Guides What Is a Property Auction and How Do They Work?

Property auctions are incredibly exciting places to be, watching the action unfold can be tense and interesting. But, what is a property auction and how do they work?

For those eager enthusiasts looking to go from fan to investor themselves, what can you expect to achieve at a property auction anyway? There are many risks associated with buying properties in this format, but with high risk comes a high reward if you know what you’re doing.

So what does a beginner need to know about investing at a property auction?

What Is a Property Auction?

A property auction is a fast-paced public sale where real estate is sold to the highest bidder. It is often used for quick, guaranteed sales of homes. Auctions can take place in three main ways: In person, online or hybrid, and there are various types of auctions.

Types of Auction

There are at least five different types of auctions, including Absolute Auction, Minimum Bid Auction, Reserve Auction, Sealed Bid Auction, and Two­Step Auction. They all vary from one another in regard to the seller.

Absolute Auction – A sale where property is sold to the highest qualified bidder.

Minimum Bid Auction – A type of sale where the seller will accept the bid that is at or over the published minimum price.

Reserve Auction – This is where there is a confidential minimum amount a seller is willing to accept for their property at auction.

Sealed Bid Auction – Occurs when there is more than one interested buyer in a property. Each buyer is invited to submit a sealed bid by a pre-specified deadline.

Two-step Auction – This is a variation on the controlled auction process used in the sale of a privately held mid-market business. As the name suggests, the process follows two-steps.

How Property Auctions Work

Property auctions involve more than just bidding, and knowing how they work can give you a real advantage as a buyer or investor. Here’s how the process works, from preparing the auction to how offers and prices are agreed.

What happens at an auction?

Participants interested in various properties compete against one another by bidding the highest in order to secure the lot they desire. It involves offering up for bid, taking bids and selling items.

Preparing the auction lot

Auctions will prepare in advance by releasing the catalogue, allowing you to arrange viewings of the properties on sale. A description will give you all the necessary information such as dimensions, room numbers, area of land attached etc. This gives you the opportunity to do your due diligence thoroughly.

Offers and prices.

Offering is as simple as holding up your bidding paddle when called upon by the auctioneer, but you will need to be clear that you are doing so. You will be given plenty of time to make up your mind, and if you meet the reserve price, you’re successful.

Key Roles in the Auction

Property auctions rely on key roles to manage the sale process, with the auctioneer leading the bidding and overseeing the transaction.

The auctioneer and their role

The role of an auctioneer is to ensure each item sells for the best price. This can be done in advance by publicising the listing and on the day of the property. They play a central role in ensuring the auction runs smoothly, legally, and fairly. Their responsibilities typically include:

✔ Protect the seller’s interests
✔ Achieve the best possible price
✔ Maintain fairness and transparency
✔ Ensure the sale is legally binding

Selling vs buying at auction

Selling will have you working with the auction to achieve a price that you find suitable. So do research beforehand and sell at the right time.

Buying is a completely different beast entirely. You need to understand your limit and only take risks when you are 100% certain it is worthwhile.

After the Auction

The end of the auction doesn’t always mean the end of the sale. Here’s what happens to unsold lots and when a buyer fails to complete.

Unsold lots and what to do with them

If your property has not been sold at auction, then speak to the auctioneer afterwards. If you are the buyer, don’t worry, as you still may be able to secure the property. It’s entirely possible for you to increase your bid or come to an arrangement with the vendor.

What happens if a buyer doesn’t complete?

If a buyer fails to complete, you can pursue various remedies, such as a court order for specific performance or sale in the county or high court. If the buyer is unable to complete due to death or other factors, the seller may not wish to rescind the contract. If the sale occurs, the seller can claim against the buyer for damages, such as rearranging removals and storage costs.

Investment Opportunities at Auction

Property auctions can offer a range of investment opportunities from unusual properties to motivated sales.

Different types of opportunities

For property investors, auctions can be a great source of buying cheap and selling high. Plenty of properties go for under their market value, presenting opportunities that are too good to pass up on – especially if you’ve done your due diligence beforehand. For example, purchasing a £100k property for £90k can increase your returns by 5.5% per annum during a 25-year investment.

Where to find deals

You can either visit your local property auction dealers in-person to ensure full visibility of the proceedings, go online or bid via your phone if you are not in the area at the time of the auction.

How to Invest in Property at Auctions and Win

My property seminars are created to help people begin their property journey and if you’d like further assistance my property consultancy service is available. Here, I share my 30+ years experience and provide you with guidance on both. property development and investment.

I have also written a handy in-depth book – John Howard’s Inside Guide to Buying & Selling Property At Auction – which you can buy at my store or on Amazon for more information.

If you would like more information on how to begin your property journey, please don’t hesitate to get in touch. Send your queries to info@johnhowardpropertyexpert.co.uk, and we will reply as soon as humanly possible. We hope to hear from you in due course and greatly welcome your interest!