Understanding the Key Differences in Property Auction Methods

Introduction

Property auctions have always been a popular way to buy and sell real estate in the UK and Ireland. In recent years, new approaches have emerged alongside the established methods, offering buyers and sellers more options. This article explains the main differences between modern property auctions and traditional property auctions, helping a seller to make an informed decision as to which method might suit them best.

It will also give a buyer an overview of when they might become contractually bound after bidding at a property auction.

Traditional Property Auctions

Traditional property auctions are what most people picture when they think of an auction. They typically take place in a physical auction room, although online options are increasingly available. The process is fast-paced and transparent, with the following characteristics:

Speed and Finality

Once the hammer falls, the highest bidder is legally committed to purchase the property, as contracts are exchanged on hammer down. A 10% deposit is usually paid immediately, and completion typically occurs within 28 days. The buyer will not be entitled to raise enquiries on the property, having been deemed to have entered into the purchase with full knowledge of the property. At completion, the buyer will make the final payment to the seller.

Transparency

All bids are made publicly, so everyone can see the progression and final price. Before the auction, the seller’s solicitors will have submitted an “auction pack” containing all relevant documents concerning the property.

This will usually include:

• A copy of the title of the property with official copy plan
• A copy of all documents referred to within the title of the property
• A pack of searches such as Local Authority Search, Drainage and Water Search, and Environmental Search
• Planning and Building Regulation documentation
• The contract, including any reimbursements the buyer must make on completion, such as the cost of searches or a management pack in the case of a leasehold sale

Certainty

There is little risk of the sale falling through after the auction, as contracts are exchanged on the day.

Buyers

Traditional auctions often attract cash buyers or those who have finance in place, as the tight timelines require swift action.

Sellers

Sellers benefit from a quick, secure sale, but may need to accept a lower price in return for the certainty and speed.

Modern Property Auctions

The modern property auction, sometimes known as the “conditional auction” or “online auction”, introduces more flexibility while retaining some of the traditional auction’s benefits. These auctions usually take place online, and the process works as follows:

Conditional Sale

When the auction ends, the winning bidder pays a reservation fee (not a deposit) and is granted an exclusivity period—usually 28–56 days—to exchange contracts and complete the purchase. The reservation fee can be high, so the buyer must consider that money lost if they are subsequently unable to complete the purchase.

Flexibility

The extended timeframe allows buyers to arrange surveys, secure mortgage finance, and carry out due diligence, making this method accessible to a broader range of buyers. Following payment of the reservation fee, the buyer will have the opportunity to raise enquiries on the property and title as per a normal purchase.

Transparency

Bidding is still transparent, with all bids visible online, but the process is less pressured than a live auction room. It is usual for the auction company to have prepared an auction pack for the property similar to that provided in a traditional auction.

Sellers

Sellers can achieve a wider audience and potentially higher prices, since more buyers are able to participate. However, there is a small risk that the sale could fall through if the buyer fails to exchange contracts during the exclusivity period.

Key Differences

Conclusion

Both traditional and modern property auctions offer distinct advantages. Traditional auctions offer speed and certainty, making them ideal for sellers who want a quick sale and buyers who are ready to move quickly. Modern auctions, on the other hand, offer flexibility and access to a wider pool of potential buyers, but with a slightly higher risk of the sale not completing. Understanding these differences will help you choose the best approach for your property transaction as a seller or buyer.

Speak to Steve Waters

Steve is a Associate Solicitor at Wollens and can advise you. Contact Steve via email steve.waters@wollens.co.uk or call 01803 396600.

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