10 Terms You Need to Know When Buying or Selling Property in an Auction
1. Conditional In-Room Auction
A conditional auction is where a property is offered in the auction room under a best bids process where the winner secures a period of exclusivity (usually four weeks). During the exclusivity period, the buyer will sort their mortgage funding and exchange contacts with a fixed completion date (usually within eight weeks of winning the property). The successful bidder will pay a non-refundable reservation fee to secure the exclusivity and both the seller and the buyer are tied into the process.
2. Guide price
A guide price is a marketing figure, which is used to guide potential buyers to know how much a property could be worth, the sale price, however, will be dependent on bidding in the auction room. Guide prices should always be showing on the property details page.
3. Legal pack
A legal pack is the set of documentation prepared by the seller’s solicitor. These are available to download via the property details page on the website. A hard copy will usually be available in the auction room too. The elements of a legal pack are:
• Official Copy of Register of Title
• Land Registry and Local Searches
• Special Conditions of Sale
• Property Information Form
• Fixtures and Fittings Form
• Management Information
• Tenancy Agreements
• Planning Permission Documentation
Auction teams recommend that all elements of the legal pack are inspected by those wishing to bid and their legal advisors. The Special Conditions of Sale will include information such as completion date, any additional disbursements that are payable incompletion, and overage clauses.
This is a confidential figure, set between the seller and the auctioneer, and it is the figure that bidding must reach before the auctioneer can sell the property in the room. For a single figure guide price, the reserve cannot be more than 10% above, the reserve must sit within that range and not exceed.
5. AH Legals
Are experts who understand the auction process and can help you to create your legal pack without delay and support your sale through to completion. AH, Legals offer:
• No sale no legal fee - If you don’t find a buyer, you won’t be charged a Legal Fee.
• No upfront fees for searches – they are provided no sale no charge via an associated supplier.
• Fixed legal fees for your sale +VAT.
• Auction legal pack – prepared no sale no charge, the cost is only payable after exchange.
• 24/7 Online tracking of your conveyancing file
If you are selling by auction, choose AH Legals to get your property ready for auction and your sale through to completion, on time and without issues.
AH, Legals also provides services for auction buyers, using a team of dedicated, experienced auction conveyancers.
• Fixed legal fees +VAT.
• Speed and efficiency – all part of their excellent service.
• Clear, concise communication throughout the process by email, text, telephone, and online.
If you are buying a property at auction, choose AH Legals to get your purchase through to completion efficiently and hassle-free.
6. Unconditional In Room Auction
An unconditional Auction is where a collection of properties are offered for sale in an auction room with contracts being exchanged to the highest bidder on the fall of the gavel. The auctions team bring together all entries into a catalog, actively promote the properties, host open house viewings where possible, get legal packs created and made available, and cultivate interest from as many buyers as possible. Competitive bidding in the room will usually see the property sell at a price above the seller’s reserve.
It's a list of changes that have been notified after the catalog being published. The sheet will be available in the auction room. Bidders should check the addendum in advance of the auction, in addition, the auctioneer will often remind bidders of any amended information prior to the property being offered. The addendum forms part of the property description and sale contract. If you have any questions about the contents of the addendum, please speak with a member of the auction team for advice prior to the auction beginning.
8. Auction Finance
Auction finance is a service provided by specialist lenders to auction buyers. There are suppliers who provide short-term finance, bridging loans, commercial finance, buy-to-let mortgages, and secured loans. Auction finance can help all types of people in a variety of situations, by providing the finance needed to move in, move up, get on or start something. Homebuyers, landlord investors, property professionals, and small businesses are regular users of auction finance.
Money is made available extremely quickly to fit into the purchasing timescales of auction buyers. Loans are secured against the property being purchased or other property assets and borrowing can often be confirmed within hours. Auction finance companies can lend to those who are employed, self-employed, limited companies, limited liability partnerships, sole traders, and partnerships. They are also very flexible about the types of property you are looking to purchase and the circumstances of your purchase.
9. Auction Passport
Auction Passport is a service provided by Essential Information Group, which gives online access to the legal packs for buyers and their solicitors to inspect in advance of auction day and prior to bidding. You will be required to provide your email address and a secure password as part of the registration process. The service notifies those that have registered any new/revised documents added to the pack.
10. Open Market Value
Open Market Value is the estimated amount that a property would sell for, on the date of the valuation. In the opinion of the valuer, it is the probable price that a property would be expected to achieve on the day in an open fair sale environment.
These are qualified lawyers who deal with Property law. Operate under the different regulatory frameworks and are responsible for setting and maintaining professional standards in the industry.
12. Due diligence
Due diligence means that you have done your homework on a property that you are interested in bidding on. You need to do this before placing a bid as there will be no turning back if it is successful. This includes checks on the property itself, its condition, remedial works required, location, design, and suitability. It also includes vetting of the legal pack including title documents, searches, special conditions of sale, and other important documents. Many buyers will engage the services of a solicitor to check the legal pack and advise on their findings.
13. Overage Clause
An overage clause in a sale contract is the means through which a seller may be entitled to receive further monies after completion if a specified condition is satisfied. It is used in situations where the property/land value can be significantly raised by the subsequent granting of planning permission for a new use or where additional dwellings are approved. We always suggest that you take advice from a professional who understands the subject.