
Every property that goes up for sale via a Modern auction will have a guide price and sometimes a reserve price.
Guide prices
The guide price is often where the auction bidding will start, although the main role of guide prices is to give you an idea of what the property is worth.
It’s important to remember that a guide price is exactly that – a guide.
Many properties sell for more than their guide price, so you should only use this figure to give you a rough idea of how much you may have to pay.
Reserve prices
A reserve price may be placed on a property by the seller before the auction starts.
This is the lowest price they are willing to sell for, so if no bids reach that figure, the property will remain unsold.
Reserve prices are only known to the seller and the online auction house.
4. Always study the legal pack
Once you’ve pinpointed a property, or properties, you’re interested in, you can download the legal and buyer information pack from the online auction portal.
The pack should include local searches, title deeds and an information form related to the property.
Always read the legal pack fully and if there’s anything that sticks out as a concern, ask a solicitor to look over it, too.
To download buyer information packs, you’ll need to be registered with the online auction house.
5. View properties you may bid on
Viewing any properties you’re interested in is crucial before submitting an online bid.
Try to view a property at least twice, at different times of day, and look at its condition with a forensic eye.
6. Seek a second opinion
If you’re looking to do major work on any of the properties you’re interested in, it can be a good idea to take a builder or surveyor along with you on a viewing.
They’ll be able to give you a second opinion on the property and outline some of the costs you might face if your bid is successful.
7. Arrange your finances in advance
One of the major benefits of the Modern Method of Auction is having 56 days to complete your purchase after a successful bid.
This opens the auction to bidders buying with mortgage finance, where more time is required than the 28 days through the Traditional Method of Auction.
Under the Modern Method, you’ll pay a reservation fee once your bid is successful, before paying your full deposit, exchanging contracts, and completing within 56 days.
The Modern Method does provide more time for you to arrange mortgage finance, but you’ll need to provide proof of funding when you pay your reservation fee.
So, making sure your finance is in place is key.
8. Make sure you have crucial documents
If your property auction bid is successful, you’ll need to be able to prove who you are and that you have the funds to complete your purchase.
Online auctions will require two forms of identification – one photographic and one to confirm your address.
You should also have a mortgage agreement in principle in place if you’re funding your auction purchase with a mortgage.
9. Don’t get carried away
Once you’ve established the properties you’re interested in bidding on and have studied the legal packs, put the properties in priority order and set yourself a maximum budget for each one.
Because auctions are fast paced, it’s easy to get carried away and over competitive.
Stick to your maximum budget and don’t be tempted to bid on a property you haven’t seen if you miss out on your original choices.
When buying through iamsold, you can set maximum bids through your online account.
10. Make sure you have insurance
Because auction completion times are fast, you’ll need to ensure you have a buildings insurance policy in place from the day you exchange contracts.
Arranging this as soon as possible after you’ve paid your reservation fee will help to keep your purchase on track.
