Buying and selling a property at auction
Auctions are a quick way to buy property and if you do your research, you could land a bargain. For sellers, the relative ease of selling at auction can be appealing, especially if a property is unique, has problems, or personal circumstances necessitate a faster sale.
In this article:
Types of property auction
A traditional auction, sometimes referred to as a standard auction, is where a buyer pays a 10% deposit and exchanges contracts as soon as the gavel falls. Buyers are then committed to complete, usually within 28 days of the successful bid.
With a modern auction, buyers pay a reservation fee of around 5% when their winning bid is accepted. The buyer must then exchange contracts 28 days later, and must complete 28 days after that (56 days on total).
Buying at auction
The following are the key steps involved in buying a property at auction:
Step 1: Research
Properties being sold at auction are usually advertised on property portals like Rightmove and Zoopla around a month before the day of the auction. You can also find upcoming auctions via dedicated websites, auction houses, or estate agents.
Step 2: Inspect the property
Arrange a viewing of the property as soon as possible. You may have to attend pre-arranged viewings. Consider taking a builder or surveyor with you to identify any potential structural issues.
Step 3: Market analysis
Look into recent sales of similar properties in the area to help you set a realistic budget.
Step 4: Due diligence
It is not uncommon for properties sold at auction to have serious legal defects, structural problems, or other issues.
When you make the winning bid at a traditional property auction, you 'exchange contracts' with the seller the moment the gavel falls. Exchange of contracts is the point in the process where both buyer and seller are legally bound to complete the transaction. Therefore, auction buyers must complete their legal due diligence on the property before the auction.
Auctioneers will make available an auction legal pack, containing key documents like the title deeds, local authority searches, property forms and the conditions of sale. This helps identify any potential legal issues, such as restrictions, defective leases, missing consents and other legal issues that could affect the property's value or future use.
Make sure you ask a solicitor to complete an pre-auction legal pack review, which will advise you on any potentially serious legal issues.
It is usually a good idea to use the same solicitor to complete the auction conveyancing, if you win the auction. The solicitor wil have set you up as a client and already have a file open, helping save time after the auction.
Step 5: Arrange your finances
You must have the funding required in place before you agree to the purchase. If you need a mortgage, you can get a decision in principle from your lender. Not all lenders offer mortgages on auction properties, and some offer special auction finance products.
If you're bidding at a standard auction, make sure you will have immediate access to the deposit (usually 10%) if you're the winning bidder. At a modern auction, you will need to pay the 5% reservation fee.
There may be other fees to pay to the auctioneer when you make the winning bid.
Step 6: Confirm that your solicitor can act for your lender
If you are buying with the help of a mortgage, your solicitor must also complete the legal work for the bank.
If your property lawyer isn't a member of your chosen lender's panel, the solicitor would have to outsource this work to another solicitor, resulting in potential delays.
Over 100 banks and building societies have approved our chosen panel solicitors, so we can help you complete your auction purchase without delay.
Our panel solicitors can act for over 100 mortgage lenders
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Step 7: Register for the auction
Usually a straightforward process - you may have to pay a fee or refundable deposit.
Step 8: Bidding
Depending on the auction, or your preference, you may be able to attend the auction in person, by phone, or you can give the auctioneer your maximum bid, and they will bid on your behalf (proxy bidding) budget.
Step 9: Winning bid
If yours is the winning bid, the next stages will depend on the type of auction:
|Stage||Traditional Auction||Modern Auction|
|Winning bid accepted||
Non-refundable 10% deposit is paid.
Any other auction costs are paid.
Non-refundable reservation fee (around 5%) is paid
|Exchange of contracts||Contracts exchanged immediately on winning bid||Contracts exchanged 28 days after winning bid|
|Completion||Completion must happen within 28 days of the winning bid||Completion must happen within 28 days of exchange of contracts.|
During this period your solicitor will need to complete the mortgage formalities (if applicable), transfer the remaining funds to the seller and pay the Stamp Duty Land Tax.
Step 10: Conveyancing
If you win the auction, your solicitor will need to act swiftly to meet the typically tight completion deadline (usually 28 days), as specified in the auction’s conditions of sale.
