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F.A.Q AUCTION GUIDE
FOR PROPERTIES
Frequently Asked Questions About Auctioning a Property
“What are the key differences between buying a property through a Private Treaty (open market) and participating in an auction, and how do these methods impact the completion time and reliability of the sale?”
Selling
“Setting a good Starting Bid is important because it grabs people’s attention and gets them to start bidding against each other. This competition can lead to a higher final selling price for your property. Auctions are great for sellers who want a quick and secure sale, so the way you price your property should reflect that goal. But don’t worry, you still have control over the sale with your Reserve Price. This is a secret minimum price you’re willing to accept. If no one offers this amount or more, your property won’t be sold.”
“If your property doesn’t sell in the first auction, it gets listed again for a second round. We can keep relisting it in more auction cycles until a successful bidder is found. If you decide you don’t want to keep trying, you can take your property off the market after the 60-day exclusive selling
rights period is over. This won’t cost you anything, but remember there’s a 21-day notice period for withdrawing your property.”
“If something changes and you’re thinking about not selling your property at auction anymore, it’s important to talk to your Auction Specialist right away. They can tell you what your choicesare. If you decide to take your property off the auction, you need to let us know in writing 21 days before. But keep in mind, if you do this during the initial 60-day contract period, you might have to pay some auction fees. Also, if a sale was already made at the auction and you want to back out, you will probably have to pay the auction fees as stated in your contract. If you’re worried or unsure about anything, it’s best to discuss it with your Auction Specialist.”
“Auctions work best for sellers who aren’t in a chain. It’s important that you’re able to finish the sale within the timeline set in the Auction Terms & Conditions. When you decide to sell your property at an auction, you sign an Auction Contract. This means you legally agree to follow
these terms. If you don’t, you could be breaking the contract, which might lead to financial consequences.”
“An Auction Pack is essential when you’re selling a property at auction. It’s a set of legal documents that helps potential buyers and their lawyers understand what they’re bidding on. This pack is quite similar to the paperwork handled by a Solicitor in regular property sales.Having all this information ready beforehand lowers the chance of the sale falling through, speeds up the process from sale agreement to completion, and gives buyers confidence to bid and reserve the property. The Auction Pack usually includes documents like the Title Register, Title Plan, Property Information Forms, Fixtures and Fittings Forms, Local and Water Searches, Energy Performance Certificate (EPC), and sometimes special documents for unregistered properties or leaseholds, like Epitomes of Title, Grants of Probate, Powers of Attorney, and Leasehold Management Packs.”
“If you’re selling a leasehold property, you’ll likely need a Management Pack. This pack is crucial as it gives buyers important information about the property, helping them make a well-informed decision when bidding. You get this pack from the property’s Freeholder or their Managing Agent. It includes details about how the Freehold is managed, ground rent, service charges, any upcoming renovations, and buildings insurance. It also informs the buyer about any responsibilities they would take on if they buy the property and includes necessary details for transferring ownership to the new buyer.”
“When you’re selling through an auction and under contract, it’s best to let the Partner Agent to handle the negotiations. If you, as the seller, accept a private offer, you might have to pay the auction fees instead of the buyer, according to the Auction Contract. The auction methods are set up to ensure commitment and security for both buyers and sellers. If you chose to sell through an auction, it was probably for these reasons. If a potential buyer is hesitant about the auction process, we can work with them to try and secure a sale for your property.”
“Sole Selling Rights agreements are common when you’re selling a property at auction. This means that Pattinson and the partnered estate Agent can market and sell your property during the contract period. If other agents also try to sell your property under different terms, it could harm your marketing efforts. It might lead buyers to bypass the auction terms and the commitment level you’ve chosen as a seller. Also, there’s a risk that you could end up having to pay fees to multiple agencies if you don’t stick to the sole selling rights agreement.”
✔ Sell to the highest bidder
✔ Sales don’t fall through
✔ Property “sold as seen”
“If the highest bid at the end of an auction is lower than your Reserve Price, your Auction Specialist will talk to you about it. If you want, you can still choose to accept this lower bid.”
“In the Modern Method of Auction, when a buyer places a bid, they are committing to pay a Reservation Fee and sign a Reservation Agreement. This doesn’t legally bind them to purchase the property. Instead, it gives them the exclusive right to agree to buy the property at a set price, with the goal of completing the exchange of contracts within 56 days from when the buyer’s Solicitors receive the draft contracts.”
