A property auction is a popular method for a prospective buyer to purchase a property due to the speed and security it offers compared to the standard conveyancing process.
There are two types of property auctions – a Traditional Auction and a Modern Auction – and our Residential Property Lawyers explore both in this blog.
What to expect when purchasing at an auction
A legal pack from the seller will be made available to prospective buyers shortly before the property auction date.
The legal pack will contain the Contract of Sale and the title documents. It may also contain conveyancing searches such as: the local authority search, drainage search, environmental search and chancel repair search.
At this time, it may be beneficial to instruct a solicitor to check through any legal documentation and to arrange a survey before any bids are placed.
The surveyor should contact the auctioneers to arrange access to the property. How you bid on the property will then depend on which “type” of auction you are attending.
Traditional Auctions
At traditional auctions, the seller will set a guide price, and prospective buyers will make bids on the auction day.
When the hammer falls at the auction, contracts will be exchanged at this point.
The buyer is required to pay a 10% deposit of the purchase price, with the balance due to the seller on completion.
Usually, completion must take place within 28 days of the exchange of contracts at auction. During this time, the seller cannot sell the property to another party.
A successful bid at a Traditional Auction is contractually binding and pulling out of the purchase afterwards could be extremely costly; a buyer could ultimately forfeit the deposit together with any auctioneer’s fees already paid.
Therefore, as mentioned above, we strongly recommend that you instruct a solicitor to review the legal pack before you make any bids at auction.
We have, unfortunately, seen instances where there have been defects in the property title, which meant that, although the buyer could complete the purchase, they would not be able to register their ownership of the property at the Land Registry following completion, and, therefore, would not have any formal title to the property.
In these cases, the issues with the titles caused significant delays and increased costs due to the unforeseen problems, which could have been avoided had the legal pack been reviewed and the issues been brought to light before the auction.
Modern method of auction
A Modern Auction is conducted online.
Prospective buyers will submit their bids online, and when a successful bid is made, the buyer will be required to pay a reservation fee to secure the property.
The reservation fee is not the deposit, and it does not form part of the purchase price. It is a non-refundable fee that is payable in addition to the purchase price and auctioneer’s fees.
Unlike Traditional Auctions, contracts are not exchanged at the auction, and buyers are not required to pay the deposit on the day of the successful bid.
Completion must usually take place within 56 days of the successful bid, and during this time, the seller cannot sell the property to another party.
If the buyer is unable to meet the completion deadline or chooses to withdraw from the purchase after the successful bid at auction, the buyer will lose the reservation fee, and the seller will be free to sell the property to someone else.
Whilst buyers have more time to exchange contracts and complete the purchase following a successful bid at a Modern Auction, and despite the reservation fee being less than the 10% deposit required at a Traditional Auction, withdrawing from the purchase can still be costly as the reservation fee and auctioneer’s fees will be lost.
Therefore, it is still imperative to have the legal pack reviewed by a solicitor and the appropriate legal advice sought prior to bidding at the auction.
How can we help you?
At Myerson, we can provide you with expert legal support to help you navigate every stage of buying a property at auction.
We will carefully and comprehensively review the legal pack provided by the auctioneer before you bid, ensuring that you fully understand the title, restrictions and obligations associated with the property.
This will not only give you an idea of the property you are committing to purchase, but it will also identify any issues with the property, minimising the risk of costly delays or failed completions.
Contact Our Residential Property Auction Lawyers
If you have any more questions or would like one of our solicitors to assist you with your auction purchase, you can contact our Residential Property Team below.
0161 941 4000
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Acacia Spencer
Solicitor Apprentice
Acacia joined Myerson in September 2024 after finishing her A-Level studies at Fallibroome Academy sixth form with straights A’s.
She is currently completing her first legal seat in the Residential Property Team. Throughout the 6-year apprenticeship programme, Acacia will work with various legal teams before qualifying as a solicitor in 2030.
About Acacia Spencer