Buying a House Before Auction [Pros & Cons, How To Do It and More]

Buying a house at auction is without doubt the most exciting way to buy property. But you're probably not buying a house for the excitement! What if you just really want that house?

How do you buy a house before it goes to auction?

To buy a house before it goes to auction you'll need to contact the auction house and submit your offer. They'll put this forward to the seller, and you may end up negotiating back and forth. If your offer is ultimately accepted then the sale will still be under auction terms, meaning you need to pay the deposit or reservation fee immediately.

But if you think you're going to grab a bargain by buying pre-auction, you may be in for a surprise. Read on to learn more about the process of buying before auction, and the pros (and unexpected cons) of buying before auction.

1. How to buy a house before it goes to auction

There are a few stages to buying a property before auction. The first thing you need to know though is that all the usual rules still apply, so the process starts with due diligence.

1.1. Do pre-auction preparations as normal

If you successfully buy pre-auction, the sale will still be under auction conditions. (This means you'll pay your deposit or reservation fee right away, and will face heavy penalties if you back out).

So do all your pre-auction prep as normal. This means:

Valuation work. Do your research and see what kind of price you'd potentially be prepared to pay for the property.
View the property. Go and see it in person. (If the auction house are doing block viewings you can use this to gauge how much other interest there is. This will have a big bearing on how likely you are to be able to agree a pre-auction sale).
Do your due diligence. Have a solicitor check the legal pack, and carry out a survey.
Finances in place. Make sure your finances are in place. If you're buying with cash, make sure the funds are readily available. If you're using auction finance make sure it's all pre-agreed. (Related: Can you buy an auction property with a mortgage? (And how?)
Decide on your maximum bid. You need to set a ceiling price for yourself. Auctions are great at making us get carried away in the moment, so set a price limit beforehand and stick to it. (REMEMBER to check the auction terms and legal pack to identify any additional costs).

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Let's say you've done all your usual pre-auction prep. What's next?

1.2. Contact the auction house and submit your offer

When you've done all your due diligence and decided on your maximum price, it's time to submit your offer.

You'll need to submit your offer through the auction house.

Don't try and "cut the auction house out" and go directly to the seller.

For one, it's bad karma to do this. (After all, the auction's successfully brought you to the property, so if you buy it they've done their job - and should be paid their fee).

But even if you don't care about soppy stuff like karma, you still can't do it: The seller is in contract with the auction house, and this bars them from selling the house elsewhere during the auction period.

Long story short, you'll need to submit your offer through the auction house.

1.3. Negotiate the price

If you've ever bought a property through an estate agent you'll be familiar with what happens next. You're going to submit your offer to the auction rep, who'll then put it forward to the seller.

You're then in negotiations to see if a deal can be agreed. But what's the best way to stack the odds in your favour?

Tips for buying a property before auction

Strike quickly after viewing. One of the main reasons a seller would accept an offer pre-auction is because they're in a hurry. So don't make them wait. Show that you're a professional buyer who's ready to move now.
Offer to complete sooner if you can. Most auctions have a 28 day completion deadline for the winning bidder. (Modern Auctions can have longer - perhaps up to 56 days). If it's possible for you to complete sooner then make this clear when you submit your offer.
Keep your cards close to your chest. There are two prices you should have in your mind: The maximum price you'd pay, and the price you actually want to pay. You're obviously going to present that 2nd price as your initial offer... but don't let the auction rep know if you'd actually be prepared to pay more!
Present your case. Do what you can to present your offer in the best light you can. Remember, the seller's two main considerations here are going to be: 1) How quickly the sale can complete, and 2) Whether they'll get a better price waiting until auction day. Do what you can to strike these chords. For example, if the auction's still 3 weeks away, selling to you is going to be much faster (especially if you can complete quickly too). Or if no one else showed up to the viewing appointment, you may be able to play on the uncertainty they may be feeling.
Be prepared to negotiate. A lot of sellers are going to have chosen the auction route because they want bidders to compete for their property. Chances are, they're not just going to accept the first offer they get, so be prepared to negotiate. While you're negotiating try and find out from the auction rep what the lowest price is that the seller would be prepared to accept.
Waiting can be a great tool. Yes, we said to be fast. But forcing the other side to wait can be a great tool too. If you feel the other side is actually keen to get a deal done, then making them sweat can work out in your favour.
Be prepared to walk away. The seller may just want to take their chances on auction day. If your maximum price isn't acceptable to them, or if you feel like you've got a better chance of securing a more favourable price on auction day, then walk away and wait for the auction.

1.4. If your offer is accepted then be fast

If the seller decides to accept your offer, then it's on the basis of a fast completion. So get any signed forms or electronic signatures back to the auction house promptly, and pay your deposit as quickly as you can.