“Usually, it’s recommended to let the auction continue to its end to try and get the best price foryour property. But your Auction Specialist can offer guidance in this situation. If you feel an offer you receive before the auction ends is good enough, you can agree to the deal early. Remember, even if you accept an early offer, the buyer will still have to follow the Terms and Conditions of the auction.”
“The Reserve Price is the lowest price you’re willing to accept for your property. It’s a secret number, not shared with potential buyers. Usually, the Reserve Price is set to be no more than 10% higher than the Starting Bid. The goal is to get enough interest to go beyond the Reserve Price, but you should also be okay if this ends up being the highest offer you receive.”
“In an auction, there’s always a Starting Bid for each property. This is the price that’s advertised and indicates where the bidding should start. It’s important to note that the Starting Bid is just a guideline; it’s not the actual selling price of the property. While each Starting Bid is linked to a Reserve Price, the Reserve Price is kept confidential and is only known by the seller and the
Auctioneer.”
“You don’t have to accept the highest bid unless it meets or exceeds your Reserve Price. The Reserve Price is the minimum you’re willing to accept for your property, but it’s not shared publicly – only the Starting Bid and the bids made during the auction are visible. If the bidding reaches or goes over your Reserve Price, then you’re expected to sell the property when the auction ends. However, if you choose not to sell at or above your Reserve Price, you might have to pay certain fees. It’s a good idea to discuss this with your Auction Specialist if you have any concerns.”
“After your Auction Pack is complete and approved, your Auction Specialist will help you pick an end date for your property’s auction. The duration depends on how much interest your property gets during the Pre-Auction Marketing stage. Typically, an auction lasts between 2 to 14 days, based on the level of interest. This flexible time frame is designed to fit your specific situation. You can always check how much time is left in your property’s auction either on the website or by talking to your Auction Specialist.”
“If you want a secure sale or need to sell your property quickly, then auction is a good option to explore. However, if you are part of a property chain, such as when you’re moving to a new place, auction might not be the best choice for your situation.”
Buying
A Reservation Agreement is a formal agreement signed by both the buyer and seller, affirming their commitment to finalize the transaction. This agreement minimizes the likelihood of the sale collapsing. For the buyer, it guarantees exclusive rights to finalize the property purchase during the agreed Reservation Period, preventing the seller from selling to others in this timeframe. Additionally, it reassures the seller of the buyer’s dedication to the sale, allowing all parties to move forward confidently and with a sense of security.
While the Traditional Auction method often isn’t suitable for buyers using a mortgage, the Modern Method of Auction offers a longer timeframe for exchanging and completing the purchase. This extended period accommodates buyers who need time to secure their mortgage. Since mortgages depend on lending criteria, affordability, and property surveys, it’s advisable to consult with your lender or financial advisor before bidding. Conducting a mortgage valuation before bidding can significantly speed up the process and provide a clear understanding of what you can afford prior to placing your bids.
Before bidding, it’s important to do your homework on the property and thoroughly examine all related documents, including the Auction Terms & Conditions, to ensure you can meet any commitments. Make sure you have the necessary funds available in case you win the bid. If you need to cancel a bid before the auction concludes, contact the Auction Specialist immediately. Be aware that if you win the auction but decide not to proceed with the purchase, you might still be responsible for paying auction fees as stated in the Terms and Conditions. Therefore, it’s crucial to be certain about your decision before placing any bids.
Auctions are most suitable for buyers who are not in a property chain. It’s crucial to be certain that you can complete the purchase within the timeframe specified in the Auction Terms & Conditions. By registering to bid, you legally agree to these terms, so you must be ready to meet these obligations. Failing to do so could breach the Auction Contract terms and may result in financial consequences.
The winning bidder is required to pay a non-refundable Reservation Fee to secure the property for the reservation period. This fee gives the seller confidence that the sale will likely proceed without issues, as it lowers the risk of the sale falling through. Similarly, the buyer gains reassurance because the seller, bound by the auction’s terms, cannot accept offers from anyone else during this period.
A Buyer Information Pack is a compilation of important details for you to examine as part of your due diligence before bidding on a property. It includes key information about the property, such as Local Authority Searches and Title Information. However, it might not cover everything you need to know. This pack can also be assessed by your Solicitor. Reviewing this information in advance, alongside your own research, helps in avoiding unexpected issues later and makes meeting auction completion deadlines more manageable.
