Your Guide to The Traditional
Method of Auction | 2023

Your Guide to The Traditional
Method of Auction | 2023

Your Guide to The Traditional
Method of Auction | 2023

How Does It
Work?

AT A GLANCE

1. Research Properties

2. Arrange a Viewing

3. Agreement in Principle

4. Auction Pack Review

5. Bid & Reservation

6. Instruct Mortgage Lender

7. Get Insurance

8. Complete Purchase

1. Research
Properties

An auction property will usually be listed on property sites like Zoopla and Rightmove a month before the the auction, regardless of modern or traditional method. This means you’ll need to move quite quickly but it’s all doable. Preparing well for an auction property is essential. Luckily, we’ve got you covered!

2. Arrange
a Viewing

Just like any other purchase, you will be able to go and view the property that you plan to purchase at auction. The auction will be on a fixed date, so if you are seriously looking to purchase an auction property, then we recommend leaving enough time between the viewing and the auction to:

  • Review the auction pack, have a solicitor review the auction pack
  • Perform any additional searches that may be necessary
  • Have a surveyor survey the property if work will be needed on the property.

Lastly, always leave enough time to think and weigh up your options before you go to the auction.

3. Agreement
in Principle

If you’re planning on buying an auction property with a mortgage, you will need an Agreement in Principle from your bank or building society. You will need to disclose to your lender that you plan on using the mortgage to buy a property at auction.

It’s important to note that with an auction property, you will need to pay a reservation fee (usually 5% of the property value) on the day of the auction, as well as paying your agreed deposit percentage with your lender on completion.

4. Auction
Pack Review

Before the auction, it’s essential that you and preferably your solicitor review the auction pack. The auction pack will include the property title documentation, a TA6 form, TA10, TA7 (if a leasehold), and certificates of works completed on the property.

If you are buying the auction property with a mortgage, your lender will review this pack and deem whether the property is “mortgageable”. This means the lender is confirming whether they are prepared to take the risk of lending on the property. If searches haven’t been provided in the pack, your solicitor will recommend performing property searches before the auction takes place.

Cost of Auction Pack Review (Buying with Mortgage)

£1,250 for file review
£250.00 for completion of matter

Cost of Auction Pack Review (Buying with cash)

£1,500 for whole of matter

5. Bid
& Reservation

In the traditional method of auction, the auction could be online or in person, the Auction House will let you know how the auction is being held in advance.

If your’s is the winning bid, when the gavel falls, contracts are automatically exchanged and you are legally bound to complete on the transaction. You will need to pay the reservation fee, this is usually 5-10% of the sale price of the property as well as administration costs, which are usually around £200 – £300.

6. Instruct
Mortgage Lender

As soon as the gavel falls, you can instruct your mortgage lender and let them know you’ve been successful. You can then proceed with the formal mortgage application.

7. Get
Insurance

Once you have instructed your mortgage provider, we recommend you get insurance on the property. As you are legally bound to purchase the property, it’s important that you get the appropriate insurance on the property. Your solicitor will be able to help you to find the appropriate level of insurance for the property.

8. Complete
Purchase

Your solicitor will draft the final documentation to complete on the purchase. A completion date will be set within the auction conditions contained within the initial auction pack, this is usually a maximum of 28 days after the auction.

We will also let your lender know when completion is due to take place in order for them to release funds to the auction house.

After completion, we will confirm the new ownership with HM Land Registry. This can take up to 6-12 months.

Who Is
Involved?

AT A GLANCE

Lyons Bowe

You

Seller

Surveyor

Auction House

Search Providers

HM Land Registry

Lyons
Bowe

Assesses the Auction Pack submitted by the seller and Auction House and raises enquiries.

Orders the formal searches on the property if necessary and provides you with a detailed report on the results.

Arranges release of funds with your lender.

Submits the Stamp Duty Land Tax Form on time.

Submits the AP1 form to the Land Registry to confirm change of ownership.

You

Assesses the Auction Pack submitted by the seller and Auction House and raises enquiries.

Orders the formal searches on the property if necessary and provides you with a detailed report on the results.

Arranges release of funds with your lender.

Submits the Stamp Duty Land Tax Form on time.

Submits the AP1 form to the Land Registry to confirm change of ownership.

Seller

Arranges for the property to be listed on property sites.

Arranges for the property to be sold with the Auction House.

Provides necessary information and documentation to form the Auction Pack.

Surveyor

Reviews the physical property. There are three main types of survey:

  • Condition Report/Valuation
  • Homebuyer Report
  • Structural Survey

Condition Report/Valuation

The Condition Report/Valuation is the most basic form of survey and cost anywhere between £200-£400 depending on provider. If the surveyor spots any additional serious issues with the property, they will recommend a secondary additional check.

We recommend obtaining a more in depth survey for all auction properties, regardless of how it looks on your viewing.

Homebuyer Report

This survey is more detailed and checks the majority of a building. A homebuyer report usually costs anywhere between £400 – £600. The report will cover a list of actions you may need to take after purchasing such as mould, replacing boilers, or replacing windows.

Structural Survey

We recommend this level of survey for all auction properties. Whilst they are the most expensive, they are also the most detailed level of survey and will give you a full view of the property’s integrity. The structural survey will give you a full view of the property’s integrity, and any major issues that are hiding such as any issues with the roof, foundations, all the way down to the smaller issues.

Auction
House

Provides you with Auction Pack containing documentation pertaining to the sale of the property.

Holds the auction.

Search
Providers

Provides information about the property and local area. Typical searches include Water, Electricity, Gas, Landfill, and Mining checks.

Your solicitor may recommend carrying out additional searches based on the results of the initial searches.

It’s essential to carry out your searches before the Auction takes place. Once the gavel falls, you will be bound to purchase the property regardless of any issues that are discovered after the auction.

HM Land
Registry

Registers Ownership of land and property in England and Wales.

Records and Changes of ownership, mortgages or leases.

Traditional Auction
FAQs

AT A GLANCE

Your FAQs

Your
FAQs

WHAT IF I PULL OUT OF A TRADITIONAL AUCTION PURCHASE?

If you want to pull out of an auction property purchase, the impacts carry on the type of auction you made the purchase in.

In the traditional method, you exchange contracts when the hammer falls. If you pull out of the purchase at any time, you’ll lose your 10% deposit and may have to pay administration fees.

If the seller pulls out of the sale in a traditional auction, you will be able to reclaim your 10% deposit.

HOW MUCH DOES IT COST TO BUY A TRADITIONAL METHOD AUCTION PROPERTY?

Cost of Auction Pack Review (Buying with Mortgage)
£1,250 for file review
£250.00 for completion of matter

Cost of Auction Pack Review (Buying with cash)
£1,500 for whole of matter

WHAT ARE THE PROS OF BUYING AN AUCTION PROPERTY?

  • You have full view of what other people are bidding so you are less likely to get gazumped
  • The purchase process is much quicker than a standard purchase
  • Banks and building societies are increasingly more willing to lend for an auction purchase than they used to be
  • Everyone bids at the same time, so you won’t be rushed into making an offer

WHAT ARE THE CONS OF AN AUCTION PROPERTY?

  • You can fall in love with a property, but you may not end up holding the winning bid
  • There are significant upfront costs when you purchase the property
  • It’s much harder to back out of an auction property than a standard purchase

CAN I BUY AN AUCTION PROPERTY WITH A MORTGAGE?

Yes, but this will vary from property to property. Your lender will need to confirm that they’re prepared to lend on the property.

It’s unlikely that a lender will accept a 5% mortgage/95% Loan to Value