Buying a property at auction can be a good way to find a home or an investment, and it can move quickly. But it works very differently from a normal purchase. At a traditional auction you are legally committed the moment the hammer falls, so almost all of the legal and financial checks have to happen before you bid, not after. This guide explains the two main types of auction, what is in the legal pack, the costs that can catch buyers out and how to make sure you can complete on time.
How does buying a property at auction work?
In a normal purchase, you agree a price, your solicitor investigates the property and you only become bound when contracts are exchanged, often weeks or months later. Either side can walk away before then. At auction, that order is turned around. The seller’s solicitor prepares the legal documents in advance, you investigate before the auction, and the bidding itself creates the contract.
Auctions take place in a saleroom, online, or both. Each lot has its own legal pack and its own conditions of sale, and those conditions decide when you pay, how long you have to complete and what extra costs you take on. Two lots in the same catalogue can have very different terms, so you need to check each one you are interested in.
There are two main formats: the traditional auction and the modern method of auction. Knowing which one applies is the first thing to check, because it changes what happens when you win.
Traditional vs modern method of auction
- Traditional (unconditional) auction
- Contracts are exchanged when the hammer falls. You pay a deposit on the day, commonly 10% of the price, and auctioneers often set a minimum deposit for lower-value lots. Completion usually follows within about 20 working days or 28 days, depending on the conditions. You cannot pull out once your bid is accepted.
- Modern method of auction (conditional)
- The winning bidder pays a reservation fee, which is usually non-refundable and often paid on top of the price rather than towards it. You then have a set period to exchange contracts and a further period to complete. These periods are typically 28 days to exchange and 28 days to complete, or 56 days in total, but the terms vary from one auctioneer to another.
The modern method gives more time, which can help if you need a mortgage. It is not risk free, though. If you fail to exchange within the time allowed, you are likely to lose the reservation fee. The fee can also be a significant sum, and it may be in addition to other costs set out in the conditions.
Check the terms for every lot
The catalogue, the auctioneer’s general conditions and the special conditions for the lot tell you which format applies, the deposit or reservation fee and the completion date. If anything is unclear, ask the auctioneer and ask us before you bid.
What is the auction legal pack?
The legal pack is put together by the seller’s solicitor and made available before the auction, usually online through the auctioneer. It is the information you are treated as having read when you bid, even if you never opened it. A typical pack includes:
- the title documents from HM Land Registry, including the register and title plan, or the deeds if the property is unregistered
- local authority, drainage and water and environmental searches, if the seller has ordered them
- the lease, if the property is leasehold, and often information from the managing agent about service charges and ground rent
- tenancy agreements and rent details, if the property is sold with tenants in it
- property information forms or replies to standard enquiries, where provided
- the special conditions of sale for the lot
- any planning permissions, building regulations certificates or warranties the seller has
Packs vary a great deal. Some are complete; others contain little more than the title and the conditions. A thin pack is not always a warning sign, but it means you are taking on more unknowns and may need to order your own searches before the auction.
On the day, the auctioneer will usually publish an addendum. This lists late changes to lots, such as a corrected description, new special conditions or a lot withdrawn from sale. The addendum forms part of the contract, so check it before your lot comes up.
Getting the legal pack reviewed before you bid
Because you can’t renegotiate after the hammer falls, the legal review has to happen first. Send us the legal pack as early as you can, ideally a week or more before the auction, so there is time to raise questions with the seller’s solicitor and get answers.
When we review a pack, we check that the seller can sell what is being offered, that the boundaries and rights of way make sense, and whether there are restrictions, covenants or charges you need to know about. We look at the searches for planning, road and environmental issues. For leasehold lots, we check the length of the lease, the ground rent, service charge arrears and any terms a lender may not accept. Then we explain what we have found in plain English, so you can decide whether to bid and how much.
If you plan to use a mortgage, we also check whether there is anything in the pack your lender is likely to object to. It is far better to find that out before you are committed. You can read more about how we help buyers on our buying page.
Special conditions and extra costs to look for
The special conditions can add costs on top of your winning bid. These are legitimate if they are in the pack, and you will be bound by them. Look out for:
- The seller’s legal costs
- Some conditions require the buyer to pay the seller’s solicitor’s fees, or a contribution towards them.
- Search fees
- You may be asked to reimburse the seller for the searches in the legal pack.
- Arrears
- For leasehold or tenanted lots, you may have to pay arrears of service charge, ground rent or rent owed by a tenant.
- Buyer’s premium or administration fee
- Most auctioneers charge the buyer a fee, often with VAT on top. It is usually payable on the day.
- VAT on the price
- Occasionally a property is sold with VAT added to the price. The conditions will say if this applies.
- Completion date and interest
- Late completion usually means paying interest to the seller at a rate set in the conditions.
Add these up before the auction and include them, along with Stamp Duty Land Tax and your own legal fees, in your maximum bid. It is easy to focus on the hammer price and forget the rest. For a clear figure for our part, get a quote.
