Auction Property Conveyancing

What is auction conveyancing?

Auction conveyancing refers to the legal process required to complete a property purchase made at a public sale where land or property is sold to the highest bidder.

Auction property conveyancing is different to the standard way of completing a property transaction. Completing auction conveyancing is much shorter than a conventional property transaction.

Contracts are legally exchanged as soon as a winning bid has been accepted. All of the legal paperwork and finance will then typically be completed within 28 days.

Auction houses list properties for sale in a catalogue several weeks ahead of the auction date. It allows for prospective buyers to investigate potential purchases.

This also gives buyers the chance to instruct a conveyancer who can set the transaction in motion. So the sale completes smoothly after the auction. Buying property at auction offers both opportunities and risks.

Those new to this process should take legal advice before making any offer because a winning bid is binding. If an issue is discovered after the auction there are a few options for legal remedy.

A winning bidder will also forfeit their 10 percent deposit if they pull out of the sale after the auction. 

Learn more in our guide to property auction conveyancing.

What is the auction conveyancing process?

The biggest difference between conventional conveyancing and the auction conveyancing process is the speed at which contracts are exchanged. 

In a typical transaction, you may make an offer that is accepted, but contracts are unlikely to be exchanged for weeks or months, giving both buyer and seller the opportunity to change their mind. 

However, when your auction bid is accepted, the contract is instantly concluded. This contract is binding, the sale is complete, and you cannot back out. 

You must now pay a deposit, usually 10 percent, and have the balance of the sale price ready to pay within 28 days. 

To buy at auction, your legal work must be done ahead of time, that's why you need to instruct an experienced auction conveyancing solicitor before you make any offer.

Learn more about the buying a property at auction process.

How quickly does a property auction sale complete?

An auction sale completes very quickly. A conveyancing transaction done in the usual way can take a minimum of eight weeks to complete. It can often take much longer. That's because the work begins after a buyer makes an offer that is accepted by the seller. 

In auction property conveyancing, the legal work must be done in advance of the auction itself.

So, when a bid is accepted, effectively contracts are then exchanged. The buyer must then pay a 10 percent deposit and prove he or she has the funds to pay the balance. 

That balance is usually paid within 28 days. It means the auction conveyancing process is done in a much shorter timeframe than normal. 

Buying at auction is a legally binding process. It's crucial that anyone considering making an offer gets expert legal advice beforehand.

Learn more about selling a property at auction.

What is a legal pack for auction?

An auction legal pack for solicitors is similar to the draft contract that is used in conventional conveyancing. However, this document contains crucial information about the land or property and specific conditions of sale that could affect any decision to buy. 

For example, the conditions might include a completion date and details of any additional disbursements to be paid on completion. Here is just some of the information the legal pack may contain:

• Official Copy of Register of Title (who owns the property)
• Land Registry and Local Searches
• Special Conditions of Sale
• Property Information Form and Fixtures and Fittings Form
• Leasehold, management and tenancy agreements
• Planning Permissions
• Any replies to pre-contract enquiries

Having access to the legal pack before bidding is vital. Your auction conveyancing solicitor will request the legal pack and review in detail every part of the contract and its small print before the auction takes place. Any potential issue or threat to your purchase can then be flagged up.

Learn more about the auction legal pack.

What are the typical auction fees for selling?

Anyone selling at auction must pay an entry fee, which covers the cost of going into the catalogue, marketing and promotion beforehand and the auction itself. 

Fees vary depending on the auction house but budget for an entry fee of between £500 and £1,000. Some auction houses will demand the entry fee up front, while others collect this once the contracts are exchanged. 

Sellers must also pay sales commission if their sale is successful. This commission, which again may vary from one auction house to another, will be outlined in the agreement the seller signs at the outset.

The commission is only payable once the sale is complete and is deducted from the deposit paid by the successful bidder. It's worth considering these costs, along with the fees for conveyancing for auction, when planning a sale.

What are the typical auction fees for buying?

Typical auction fees for buying include an administration fee that is paid to the auction house. This is usually between £200 and £300 and may either be a fixed fee or a percentage of the sale price.

The admin fee that covers the auctioneer's costs, is subject to VAT and is paid at the same time as the deposit. You may also be subject to a “buyer's premium”, which is an additional percentage charge on the winning bid at auction.

The sale catalogue will indicate properties where a buyer's premium is being charged. When budgeting for a property buy, you need to take these charges into consideration along with your essential auction conveyancing fees.

Do I need a property auction solicitor before auction?

There is no legal requirement to have a conveyancing solicitor in place before you buy at auction.

However, instructing property auction solicitors beforehand is the most prudent course of action. As well as examining the auction legal pack, solicitors can also offer other services that will help in your decision to bid or not to bid on auction day.

This might include an Auction Title Checker that will examine who owns the property, any issues around leasehold and any charges on the property, such as outstanding mortgages.

A Pre-Auction Report includes a review of all available paperwork, identifies any missing documentation, examines legal ownership and highlights any potential risks for a purchaser.

Instructing a conveyancer before auction gives you access to legal advice on how best to make a successful bid.

Do I need to have finance in place before buying at auction?

In a word, yes. If your bid is successful on the day, you must pay a deposit of 10 percent of the purchase price immediately.

The auctioneers will also ask for proof of funds to pay the balance by completion, usually only 28 days later. That means you must ensure all your finance is in place before making any bid.

Cash buyers will have to demonstrate they have the money in place, and if you're buying with a mortgage, you must arrange an agreement in principle before making any bid.

Lenders will only make a definite offer once you have bid on a specific property. Your auction conveyancing solicitor will liaise with the lender before the auction to ensure the finance is secure.

Should I get a building survey done before making a bid at auction?

The sensible answer is that if you are serious about purchasing any property, you should have it surveyed by a RICS chartered surveyor. A building survey will give you an expert opinion on the condition of a property and identify any structural or other issues.

The advantage of having a survey done is that you will know what the property is worth and if it is worth making an offer on.

The disadvantage is you might spend several hundred pounds only not to bid at all - in that case, however, you may have saved yourself thousands in the long run.

When you are buying at auction with a mortgage, your lender is also likely to demand more than simply a valuation report on an auction property. This is because they need to be certain the property is worth what they are lending to you in case of default. Talk to your property auction solicitor about your survey options.

What are the benefits of selling your property at auction?

There are a number of clear benefits of selling your property at auction. Let's look at a couple of the most obvious ones:

• Speed: How quickly a conveyancing transaction can be completed is one of the key advantages of selling at auction. The whole process - from registering with an auction house to the day of sale to completion - can be done in as little as eight weeks, assuming there are no other hitches.
• A binding sale: Once a winning bid has been accepted, the buyer must commit to purchasing the property. Legally, the sale contract has been completed the instant that the hammer falls. The buyer must pay a deposit, usually 10 percent, immediately and provide the balance of the sale price within 28 days. Where they fail to complete their side of the deal, the buyer must forfeit their deposit.
• Competition among buyers: The catalogue sale price will be set to encourage bidding among those in the auction. Competition among bidders on the day can push the sale price up and help you realise a greater profit than selling in a conventional way through an estate agent.
• Setting a reserve price: You can stay in control of the sale by setting a reserve price. This is the basic figure that you want to achieve from the sale. If the auctioneer does not receive any bids that reach the reserve price, the lot will be withdrawn. It is then up to you to decide whether to change the reserve price or to negotiate with those who bid below that figure.