Auctions have only been gaining popularity in recent years, and more first-time buyers are flocking to register to bid than ever before. If you’re new to the world of auctions, some of the terminology can seem a little confusing at first, and you may not have come across some of it before, even if you have experience in property, so we’ve compiled a list of the most frequently used terms to help you.
Addendum
An amendment or addition to the legal pack or the description of the property in the auction catalogue. Made in the form of a written notice from the auctioneer prior to the auction.
Block Viewings
Property viewings take place a little differently to ones held for properties sold through private treaty. Due to the fast-paced nature of a property auction, there is a small window for a lot of interested buyers to view the property, so they are scheduled on a block basis with all interested parties viewing together in the weeks leading up to auction day with each viewing lasting about half an hour.
Buyers Administration Fee
A payment made by the purchaser to the auctioneer at the point of exchange to cover the cost of administering the contract sale and managing such matters as the Anti Money Laundering Regulations, source of funds information and administration of the deposit.
Catalogue
An auction catalogue is a comprehensive document or digital listing prepared by the auctioneer, containing detailed information about the properties available for auction. It typically includes descriptions, photographs, floorplans, provenance, condition reports, estimated prices, the auction’s terms and conditions, and sometimes video tours.
Common Auction Conditions
The standard auction conditions that form the contract of sale. Produced by RICS, the current version is Edition 4.0.
Completion Date
This is when the sale is scheduled to be finalised and the purchase price is paid in full, from the buyer to the seller. This is typically 20 working days from the date of sale but can be varied by the seller – check the legal pack special conditions for confirmation of the completion date. Financial penalties will be applied if the sale is completed late and failure to complete will result in forfeiture of the buyer’s deposit.
Conveyancing
Conveyancing is the legal process involved when the title of a property transfers from the seller to the buyer, or the granting of an encumbrance, like a mortgage.
Gazumping
This term refers to private treaty sales (estate agency) when a seller accepts another buyer’s offer on a property you were in the process of purchasing, usually because they offer more money. Yes, it is legal, even if it does seem unfair. At auction, you eliminate the risk of gazumping as the battle for the bid is contained to during the auction with buyer and seller legally bound at the fall of the gavel.
Ground Rent Investment
Ground rents are popular at auction as they offer investors an accessible investment with good potential returns. Ground rents provide the owner the freehold of a property, where they can receive regular payments from the leaseholders. Be sure to keep an eye out in the catalogues for properties marked as ground rents.
Guide Price
Guide Prices are provided as an indication of each seller’s minimum expectation. They are not necessarily figures which a property will sell for and may change at any time prior to the auction. Virtually every property will be offered subject to a Reserve (a figure below which the Auctioneer cannot sell the property during the auction) which will be set within the Guide Range or no more than 10% above a single figure Guide.
Legal Pack
Legal packs are the conveyancing documents that are attached to every lot in an auction providing all the information a buyer would need to make a fully informed decision. They are compiled by the seller’s solicitor and contains copies of: special conditions of sale, title deeds, leases, office copy entries, searches & replies to pre-contract enquiries. It is necessary to perform thorough due diligence before an auction as buyers will be subjected to the terms of the contract regardless of whether they’ve read them.
Lot
The properties sold at auction are referred to as a ‘lot’ in the catalogue, and each will have its own lot number.
Reserve Price
Sellers have a minimum price that they are willing to accept a property to be sold for. This is the reverse price and is agreed on privately between seller and auctioneer. If this price isn’t met during the bidding, the property will not be sold.
Special Conditions
The document within a legal pack that notifies buyers of any change to the Common Auction Conditions and any costs the seller is recovering from the buyer.
There you have it. Hopefully this guide has explained the meaning behind some of the auction jargon, and you are all set to start your journey into the bidding fray.