As a business committed to best practices and compliance, particularly crucial in the property industry where financial transactions are frequent, we prioritize knowing the identity of everyone we interact with during transactions. To achieve this, we collect contact details and verify identities as part of our registration process. This is essential to minimize risks for all parties involved in the process.
Certainly, we collaborate with the listing agent to organize property viewings just like those for properties on the open market. To schedule a viewing, simply contact the listing agent. After your viewing, iamsold will reach out to you for your feedback.
Automatic Bidding is an option for those who cannot actively participate at the end of an auction. You start by placing an initial bid and setting a maximum bid limit you’re willing to go up to. If someone outbids you, the system automatically places a higher bid on your behalf, usually increasing by £500 each time. This continues until the bidding either stops below your maximum bid or another bid surpasses your set limit. However, setting a maximum bid doesn’t ensure that your bid will reach that exact amount. The system only increases bids incrementally by £500 above the last bid, so your final bid might be slightly below your maximum. For example, if your starting bid is £200,000 and your maximum is £220,000, the automatic increments of £500 won’t necessarily reach £220,000. To have complete control over your bids, it’s recommended to actively participate in the live auction if possible.
According to current HMRC guidelines, the ‘chargeable consideration’ for a property transaction includes everything given (directly or indirectly) to acquire the property, by the buyer or someone associated with them. This encompasses fees required for acquiring the property. Therefore, any amount paid by the buyer, including the Reservation Fee, is considered part of the property’s purchase price and is included in the calculation of Stamp Duty liability. It’s always advisable to consult with your chosen solicitors before committing to a bid for clear understanding and compliance.
Typically, sellers require buyers to pay the Reservation Fee as a sign of their commitment and agreement to the Auction Terms and Conditions. Since this cost is not usually borne by the seller, it is understood that the buyer will consider this fee in addition to the purchase price. Many sellers opt for the auction method prioritizing the security and speed of the sale over the final price achieved. As a buyer, in addition to paying the Reservation Fee, you also enter into a Reservation Agreement. This agreement serves as a mutual commitment between you and the seller to complete the transaction, thereby lowering the risk of the sale not being finalized. The seller is also obligated by the same terms, ensuring that both parties have security from the payment of the Reservation Fee.
The Reservation Fee is retained by Pattinson, serving to reserve the property for the buyer and demonstrate their commitment to the purchase. This fee is subsequently used to cover the auction fees for the seller, including payments to the Listing Agent and Auctioneer, who collaborate to facilitate the auction process.
Our sales approaches are structured to assure both buyers and sellers that a sale will likely proceed with a lower risk of falling through. In the Modern Method of Auction, your bid commits you to pay a Reservation Fee and sign a Reservation Agreement, securing exclusive rights to the property for the reservation period. In Traditional Auction, when your bid is accepted or you win the auction, you must exchange contracts, pay a 10% deposit, and the Reservation Fee. Completion usually follows within 28 days. In both methods, failure to complete the purchase results in the loss of the non-refundable Reservation Fee.
Legally, we are obligated to present any offer made to the seller. The seller then decides whether to consider the offer and potentially remove the property from the auction early. In such cases, the Reservation Fee is still due, and the Auction Terms and Conditions remain applicable. If you make an offer during the “Pre-Auction Marketing” phase, be aware that the Buyer Information Pack may not be fully complete, and there could be crucial information missing.
Before you register to bid, it’s advisable to visit the property and thoroughly review all legal documents included in the Buyer Information Pack for each lot. Ensure you can comply with the Auction Terms and Conditions before placing a bid. If you don’t have an account, you’ll need to create one to register to bid on a property. On the property’s listing on our website, you’ll find a “bid to purchase” option, which begins the registration process. During registration, you’ll be asked to provide information to verify your identity and may need to enter payment details for any relevant fees. Your eligibility to bid must be approved by us, so it’s important to register early if you’re interested in participating in the auction.
The duration of an auction can vary based on the seller’s situation or the interest a property attracts during the Pre-Auction Marketing period. It can range from as short as 48 hours to up to 14 days. To keep track of properties you’re interested in, you can use the “Watch List” feature by creating an account on our website. We strongly advise visiting the property in person before it goes to auction and registering to bid early, so you’re prepared to make an offer when the auction goes live. Our Auction Specialists will keep all interested parties informed. If a seller chooses to accept a bid before the auction ends, they will communicate this. Without knowing your interest in a property, it becomes challenging for us to inform you about any changes in the auction’s status.
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