18 February 2021
Pandemic leads to online property auction boom
The popularity of buying property at auction has not diminished as a result of the pandemic. Amadeus Wilson, SPF Private Clients’ auction finance expert, explains what you need to know.
While bidders can no longer pack auction rooms, auctions have moved online very efficiently, with auction houses reporting that they are busier than ever. This is particularly the case since the start of the year with properties bought at auction taking 28 days to complete – leaving bidders enough time to take advantage of the stamp duty holiday which runs until the end of next month.
Those buying via an online auction need to be more organised than they would have been at an auction attended in person pre-Covid. For example, if an online auction takes place at 11am, you will usually need to have registered by 3pm the day before in order to take part. Pre-Covid, you could simply turn up at the venue on the day of the auction and flash your ID.
Open houses are trickier but are still taking place before auctions, as are virtual tours. It is important to investigate the property as much as possible before bidding or you could end up committed to a purchase which turns out to be an expensive mistake. If you have to get an architect or builder to look at the property before bidding, allow more time to organise this as everyone is pretty busy.
There is also a higher entry level to an online auction with a £5,000 refundable deposit increasingly the norm to sit in the virtual auction room. This is refundable at the end of the day. Decent properties are going for 15 to 20 per cent over guide price, depending on how low-ball the auction house sets the guide price, so be prepared for this.
On the day of the auction, if you have the winning bid you effectively exchange contracts and pay a 10 per cent deposit. You then have 28 days to complete. This is a tight timescale so you have to be organised and get your ducks in a row before the auction.
We recommend that in the week preceding the auction you speak to a broker such as SPF which specialises in auction finance to ensure the figures stack up. Auction finance loan-to-values are a bit more conservative than standard mortgages so you will need a bigger down-payment – you can borrow up to 70 to 75 per cent on the auction side, compared with 85 to 90 per cent on the high street. Generally speaking, the first week after exchange the valuation is done, the offer is issued in the second week, the legals are done in week three and in week four you complete.