Buying property at auction can be a fantastic way to secure below-market deals, but it also comes with risks. From hidden structural issues to legal complications, many investors have learned the hard way that not every auction purchase is a bargain.
To help you make informed decisions, we’ve outlined the most common risks of buying at auction—and how to avoid them.
Non-Mortgageable Properties
- Have no functioning kitchen or bathroom.
- Suffer from serious structural damage.
- Have issues with legal ownership or unclear title deeds.
How to Avoid This Risk:
– Check the property condition before bidding.
– If planning to use a mortgage, confirm with a broker that the property is mortgageable.
– Use bridging finance as an alternative if needed.
Related: Auction Finance Solutions
Hidden Structural Issues & Costly Repairs
Many auction properties are sold as seen, meaning there’s no chance to negotiate repairs with the seller.
Common Hidden Issues:
- Subsidence (cracks in walls, uneven flooring).
- Damp and mould problems.
- Roof damage or missing tiles.
- Unsafe electrics and outdated plumbing.
How to Avoid This Risk
Arrange a property survey before bidding.
Factor in a contingency budget for unforeseen repairs.
Visit the property in person—don’t rely solely on auction listings.
Restrictive Covenants & Legal Pitfalls
A restrictive covenant is a legal restriction on how a property can be used. These can prevent you from:
- Extending or converting the property.
- Using it for rental purposes.
- Making structural changes.
How to Avoid This Risk
Have a solicitor review the legal pack before bidding. Check for restrictive covenants that could affect your investment plans.
Auction Fees & Hidden Costs
- Buyer’s Premium (1%-5% of property price).
- Auction House Admin Fees.
- Legal & Survey Fees.
How to Avoid This Risk
Read the auction terms carefully. Use our SDLT Calculator to check tax obligations.
Planning Permission & Article 4 Restrictions
Some properties, especially HMOs, require planning permission. If an area is under an Article 4 Direction, you may need planning approval before converting a property into an HMO.
How to Avoid This Risk:
Check if the property is in an Article 4 area before bidding. Look at local planning rules for any restrictions.
Related: HMO Licensing & Planning Guide
Inability to Complete Within 28 Days
Most auction properties require completion within 28 days. If you can’t secure funds in time, you could:
- Lose your deposit (typically 10%).
- Face legal action from the seller.
How to Avoid This Risk
Get pre-approved finance before bidding. Consider bridging loans if a mortgage takes too long to arrange.
Case Study: A Costly Auction Mistake
Investor Profile:
- Ben, an investor, won an auction property for £180,000.
What Went Wrong?
- He didn’t review the legal pack and later discovered the property had a restrictive covenant preventing it from being let as an HMO.
- He underestimated refurbishment costs, which doubled his expected budget.
- His mortgage lender refused funding because the property had no working kitchen.
Outcome:
Ben had to resell the property at a loss and pay additional legal fees to remove the restrictive covenant.
Closing Note
Buying at auction can be profitable, but only if you plan ahead and do your research.
- Check if the property is mortgageable.
- Review the legal pack for restrictive covenants.
- Budget for extra costs beyond the hammer price.
- Arrange auction finance in advance to avoid delays.
FAQs
Ans: No. Once the hammer falls, your 10% deposit is legally binding.
Ans: No. Auction properties are sold as seen—it’s your responsibility to do due diligence.
Ans: You could use a bridging loan to meet the 28-day deadline and refinance later.
Ans: Always get a solicitor to review the legal pack before bidding.