Your solicitor will receive the sales details from the auctioneers, exchange contracts, draft and submit the transfer deed, raise enquiries with the seller’s solicitor, carry out pre-completion searches, complete the mortgage formalities (if applicable), transfer the funds to the seller’s solicitor, and complete the transaction.
Following completion, the solicitor pays any Stamp Duty Land Tax (SDLT) due.
Once the sale is complete, you'll receive the keys and the property is yours. Your solicitor will then need to register you as the new owner at HM Land Registry.
Selling at auction
When representing a seller at a property auction, a conveyancing solicitor prepares the auction legal pack, which includes key documents like the title deeds, contract of sale, property searches, and the property forms. The pack is made available to prospective buyers for review before the auction.
After the auction, the solicitor coordinates the immediate exchange of contracts and completion (in under 28 days), ensuring that any outstanding mortgage on the property is settled and that the proceeds of the sale are correctly distributed to the seller.
The solicitor acts as the main point of communication between all parties, making sure the transaction proceeds smoothly and within the stipulated time frame.
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How much does auction conveyancing cost?
Solicitors fees for buying at auction typically range from £500 to £1,500 inc. VAT (depending on the solicitor) plus disbursements. A pre-auction legal pack review can cost between £300 and £600 inc. VAT.
A disbursement is a third-party cost incurred by a conveyancing solicitor on behalf of their client during the conveyancing process. Examples of disbursements include Stamp Duty and HM Land Registry fees).
Again, depending on the solicitor you choose, fees for selling at auction typically range from £500 to £1,000 inc. VAT plus disbursements.
Our panel solicitors offer a low-cost, fixed fee auction conveyancing service, with a focus on completing the purchase well within the auction deadline.
Who pays for property searches?
Sellers at auction are encouraged, but not legally required, to include property searches in the auction legal pack. If the auction pack does not include property searches, your solicitor will recommend that these are carried out. If you are buying the property with a mortgage, property searches will be required by your lender.
Some lenders will accept an indemnity policy in lieu of searches, which is a faster and cheaper option.
In most cases, searches are initially paid for by the seller and included in the auction legal pack. It is now a common stipulation in the terms of sale, for the buyer to purchase the property searches from the seller. This is no bad thing, as the buyer would have to pay for searches in any event, and having them immediately available helps reduce delays.
Ideally you will have asked your solicitor to carry out an auction legal pack review, so aunty issues with the searches will have been flagged with you before the auction.
When budgeting to buy a property at auction, there are a number of other potential fees to watch out for. Make sure you review the property details and the auctions terms of sale to identify additional fees, which can include:
Auctioneers are increasingly charging a buyer’s premium fee, instead of (but sometimes as well as) charging the seller a sale commission. Payable by the buyer at exchange of contracts, the fee will be charged as a percentage of the agreed purchase price.
Buyer’s Administration Fee
Most auction houses charge a buyer’s administration fee of between £200 and £1,000 including VAT. This fee is also payable by the buyer on exchange.
Special Conditions of Sale
Additional fees can also often be listed in the special conditions of sale, which can be found in the auction legal pack. These fees can be lot specific, so they won’t necessarily apply equally to all lots being auctioned. Additional fees could include an obligation to purchase the property searches from the seller to an agreement to make a contribution to the seller’s conveyancing fees.
How we can help you
If you are buying or selling a property at auction, you'll need a solicitor to handle the legal side of the process.
We work with a panel of auction specialist conveyancing solicitors to help deliver a stress-free auction buying experience.
Our expert panel of auction solicitors can:
- Prepare the auction legal pack for sellers
- Review the auction legal pack for buyers (Find out more)
- Complete the auction conveyancing for buyers and sellers
- Work to the strict auction deadlines
Fixed auction conveyancing fees from £415 inc VAT
Chris Salmon, Director
About the author
Chris Salmon is a co-founder and Director of Quittance Legal Services. Chris has played key roles in the shaping and scaling of a number of legal services brands and is a regular commentator in the legal press.