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It's hard to believe that the daytime TV show 'Homes Under the Hammer' has been on air for 20 years now and in that time, it has introduced many people to the highs and lows of buying a property at auction. However, the auction process is significantly different from the usual method of purchasing a home, with unique regulations and potential obstacles to face. This guide will take you step-by-step from the initial preparations required before the auction to completing the contract and obtaining your new residence.

Preparation is Key

As fans of 'Homes Under the Hammer' know, before you even consider entering an auction room, you must do your homework. Start by researching properties available for auction in the area in which you are interested, and always visit any as soon as you can. This will enable you to conduct surveys, find out house prices in the area and review the legal paperwork outlining any problems or limitations. Remember that houses auctioned are usually sold in their current condition, so you will need to cover expenses for any repairs, renovations or improvements after buying, and it is strongly recommended that you obtain estimates from contractors to evaluate possible building expenses. It is also important to understand the local market by attending some auctions as a spectator and keeping track of the house sold prices before bidding. This will prevent you from paying too much in the spur of the moment.

After that, you must organise your finances. Auctions require quick payment; therefore, it is essential to have your mortgage pre-approved for a specific borrowing amount. Make sure to have proof of funds documentation prepared if you plan to purchase with cash. Obtaining pre-approval from your lender for the highest amount you plan to bid is a wise move.

The Big Day

On the day of the auction, arrive well in advance of the start time, as this will enable you to sign up, receive your bidding paddle and check the legal packs for any last-minute changes. Try to sit towards the front of the auction room and make a note of the numbers of the lots you want to bid on. Watch the auctioneer carefully and track the bidding trends and house sold prices until it's time for your target property to be auctioned.

Remain composed and focused when the bidding begins for your property. Stay firm on your ultimate maximum price, and don't let yourself be influenced by the intense environment - emotions can easily cloud judgment and it's a costly error to get caught up in bidding wars. If you win, you will usually have to promptly provide information about your solicitor and lender and you will need to pay a non-refundable deposit of approximately 10% of the buying price before exiting the auction space.

Crossing the Finish Line

Even if your bid is successful at the auction, there are still several hurdles to overcome before you can truly celebrate and get the keys to your new property. The tight timelines involved mean you'll need to act quickly, and typically, you'll have around 20 working days to complete all the necessary transactions and legal processes. Your first priority will be finalising your mortgage arrangements if going down that route. The lender will require you to carry out any outstanding surveys and valuations, as well as transferring the rest of the deposit funds.

It's highly advisable - and in some cases obligatory - to enlist the services of an experienced property solicitor or conveyancer at this stage. They will handle negotiating the contract pack with the seller's legal representatives, carrying out essential searches, and scrutinising the small print to ensure there are no nasty surprises. This is also the stage where you'll need to get buildings insurance lined up, as well as making any other practical arrangements for actually moving into the property once the sale is complete.

Once both sides' solicitors are satisfied, you'll be cleared to exchange contracts, at which point you'll need to transfer the remainder of the deposit funds. Only once this is done can you truly breathe a sigh of relief - there's no longer any risk of being hit with penalty costs if you have to withdraw from the sale.

The final step is the actual completion, where the full remaining balance is transferred to the seller's legal firm, and you receive the deeds to take ownership. It's only at this point, potentially 4-6 weeks after the auction, that you'll finally be able to collect the keys and begin making your new property your home.

The Financial Considerations

Securing suitable financing is a major obstacle when purchasing items at an auction. Lenders might require a higher deposit for a non-standard property purchase, typically 25% or more of the agreed price, because of the increased risks. Some lenders may refuse to offer mortgage loans for specific properties sold at auction, such as those requiring significant renovations or with current tenants. Discussing your plans with multiple mortgage providers and brokers well ahead of time is essential.

What Could Go Wrong?

While the prospect of bagging a bargain is enticing, auction properties carry some significant risks. As they're sold "as seen", any required repairs or refurbishments will come out of your pocket post-sale. Arranging a survey beforehand is advisable but not always possible. There's also minimal opportunity to negotiate on house prices or arrangements once the hammer has fallen. The strict timelines and non-refundable deposits involved leave little wriggle room if any issues crop up.

Is an Auction Right for First-Time Buyers?

For first-time buyers unfamiliar with the property market, the fast-paced auction process carries significant risks. The need to arrange financing swiftly, make huge deposits immediately and commit to purchases despite limited survey opportunities makes auctions a daunting prospect. That said, for first-timers with prior property experience, a strong grasp of the auction rules and access to the necessary funds, auctions can open the door to real bargains. Working closely with a conveyancing solicitor and a mortgage broker is advisable.

If programmes like 'Homes Under the Hammer' have inspired you or you are just in search of a property bargain, buying a home at auction can bring significant benefits. Just remember to seek expert advice, always do your homework and find the right financing to increase your chances of auction success.

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