Property auctions have traditionally been a niche part of the UK property market, accounting for around 20,000 residential property sales each year, roughly one in 50, according to the NRLA.
However, they are growing in popularity. According to the Essential Information Group, approximately 4,538 lots were offered in September 2024, with 3,243 properties sold, marking a 9% increase compared to the previous year.
One attraction of auctions is the speed and certainty of the transaction. With traditional transaction times stretching months until completion, auctions provide buyers with an opportunity to secure property more quickly and this can be particularly popular amongst investors who want to grow their portfolio .
When most people think of auctions, they imagine a packed room with fast-paced bidding. While this traditional auction model still exists, it has largely moved online. In this format, bids are only accepted during the auction itself, and once the hammer falls, if the reserve price has been met, the winning bidder must immediately pay a 10% deposit.
An alternative, increasingly popular approach is the ‘modern method’ of auction, which operates more like an online marketplace. Properties are listed for a set period, typically three to four weeks, with bids being placed over time. Unlike traditional auctions, bidding does not stop at a fixed point; if bids are still coming in at the scheduled closing time, the auction can be extended. In this model, the winning bidder pays a reservation fee of around 4-5% on top of the purchase price.
A key difference between these auction models is the level of commitment required from the buyer. Traditional auctions are generally unconditional, meaning that when the hammer falls, the buyer is legally bound to complete the purchase. Contracts are exchanged immediately, and failure to complete the sale would put either party in breach of contract. The transaction must usually be completed within 28 days. In contrast, the modern method of auction is typically “conditional,” meaning that the winning bidder secures an exclusivity period but does not immediately exchange contracts. The buyer has 28 days to exchange contracts and another 28 days to complete the purchase, offering slightly more flexibility.
Either way, the timelines associated with an auction purchase can be challenging, even for some bridging lenders, so it’s important to work with a lender you can trust to deliver on service.
Another key consideration is the condition of the property. Many auction properties require some degree of refurbishment, ranging from light work such as kitchen and bathroom updates to more extensive structural renovations or conversions. These can present particularly attractive assets for investors as they provide an opportunity to add value. In these situations, a refurb bridging loan – either light refurb or heavy refurb depending on the nature of the works – can provide an investor with the finds required to purchase the property and complete the project ahead of selling the asset at an increased price or refinancing onto a longer term product and letting it to tenants.
Auction purchases are growing in popularity and can present an excellent opportunity for investors to secure assets and add value quickly. It’s important to choose your lender carefully – reliable service and efficient execution can make all the difference in ensuring a smooth and successful auction investment.
