There are two types of auction; the faster traditional method and the more flexible modern method.
With traditional auctions, they tend to be favoured by experienced investors and cash buyers because they are less flexible and have a shorter time frame.
Traditional auctions are usually held at an auction house and all interested buyers will be there and place bids in front of each other. The highest bidder gets to exchange contracts and pay a deposit on the day of the auction which is usually 10% of the purchase price. If you withdraw, you will lose your deposit as you have already exchanged legal contracts. You will then have to pay the rest of the money within 28 days.
On the other hand, the modern auction method gives the buyer more time and flexibility as the auction runs online, is usually for up to 30 days and you can bid at any time.
If you are the winning bidder, you put down a reservation fee which is usually around 5% of the purchase price and pays for the estate agent and auctioneer costs. You then have 56 days in total to complete the process. You have to exchange contracts and pay a 10% deposit within 28 days, then you get another 28 days to complete.
With this longer timeframe, it is much easier to buy with a mortgage than in a traditional auction.
How do House Auctions work?
When a house goes up for sale by auction, it will be listed online by either an estate agent or an auction house. Auction properties are usually online for about a month before the auction which gives interested buyers time to view and decide if they want to bid.
In a traditional auction, there is a set auction day and time. The auctioneer will invite interested buyers to bid in quick succession. However, in a modern auction, you can submit bids online up until a final time and date.
In both cases, the seller will set a reserve price. This is the lowest amount of money they would accept to sell. The highest bidder over the reserve price gets the property.
If you are the highest bidder, you will have to pay a deposit or a reservation fee on the day of the auction.
Why do people choose to sell by auction?
The speed and ease of a property auction sale are the main benefits for sellers. You can have a legally binding sale within a few weeks or a couple of months.
The seller might want to sell the house quickly because they have inherited it or have no use for it anymore. Other sellers choose an auction if they do not want to fix issues with a property. For example, the property might need lots of refurbishment work or some structural improvements.
There are also fixed timeframes once the house has been sold at auction. This means that the sale progresses smoothly and quickly, with less need for communication between different parties.
If you are looking for further advice and assistance, then Bond Adams LLP can advise and empower you to understand your options. We will support your decisions about the future. Our lawyers have extensive training to fully support you. Their goal is to provide you with the best outcome you can possibly have.
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