We know that selling at auction can feel both exciting and overwhelming, especially if it’s your first time. With the right preparation and a clear understanding of the process, you can maximise interest and achieve a smooth, successful sale. Here, we’ve outlined the key things every seller should know before taking their property to auction.
Understanding the Auction Process
Before a property auction, sellers will liaise with the auction house to put together a legal pack for prospective buyers to review. This typically includes Office Copy entries from the Land Registry, property information forms which will need to be completed by the sellers, and relevant property searches which there will be an upfront cost for. Buyers will be able to review this legal pack and instruct a conveyancer to review its contents.
In a traditional (unconditional) auction, buyers place bids on a property or piece of land, with the highest bid at the close of the auction being successful and at this point contracts are exchanged, and the transaction becomes legally binding. The buyer is then required to pay a deposit, usually 10% of the purchase price, to the auction house and proceed to completion within the timeframe set out in the contract. If the buyer withdraws after exchange, the seller is generally entitled to retain the deposit.
In a modern (conditional) auction, buyers place bids during a set marketing period, often online. When the auction ends, the successful bidder is required to pay a non-refundable reservation fee to secure the property. Contracts are not exchanged immediately; instead, the buyer is given a fixed period, typically 56 days, to exchange contracts, followed by a further period to complete. If the buyer fails to exchange contracts within the agreed timeframe, the reservation fee is usually forfeited.
Setting a Reserve Price
The reserve price is the minimum price the seller is willing to accept for the property. This figure is agreed with the auctioneer prior to the auction and remains confidential. As the seller you should consider professional advice, market conditions, and comparable sales when agreeing the reserve.
Understanding Fees and Commissions
Before committing to an auction, sellers should have a clear understanding of all costs involved. These may include:
- Auctioneer fees
- Legal and conveyancing costs
- Upfront costs for the legal pack. This includes property searches and official copy documentation provided by land registry
- Read the Conditions of the Contract
The legal pack will include the contract for sale, which often contains special conditions.
It is important to read and fully understand the contract before the auction takes place, as this is the contract that will be exchanged and become legally binding if a bid is successful. Sellers should be aware of the conditions and if they expect any fees to be payable to them i.e. it may be a condition of the contract that the buyers will refund the sellers for the upfront cost of the searches. If you are expecting this, you should ensure it is noted within the contract.
Preparing the Legal Pack
A legal pack is prepared prior to the auction. This pack is made available to prospective buyers before the auction and typically includes:
- The contract for sale
- Title documentation
- Property searches
- Property Information Forms
- EPC
- Any lease and or tenancy agreements
- Any additional and supporting documentation that the seller can provide. This includes any documentation for works that have been carried out at the property i.e. windows/central heating/extensions/electricity
If you are selling a leasehold property, a management pack will need to be obtained from the landlord or managing agent, and this will usually involve an upfront fee.
The legal pack should be prepared by a conveyancer well in advance of the auction and there will be upfront costs during this process to obtain the required information.
If you’re unsure about any part of the auction process, our team of conveyancers and specialist investment property team can provide practical advice and handle the legal work on your behalf. Get in touch with our team on 01752 292292 or email clientservices@wolferstans.com to find out how we can help.