To help you understand the new terms used around auction sales, we’ve compiled a simple glossary of common terms with an explanation behind each one.
The Modern Method of Auction
The modern method is also known as a conditional auction: After the acceptance of an offer or at the close of the auction, the buyer must place a non-refundable reservation fee to reserve the property. The buyer is then given 28 days to exchange contracts and a further 28 days to complete the purchase. Most buyers prefer to buy through the modern method of auction as the extra time provides greater flexibility.
Traditional Auction
A traditional auction is also known as an unconditional auction: When a property is sold in this way a 10% deposit is paid on the day and contracts are exchanged immediately. Completion normally takes place 28 days later. This type of auction is generally best suited to investors and property professionals..
Start Bid
Every property is advertised with a start bid, which is the recommended level at which the bidding should open. It must not be relied upon by potential buyers as a valuation, as in most cases the reserve is above this level.
Reserve Price
This is the minimum price that a seller is willing to accept for a subject property. This figure acts as a safety catch as the property will not be sold for less. Reserve prices are not published; this is a private agreement between the vendor and the auctioneer.
Reservation Fee
Unless otherwise stated, each property is sold subject to a reservation fee. If you are interested in a particular lot please speak to a member of the team before you bid. Please note that the reservation fee is in addition to the final negotiated selling price, and is received on a non-refundable basis. It is held as a reservation against the subject property until such time that exchange of contracts take place. If the sale falls through due to an act of the vendor, the reservation fee becomes repayable to the buyer in full.
Reservation Form
The reservation form is an agreement between the auction house and the buyer which lays out in plain English the terms and conditions which need to be met by the buyer. The sale will not be instructed nor Memorandums of Sale sent out until the reservation form is signed by the buyer.
Pre-auction Offers
If you really like a property and don’t want to wait until the auction is over, don’t worry – you can offer on it before the auction ends. All offers, irrespective of when they are made, will be considered by the vendor. If an offer is accepted before the auction ends it will be subject to the terms and conditions of the auction method of sale.
Exchange of Contracts
Here, the buyer signs the contract for sale and sends it to the seller, who also signs it. This is the point at which both parties are legally obliged to complete the transaction, and usually takes place 28 days after the fall of the hammer. The purchase is not actually complete at this point, but there is a legal obligation for the purchaser to buy and the vendor to sell.
Completion
This is when the purchase becomes final: the purchase price is paid in full by the buyer’s conveyancer and received by the seller’s conveyancer. Completion can take place at the same time as the exchange of contracts (see above) but is usually a week or so later. The seller must move out of the property on this date and release the keys to the buyer, who may move into the property.
Buy to Let
This is where a property is bought with the intention of letting it out on a commercial basis. There are specific mortgages for this type of purchase known as buy to let mortgages.
Fixtures and Fittings List
This is a list of items which will remain, or conversely, be taken from the property upon completion. It is a legally binding document with copies attached to each part of the contract and it is completed by the seller.
Stamp Duty
This is the tax payable on the purchase of a property. For current stamp duty tariffs please visit the Inland Revenue website.
Survey
This is an inspection of the property by the surveyor to check its physical condition and to advise the buyer of its value. There are different types of survey and your conveyancer will advise you on the best type for you. A survey is not the same as a mortgage valuation.
