There are a few different ways to purchase a property in the UK. In this guide, we’ll consider a comparison of buying a property at auction vs buying a property by private treaty through an estate agent. Deciding which method is right for you will depend on your budget and financing options, timeframe, experience and your reasons behind buying a property.
Buying a Property by Private Treaty
Buying a property by private treaty is the most common way of purchasing a house or flat in the UK. Whether the process is managed by an estate agent or is self-managed, the property for sale will be advertised for a certain price and prospective buyers will submit offers for the seller to consider.
1. The seller or estate agent advertises property with an asking price.
2. Potential buyers submit offers to the seller.
3. The seller accepts an offer.
4. A contract of sale is issued and signed.
5. The buyer arranges their finance and any surveys are completed.
6. The contracts are exchanged.
Buying a Property at Auction
There are two types of auctions, non-conditional (also known as ‘traditional’) and conditional (also known as the ‘modern method of auction’).
Buyers at an auction will be provided details of the properties available ahead of time, and will have the opportunity to view and conduct any surveys that they wish. The property will have a guide price, and during the auction buyers bid with each other.
During a traditional auction the property for sale is sold to the highest bidder, and the contracts are exchanged as soon as the hammer falls. The buyer pays a deposit on the day, and then from the date of the auction has 28 days to complete the purchase and pay the remaining funds.
During a conditional auction, the buyer pays a non-refundable reservation fee instead. This doesn’t normally form part of the property purchase price, and so is an extra cost to consider. From the date of the auction the buyer has 28 days to exchange contracts, and then 28 days to complete the purchase.
Should I Buy a Property at Auction or by Private Treaty?
In order to decide whether you should buy a property at auction or by private treaty, you’ll need to consider your timeframe, the flexibility you have when it comes to funding the purchase, the transparency you require, the commitment and the type of property that you are purchasing.
Buying a property for sale by private treaty can often be a long and drawn-out process, since the buyer has no obligation to purchase the property until the contracts have been exchanged. There are often multiple offers for the buyer to consider, and another buyer can come in at the last minute and the seller can change their mind.
When buying a property at auction, however, the buyer and seller are obligated to exchange contracts either on the day or within 28 days of the auction. This makes it much easier to plan the purchase and any refurbishments.
Auctions do not allow for much flexibility when it comes to arranging funds, although a conditional auction is better than a traditional auction from this point of view. When buying a property by private treaty, there is no time limit within which to secure a mortgage, arrange bridging finance or come up with the cash.
If there’s any chance that you might change your mind about buying a property, then buying through auction is probably not going to be the right method for you. Once the hammer falls, you are obligated to buy the property, and if you change your mind, you will be subject to auction fees and may lose your deposit or non-refundable fee.
Type of Property
The types of properties sold at auction are usually more run-down, in need of modernisation, or come with other difficulties. If you’re looking for a property that you can move into straight away and call home with minimal refurbishment work, then an auction probably isn’t the right place to look.