Buying a house is always a huge commitment, no matter how you go about it. This rule rings true for buying a house at auction, just as it does through an estate agent, or through any other means you can think of. That said, there are certainly some unique points to keep in mind when considering buying a house at auction.

Unlike a lot of houses bought through other means, auctioned houses are usually foreclosures. They tend to arrive at auction because the original owner fell behind on debt repayments, which often means the properties themselves are not in mint condition. This point is one often overlooked, leading to buyers getting much more than they bargained for. If you want to avoid making expensive mistakes when buying houses at auction, here’s what you need to know.

How does buying houses at auction work?

Where better to start than the process itself? As you likely know, properties for sale at auction are open to bids from the audience. Generally, the house will go to the highest bidder, though the exact specifics vary depending on the type of auction in question. Let’s take a look at the different types.

Lender confirmation auction

A lender confirmation auction is the most vague. Houses at these auctions will have a minimum amount that must be reached before a sale is agreed upon. Though this sounds simple, it gets a little more complicated when sellers keep this minimum from potential buyers, as is often the case. If the minimum amount isn’t reached, it’s up to the seller whether they accept the highest offer or refuse to sell entirely. The latter doesn’t often happen, provided the highest bid is somewhat close to what the seller has as a minimum. After all, should a sale not be reached, everyone goes home having wasted their time.

Absolute auction

An absolute auction is the type most people have in mind when thinking of auctions. If you like what’s on offer, buying it is as simple as bidding the highest, regardless of what that sum actually is. Due to the simplicity, absolute auctions are the most popular type, for buyers and sellers alike. Sellers like it, as most auctioned properties are foreclosures that need to be shifted, while buyers like the lack of a minimum price or bid.

Minimum bid auction

A minimum bid auction is a middle ground between the last two types. It’s exactly how it sounds, with a minimum bid required to enter the fray. Unlike lender confirmation auctions, the minimum bid will be announced well before the auction, with a further announcement being made as bidding commences. This way, everyone knows where they stand, even if the minimum might be beyond what some are prepared to pay.

How to prepare for buying a house at auction

Knowing how the auctions themselves work is a good start, but it’s only a small part of what’s required for a successful auction. To ensure you come away with a house that matches your dream home, you’ll need to follow a few rules.

Familiarise yourself with the auction house

If you’re looking to buy a house at auction, the first best step you can take is choosing an auction house and researching it. As we’ve mentioned, there is more than just one type of auction, so knowing what you’re walking into is a must. Most auctions advertise themselves in some form, either through paper media or online, presenting the information you need to know.

Research the houses on offer

Not every auction will be selling something that fits your ideal. Houses that will be for sale at an auction will usually be advertised beforehand, either online or in newspapers. While it can be interesting to enter an auction blind, it certainly is a great way to leave empty-handed.

Visit your chosen properties in person

This point cannot be stressed enough – personally pay a visit to any property you intend to buy at auction. Houses for sale via estate agencies often have pictures that exaggerate the positives of the property. This is doubly true for auctioned properties. As some of the houses are in a degree of disrepair, paying a personal visit does wonders for determining the extent.

If you make a purchase, you’ll be buying the house in the condition it’s in. With no help from the auction house and likely not the seller. By checking up on the house, you can mitigate some of the risk should you go through with the purchase. You will have a better idea of what you’re getting into. If you intend to buy a house for resale, this can also help judge whether your investment will be worthwhile, or sunk into an unending pit of repairs and refurbishments.

Get your finances ready

The last thing you want at auction is to make a successful bid, but lack the necessary financing to go through with the purchase. In most cases, you will have a limited time in which you must pay the value of your bid. Else the purchase will be null and void. To ensure this doesn’t happen, it’s a good idea to keep the amount you expect to bid at hand. Or have the ability to finance your purchase as soon as you need to. For a quick loan at short notice, bridging loans are a good option.

Houses at auction are not always well-kept

One sad but true fact is that foreclosures are infamous for often being poorly maintained. As many houses for sale at auction are foreclosures, this means you’ll likely see your fair share of houses sorely needing some care and attention. While it’s understandable that a person on the brink of foreclosure likely won’t have the time or money to keep their house in working order, it makes your job a bit harder. You’ll want to keep this fact in mind when buying a house at auction. Even if you don’t immediately see problems on the surface. It’s entirely possible that more sensitive components, like the plumbing or electrics, are on their last legs.

Final thoughts

Buying a house at auction is a perfectly viable option, one that might well bring more excitement than alternative methods. However, it does have its drawbacks, notable ones at that. Firstly, you’ll need to do a fair bit of research. While this is necessary for any property purchase, it is especially so for auctioned houses. Secondly, houses sold at auction are often in poor condition. This means you’ll likely be faced with a much greater amount of work than simply moving in, as if that was easy in the first place. Provided you aren’t dissuaded by the downsides, buying a house at auction could be just what you need to secure your dream home. Just take care not to be swept up in the excitement of the auction.