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:
An addendum is an addition or alteration to the previously published information about the property in question. This will either be made public by changes on the website and/or it will be announced at the auction itself by way of a printed sheet. 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 before making a bid or check online before arriving.
This gives a clear and up to date description about 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.
An auction reserve price is simply the lowest price that the vendor will accept for the lot. This is agreed upon by the vendor and the auctioneer. All entered properties will have a reserve price, which is kept confidential.
Under the supervision of your solicitors, completion will often take place in the next 20-28 days after the exchange date.
If you successfully bid 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.
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 addendums, 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, grants the owner the 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.
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.
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, the bidding will begin from there.
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.
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 cheque 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 subject to the tenancy or to sell 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 on 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.