Buying a Property at Auction (Without Accidentally Buying a Roofless Cottage)

In recent years, the Method of Modern Auction (MMA) has become increasingly popular in the UK. It combines the speed of auctions with a slightly more buyer-friendly process (and fewer raised paddles… usually).

But before you dive in and bid on a “charming fixer-upper” that turns out to be missing a kitchen (yes, that matters), let’s break down how it all works — costs, risks, finance options, and how to avoid any expensive surprises.

What Is the Method of Modern Auction?

The Method of Modern Auction is a hybrid between a traditional auction and a private sale.

Unlike traditional auctions (where you exchange contracts immediately and complete within 28 days), MMA gives you a bit more breathing space.

Here’s how it works:

1. You place bids online (or via an agent) over a set period

2. The highest bidder wins

3. You pay a reservation fee

4. You then have 28 days to exchange contracts

5. Followed by another 28 days to complete

So in total, around 56 days to complete — which is much more manageable than the traditional auction sprint.

The Not-So-Small Print: Reservation Fees

Here’s where things get real.

Instead of a deposit upfront, MMA requires a reservation fee, which is:

• Typically 4%–5% of the purchase price

• Often with a minimum fee (e.g. £5,000–£10,000)

• Usually non-refundable

Yes — non-refundable.

So if you change your mind, can’t get a mortgage, or discover the property is actually held together by optimism and duct tape… you could lose that fee.

Legal Considerations (AKA: Read Everything!)

When buying via auction, your solicitor will become your new best friend. Instruct a solicitor upfront and have them look through the legal pack, or sometimes called the Buyers Information Pack, which may include:

• Title documents

• Searches

• Lease details (if leasehold)

• Special conditions of sale

Watch Out for Leasehold Surprises

If the property is leasehold, check:

• Remaining lease length - 80 years or less could mean trouble

• Ground rent and renewal period (some can double over time which is not ideal)

• Service charges (and what facilities and services they pay for)

Short leases or unusual terms can make a property hard to mortgage and expensive to fix later.

Why Makes a Vendor Sell at Auction?

There’s usually a reason a property ends up at auction. Common ones include:

• It needs significant renovation

• It’s unmortgageable in its current condition

• It has legal complexities

• It’s a quick sale (e.g. repossession or probate)

Red Flags to Look Out For

• No functioning kitchen or bathroom

• Structural issues like damp or cracks in the walls

• Non-standard construction like concrete or timber, or a thatched roof

• Short lease

• Missing documentation

If a lender wouldn’t happily send their valuer around with confidence, you may struggle to get a mortgage.

Can You Get a Mortgage for an Auction Property?

Yes — but timing is everything.

With MMA, you have around 56 days to complete, which is usually enough time to arrange a mortgage if everything goes smoothly.

Key Tips:

• Get a Mortgage Agreement in Principle (AIP) before bidding

• Speak to a broker who understands property auctions and pitfalls

• Make sure the property is mortgageable...

Because if your mortgage falls through after you’ve paid the reservation fee… you’ll be having a very expensive learning experience.

What If the Property Isn’t Mortgageable?

This is where bridging finance often comes in.

Bridging Loans: The Short-Term Fix

A bridging loan is a short-term loan designed to help you:

• Buy quickly

• Fund renovations

• Exit onto a standard mortgage later

Think of it as a financial “bridge” between buying the property and making it mortgageable.

You'll need to consult with a commercial broker that does bridging finance. The process is similar to getting a normal mortgage, but usually you'll need to show your plan and a schedule of works for how you're going to bring the property back to life. Once funds are released, you'll pay an interest carge every month until the loan is paid back. Bridging loans are usually granted for a short period of time like 1-2 years, and you should expect some upfront fees.

The Exit Plan: Remortgaging After Renovation

Once the property is in good condition, many buyers plan to remortgage onto a standard residential or buy-to-let mortgage.

Typical Lender Criteria:

• The property must be habitable and mortgageable

• It must be registered with the Land Registry

• Many lenders require 6 months ownership before remortgaging

However…

👉 Some lenders offer “day 1 remortgage” options, meaning you may not need to wait the full 6 months — subject to criteria and valuation. This can be particularly helpful if you’ve added value quickly through refurbishment.

Example Costs: Buying at £185,000

Let’s break it down with a realistic example.

Purchase Price:

£185,000

Reservation Fee (5% example):

£9,250 (non-refundable)

Deposit (if using a mortgage, typically 10% for a residential purchase of 25% for a buy-to-let):

£18,500

(Important: the reservation fee is usually separate from your deposit)

Stamp Duty (standard residential, assuming not first-time buyer):

• On £185,000 = approx £1,750 (subject to current thresholds)

Legal Fees:

• Approx £1,500–£2,500

Total Cash Needed (rough estimate):

• Reservation fee: £9,250

• Deposit: £18,500 for a main residence / £46,250 for a buy-to-let

• Stamp duty: £1,750 for a main residence / £10,450 for a buy-to-let

• Legal fees: £2,000

👉 Total: ~£31,500 for a main residence

👉 Total: ~£67,950 for a buy-to-let

And that’s before any renovation costs… or replacing that missing kitchen.

Final Thoughts: Exciting, But Do Your Homework

Buying via the Method of Modern Auction can be a fantastic opportunity:

✔ Potential bargains

✔ Faster process than traditional buying

✔ Great for investors or renovation projects

But it also comes with risks:

❗ Non-refundable reservation fees

❗ Tight timelines

❗ Potentially unmortgageable properties

The key is preparation.

• Review the legal pack carefully

• Speak to a mortgage adviser early

• Understand your finance options

• Always have a backup plan (especially if using bridging)

• Plan a contingency fund - bridging lenders for example will want you to factor in 5-10% extra towards your renovations budget

Because while auctions can be thrilling… they’re a lot less fun if you realise after winning that the property doesn’t have a roof, a kitchen, or a mortgage solution.

Having said that, working with the right people and being thorough can get you a bargain property.