What happens when a house goes to auction?
Step 1: The listing process
When a property owner decides to sell via an auction, they will appoint a specific auction house whose first job is to list the property as a ‘lot’ on their magazine/catalogue and website.
Every auction house will differ in the amount of information provided, but it will generally include the address of the property, a detailed description (size, number of bedrooms, bathrooms, etc.), photos, special conditions and a guide price. The guide price is an estimate and can be higher or lower than the confidential reserve price (the minimum offer the seller will accept).
Anybody interested in buying property at auction can subscribe to auction house catalogues and websites, and they will receive notification of any upcoming auctions and the lots. Visiting an auction house as an observer is a great way to really understand what happens when a house goes to auction.
Step 2: The preparation process
Before the auction date, those interested in a lot will have the opportunity to view the property, obtain legal advice and carry out their own valuations and surveys. This is highly recommended, especially if the bidder is relying on a mortgage to purchase the property.
Organising finance is a major part of the preparation process. A bidder will need to provide proof that they can afford the property should they win. This will often mean securing an agreement in principle (AIP) with a mortgage provider. Alternatively, a buyer may have the cash or a loan agreement in place.
Step 3: The bidding process
As with many other areas of life, what happens when a house goes to auction has been impacted by the advance of technology. For example, many auctions are now livestreamed over the internet.
Whether the auction is in person or live, the auctioneer oversees the bidding process, presenting each lot and taking bids. They will determine the starting offer and the increments by which they will increase the offer. They will also explain how a bid is made (e.g., by raising a hand or making a specific gesture).
Step 4: The completion process
When there are no more bids on a lot, the auctioneer will declare the highest bidder the winner. They must immediately pay their deposit (usually 10%), and then they will have between two and six weeks to complete the purchase, depending on whether the sale was unconditional or conditional.
An unconditional sale is legally binding and the purchaser must complete within 15 days or face hefty penalties. A conditional sale is non-binding and the buyer has around 40 days to complete.
As with all property transactions, the buyer and seller will need to exchange contracts prior to completion, and the buyer will have to insure the property and pay any other monies due (stamp duty land tax, legal fees, commissions, etc.)
If you are interested in buying or selling at an auction, we recommend you research the auction houses in your area and, if possible, attend one or two as an observer. While auctions are usually fun and friendly, you are likely to get your fingers burned if you approach them without due preparation.
What happens when a house goes to auction? Ask the experts!
For more detailed guidance on what happens when a house goes to auction, we recommend attending one of our upcoming FREE property seminars. There will be a wealth of experience in the room, and you will be able to ask questions of property specialists who will be familiar with the auction process.
Take a look through our list of dates and venues and book a slot that suits you. Don’t worry if you can’t find a convenient seminar. New ones are frequently added, and there is a place where you can put your name down to receive an alert.