Viewings, surveys and extra checks
Properties end up at auction for many reasons. Some are probate sales where executors want certainty. Some are repossessions. Others are properties that are hard to sell in the usual way, perhaps because of structural problems, short leases, title defects, lack of access or a sitting tenant. Plenty of auction lots are perfectly sound, but it is sensible to assume there may be a reason and look for it.
- Go to the viewings. Auctioneers usually arrange set viewing times, and you may not get another chance.
- Consider a survey before the auction. It costs money even if you don’t win, but it can stop you buying a serious problem.
- Check the area, the planning history and, if you plan to develop, whether your plans are likely to be allowed.
- For tenanted property, check the tenancy, the rent, the deposit protection and whether the tenant is up to date.
- For leasehold property, check how long is left on the lease. A short lease can affect value and mortgage options.
Buying a tenanted lot means you take on the landlord’s role, and the tenant’s rights continue. Make sure you understand the type of tenancy and your obligations before you bid.
Arranging finance before you bid
At a traditional auction, you need the deposit on the day and the rest of the money by the completion date, usually around four weeks later. Mortgage lenders can take longer than that to value a property and issue an offer, and some will not lend on certain auction properties at all.
- Speak to a mortgage broker or lender well before the auction, and tell them it is an auction purchase.
- Ask whether they can get a valuation done before the auction and issue an offer in time.
- If a mortgage may not be ready, consider bridging finance as a back-up, and understand its costs.
- Make sure your deposit is available in a form the auctioneer accepts. Many no longer take cash.
What if you can’t complete?
If you don’t complete on time, you are in breach of contract. The seller can usually serve a notice to complete and, if you still don’t complete, end the contract and keep your deposit. They may also be able to resell the property and claim from you any loss and costs on top of that. Don’t bid unless your funding is secure.
On auction day: bidding, ID and what happens next
You can usually bid in the room, online, by phone or by proxy, where the auctioneer bids for you up to a maximum you set in advance. For remote and proxy bidding you will normally need to register before the auction, provide ID and proof of address, and sometimes give card details or pay a deposit in advance. Leave time for this, as each auctioneer has its own process and deadlines.
- Check the addendum. Read any late changes to your lot before bidding starts, and ask us if something new appears.
- Bid within your limit. Set a firm maximum that includes the extra costs, and stick to it.
- The hammer falls. At a traditional auction, contracts are exchanged at that moment and you are legally bound to buy.
- Pay the deposit and fees. You pay the deposit and any buyer’s fee on the day, and the contract or memorandum of sale is signed, by you in the room or by the auctioneer on your behalf if you bid remotely.
- Insure the property. Under most auction conditions the risk passes to you when contracts are exchanged. Arrange buildings insurance from the auction day, not from completion.
- Send us the paperwork. Send us the signed contract and confirmation of the deposit. We contact the seller’s solicitor, report to any lender and prepare for completion.
- Complete. You send us the balance of the price and costs in good time. We pay the seller, collect the keys or arrange their release, pay any Stamp Duty Land Tax and register you as the owner.
How we help with auction purchases
We review legal packs before you bid, explain the risks and costs in plain English and then handle the purchase through to registration. Because auction timescales are short, tell us as soon as you have a lot in mind, so we have time to do the work properly. If you are on the other side of the auction, our guide to selling at auction explains how it works for sellers.
Common questions
At a traditional auction, no. Contracts are exchanged when the hammer falls, so you are legally bound to buy. If you then fail to complete, you are likely to lose your deposit and may face further claims from the seller. With the modern method of auction you have a period to exchange, but pulling out usually means losing the reservation fee.
At a traditional auction the deposit is commonly 10% of the price, paid on the day. Many auctioneers also set a minimum deposit, which matters for lower-value lots. With the modern method of auction you pay a reservation fee instead, and the deposit is paid later on exchange. Check the conditions for each lot and the payment methods the auctioneer accepts.
Often, yes, but timing is the challenge. At a traditional auction you usually need to complete within about four weeks, which can be tight for a lender. Speak to a broker early, see whether the valuation can be done before the auction, and consider bridging finance as a back-up. Some lenders will not lend on certain auction properties at all.
Yes. Once the hammer falls you are treated as having accepted everything in the legal pack, including any extra costs in the special conditions. A solicitor can review the pack beforehand, point out risks and costs, and check whether your lender is likely to accept the property. Send the pack over as early as you can before the auction day.
Under most auction conditions, the risk passes to the buyer when contracts are exchanged, which at a traditional auction is when the hammer falls. That means you should arrange buildings insurance to start on the day you win the lot, not on completion. Check the conditions for your lot, and your lender may also require cover from exchange.
Common extras include a buyer’s premium or administration fee, often plus VAT, reimbursing the seller’s search fees or legal costs, and paying arrears of rent, service charge or ground rent. There is also Stamp Duty Land Tax and your own legal fees. The special conditions in the legal pack set out what applies, so check them before you bid.
What will your move cost?
This guide is general information, not legal advice for your situation. Have a question? Read our FAQs or ask us.
