Is It Cheaper To Buy a House At Auction?

The question “Are auction properties cheaper?” can be definitively answered with a YES.

For property investors seeking below-market-value deals, auction houses are a prime destination. Our review of recent national auction data revealed that in December 2023, residential properties were sold for an average of £168,152. This is more than £116,000 and 41% less than the UK average house price of £284,691.

Property investors should take note: the availability of residential properties at auction is on the rise. In 2023, there was a 19% increase in the number of residential lots offered compared to 2022, with 31,549 properties going under the hammer this year versus 26,559 last year.

Auctions present a prime opportunity for acquiring properties at significantly reduced prices compared to the market. Additionally, the rapid pace of auction transactions facilitates quick deals and the potential for substantial returns. Whether you’re an experienced investor or a first-time developer, auctions offer a chance to discover unique or undervalued properties ideal for renovation or rental.

Typically, auctions require a 10% deposit on the day of the sale, with the remaining balance due within 28 days. Buyers must be prepared to secure funds swiftly to complete their purchase. Auction finance options can help finalise transactions without risking the deposit or losing the property. Funding can be arranged quickly—up to £300k in 3 days, £750k in 7 days, and even up to £250m within 14 days.

Where can investors find the greatest discrepancies between auction prices and market value in the UK?

In December 2023, residential properties sold at auction were priced £116k below the market average. However, some regions offer even greater savings.

The East of England, including Cambridgeshire, Norfolk, and Suffolk, provides the most substantial opportunities, with auction properties there selling for £180k below market value. Other areas where auction prices are more than £100k below market value include the South East, South West, West Midlands, North West, East Midlands, Scotland, and Wales.

In contrast, London properties sold at auction are the closest to their market value, yet still average £70k below.

How a bridging loan can help

A bridging loan can be a powerful tool if you’re looking to buy a property at auction, especially if you need to act quickly or secure funding before selling an existing property. Here’s how it works and how it can help:

1. Quick Access to Funds: Auctions often require buyers to complete the purchase quickly, typically within 28 to 56 days. A bridging loan can provide the fast funding you need to secure the property.
2. Purchase Before Selling: If you need to buy a new property before selling your current one, a bridging loan can cover the gap. This is particularly useful if you’re buying a property at auction and don’t have the cash on hand from the sale of your current property yet.
3. Short-Term Financing: Bridging loans are designed for short-term use, making them ideal for auction purchases. They can be used to secure the property while you arrange longer-term financing, such as a mortgage, or while waiting for your existing property to sell.
4. Flexibility: Bridging loans can be more flexible in terms of qualifying criteria compared to traditional loans. They are often based on the value of the property being purchased or other assets rather than your credit score alone.
5. Competitive Edge: Having a bridging loan in place can give you a competitive advantage at auction. Sellers and auction houses often prefer buyers who can complete the transaction quickly, and having bridging finance arranged can demonstrate that you’re a serious buyer.
6. Cover Auction Deposits: Auctions typically require a deposit on the day of the auction, with the balance due within a short timeframe. A bridging loan can help cover this deposit and the balance due, ensuring you can complete the purchase.