Whenever someone embarks on their first trip to an auction room, it is a highly exciting time. The intrigue of the unknown is always a great feeling; however, when it comes to parting with large amounts of money, you need to do some research before you go. During an auction, terms fly around at a fast pace, and often, if you’re not in the loop, you can be left wondering what they are on about and, worse, making a bid you’ll regret. Therefore, it’s essential that you understand the most frequently used terms before you arrive. Below is what you need to know:
Addendum
An addendum is an addition or alteration to the previously published information about the property in question. Changes to the website and/or a printed sheet announced at the auction itself will make this public. It could be anything from a change to the price to the size of the property. When you arrive at an auction, always make sure to get a copy of the addendum sheet so you know everything you need to know before making a bid or checking online before arriving.
Auction Catalogue
This gives a clear and up-to-date description of the property, along with details on how to view each property and the conditions of sale. These are prepared by the auctioneer, stating the basis on which the auction is carried out.
Auction Reserve
An auction reserve price is simply the lowest price that the vendor will accept for the lot. The vendor and the auctioneer have agreed to this. All entered properties will have a reserve price, which is kept confidential.
Completion
Under the supervision of your solicitors, completion will often take place in the next 20–28 days after the exchange date.
The Deposit
If you successfully bid on and win a property, you will then have to pay a non-refundable 10% deposit of the purchase price (unless subject to a minimum figure); this sum is to be paid on exchange of contracts to secure the lot. The deposit is a part payment on a guarantee that the buyer will complete the purchase.
Guide Price
Traditionally, guide prices are suggestive only and will be within 10%—above or below—of the auction reserve set at the time when the auction catalogue went to print following the seller’s guidance. The guide price, however, does not give an indication of the predicted sale price or value. Once again, like the addenda, you should check for guide price updates, as they are subject to change before the auction commences.
Freehold/Ground Rent Investments
By purchasing a ground rent, it grants the owner freehold of a property, receiving regular payments from leaseholders. A really sought-after auction acquisition, they give investors the ability to access parts of the UK property market for a fraction of the actual price of a house.
Lot
The property that the seller has agreed to sell at auction is typically described as the auction lot and will have its own lot number and description in the above-mentioned auction catalogue.
Opening Price
The auctioneer will propose an initial starting price for the property. If that price isn’t well received and no bids are made, the auctioneer will reduce the asking price of the lot to spike attention from bidders. If the room still does not respond, the auctioneer will engage with the room to ask for a starting bid, and if one is spoken to, the bidding will begin from there.
Pre-Auction Bids
If you want or if it is in your interest to place a pre-auction bid, you will need to speak to the auction team, who will explain the specific process to you. Vendors can consider offers before the auction starts but this is ultimately their decision.
Proxy Bid
Auctioneers have the power to carry out bidding on behalf of a potential buyer who is unable to physically attend the live event. These buyers will have to contact the auction house before the auction date so that they can get an official proxy bidding form, which must then be returned to the auction house with a deposit check within the time specified by the auctioneers. The buyer writes the maximum amount they will bid to on the form and the auctioneers will bid on behalf of the buyer, up to, but not beyond, the stated price.
Tenanted Commercial Property
This refers to a building that has already been rented out. When the owner who has previously let out their property wants to sell it, they are faced with the decision of selling it subject to the tenancy or selling it with vacant possession when it completes.
These are just a select few of the most frequently mentioned terms so there is plenty more research to be done! If, however, you’re still unsure of any of the terms or would like some guidance before your first auction, please don’t hesitate to get in touch with our auctions team. They’re on hand to offer advice or help you with whatever you need related to your property search and purchase.