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How auctions actually work

How auctions actually work
Understanding Auction in the UK

You've probably seen people on Tiktok or Instagram boasting about buying a property at auction. Auctions can be an incredible place to buy your first home or even an investment property. Auctions are very fast paced and this often why it can either make you money and be a good deal or lose you money and bankrupt some. Let's dive into how auctions work and get you up date like a professional.

Types of Auctions:

There are two types of auctions -

  1. The Traditional Auction
  2. Modern Method of Auction (MMOA)

Both of these are completely different and often require bidding, buying and financing in different ways. In the Property Everything Membership I have thrown together a video on the different ways to finance an auction property as the traditional way of mortgages are usually not suitable.

  1. Traditional Auctions are the type of auctions you have probably seen on tv, on shows like Homes under the hammer. A crowded, high charged room, with an overly shouty and enthusiastic auctioneer. Traditional auction usually give you 14-28 days to complete on property but also carry severe penalties if you do not complete on the purchase in within the timeframe set out in the contract.
  2. MMOA are online auctions. They usually give you around 56 days to buy these types of properties.

Both of these auctions allow you to offer to buy properties 'Pre-Auction'. This means you can make an offer to buy the property so it doesnt go to auction day. You will still need to abide by auction rules if buy pre-auction.

Hidden Risks to Consider:

Auctions are exciting, but there are hidden dangers that many people are not aware of. Here's what to watch out for:

  • Time : Unlike traditional sales, auctions offer less time for in-depth inspections and legal checks. Do your homework beforehand!
  • Reserve Price : The seller sets a minimum acceptable price (the reserve) that's kept secret. The property might not sell if bids fall short.
  • Bidding : The auction atmosphere can be intoxicating, leading to impulsive overspending. Set a budget and stick to it!
  • Unforeseen Expenses: Don't forget auction house fees, legal costs, and potential repairs that can add up quickly on top of the winning bid.

I will be making an in depth a video covering 'How to finance an auction property and breaking down the two Auction types in detail in the Property Everything Membership. I would love to see you in there

See you soon

Tj Atkinson - Your Property Coach