Fulfil your end of the bargain.

1.5. Complete within the timeframes promised

Finally, if you promised a completion in two weeks, then deliver for them.

That's how you purchase a property before the auction. It's a fairly straightforward process...

But is it actually a good idea to buy pre-auction? Let's cover that next.

2. Pros and Cons of buying a house before auction

The pre-conception about pre-auction purchases is that you're going to get a good deal. But it's not always the case. There are actually a few pros and cons to consider.

2.1. Benefits of buying a house before auction

You might get a good deal. By entering negotiations with the seller, you may be able to secure the property for less than your "maximum bid". It's not always the case, but you're in with a chance.
Better chances of getting the property. Even if you end up having to increase to your very highest price to agree a pre-auction sale, you may have lost the house altogether had it gone to auction. If someone bid higher, you'd have lost it. So you give yourself a better chance of winning the house by trying to secure it pre-auction.
You'll get the property more quickly. Properties are generally marketed for 4 weeks before the auction. If you see the property in week 1 and submit your offer, it's just so much faster than having to hang around until auction day.
Auction Conditions prevail. Although you didn't actually win an auction, it's not the sale's still under auction conditions, which means the seller won't pull out and will need to complete quickly.
It costs nothing to try. It's not like making a pre-auction offer is an all-or-nothing thing, where you'll lose a load of money if it's rejected. It's just a couple of phone calls and a proposal. If it's shot down then you're no worse off.
If it's rejected, just bid at the auction. If the seller insists on waiting until auction day, just bid then! Again, there's nothing to lose.

2.2. Disadvantages of buying a house before auction

You may have to pay a top price. Typically, sellers want to put their property into auction and have a crowd of bidders compete for it. This ensures they get the best price possible from the process. You may have to offer them a high price to convince them not to wait for auction day.
It may have been cheaper to wait for auction day. What if there was going to be little to no competition for auction day? By negotiating outside of the auction, you may end up paying more than you could have won it for at auction.
You'll have to rely on the auction rep. When you bid at an auction you're fully in control. But when you buy pre-auction you'll have to negotiate via the auction rep. This can be really hit or miss. Some reps will be better than others (and more motivated than others) in trying to get a deal tied up. Unfortunately, their skill and motivation are going to have a strong bearing on how likely you are to secure the property, and there's not really much you can do to control it.
Negotiations are behind closed doors. You won't be able to pick up much of a steer on what the seller would be prepared to accept. This is because negotiations take place over phone calls that you're not party to. It's much more difficult than if you were able to negotiate directly with a seller.
Not all properties can be sold before auction. Some sellers may have to sell the property publicly. For example, probate companies and mortgage lenders have to demonstrate they've tried to get the best possible price for the property. Selling it outside the auction doesn't tick this box, so may just not be an option for them.

These are the pros and cons of buying a house before auction. To check out the advantages and disadvantages of buying a property on auction day itself, check out this article: Want To Buy At Auction? 12 Crucial Pros & Cons to Consider First

3. Should you buy a house before auction?

In my opinion, whether or not you should buy pre-auction depends on which of these two brackets you fall in to:

Have you seen a property you love, and are desperate not to lose it?
Or are you just looking for a property at a great price?

3.1. Emotion-driven pre-auction purchases

If you fall into the first bracket and you're desperate to buy this specific house, here's what I'd do:

Do all your due diligence as suggested.
Contact the auction house and submit a low offer.
Be prepared to increase up to your very maximum offer.
If you win it, congratulations! If you didn't, you just need to walk away.

Approaching it this way gives you the best chance to secure the property.

You do run the risk of overpaying compared to what you could buy for on auction day... but if your priority was actually making sure you get the house, then it's ok.

You may have paid a bit more, but you removed the risk of losing it to another bidder.

3.2. Finance-driven pre-auction purchases

If you're buying at auction because you really want a great deal, then I don't really think pre-auction purchases are the way to do it.

There's no harm done in submitting a low pre-auction offer, but the seller's probably going to reject it.

In most cases, they'll want to wait until auction day, and you'll have to pay a high price to convince them not to.

A better option is to show up on the day, and hope for little competition.

If getting a good deal is really what you're after, you'll probably find more success in post-auction sales than you will in pre-auction sales.

I read a great comment from a user called Marcus on the Property Tribes forum that encapsulated this exactly:

I've always thought that generally buying pre-auction is dearer, and buying post-auction is cheaper.

If getting a great price is the most important thing to you, pre-auction sales probably aren't the way to do it... But if you love the house and don't want to run the risk of losing it then tying it up beforehand is a great idea.