Traditional Auctions vs Modern (Online) Auctions
Traditional auctions — sometimes called 'unconditional' auctions — are the format most people picture: a room full of bidders, an auctioneer with a gavel, and a legally binding sale when the hammer falls. The buyer must pay a 10% deposit on the day and complete within 28 days. There is no cooling-off period, no option to change your mind, and no way to renegotiate the price after the hammer falls.
Modern method auctions (also called 'conditional' auctions) are increasingly popular and work differently. When you win the bid, you pay a reservation fee (typically 4–5% of the sale price, or a fixed fee of £5,000–£10,000+). You then have 28–56 days to complete the purchase — during which time you can arrange your mortgage, conduct surveys, and complete conveyancing. The property is withdrawn from the market during this period.
The key difference is that modern auction reservation fees are often non-refundable and are paid to the auction house, not the seller — so they're a cost on top of the purchase price. If you fail to complete within the deadline, you lose the reservation fee and the property goes back to market. Read the terms carefully — some modern auction contracts include penalty clauses for late completion.
| Feature | Traditional auction | Modern (online) auction |
|---|---|---|
| Binding moment | Fall of the hammer | When reservation fee is paid |
| Deposit on the day | 10% of sale price | 4–5% reservation fee (non-refundable, on top of price) |
| Completion deadline | 28 days (standard) | 28–56 days (negotiable) |
| Mortgage feasibility | Need pre-approval + valuation done beforehand | Time to arrange during reservation period |
| Cooling-off period | None | None (reservation fee lost if you withdraw) |
| Typical discount vs market | 10–30% below market | 5–15% below market |
Reviewing the Legal Pack
Every auction property comes with a legal pack, which is made available before the auction date. This is the single most important document you'll read. It contains the title deeds, local authority search results, property information forms, special conditions of sale, and any other relevant documentation. You must review it with a solicitor before bidding — not after.
Common red flags in legal packs include: short leases (under 80 years), restrictive covenants that limit what you can do with the property, chancel repair liability (a medieval obligation that can cost tens of thousands), absent freeholder or management company issues, planning enforcement notices, and access rights disputes.
A solicitor's review of an auction legal pack typically costs £300–£500. This is money at risk — if you don't win the auction, you've spent it for nothing. But bidding without legal advice is far riskier. Properties end up at auction for a reason, and the legal pack often reveals what that reason is.
Guide Prices, Reserve Prices, and Bidding Strategy
The guide price is the price the auctioneer advertises to attract interest. Under auction regulations, the guide price must be within 10% of the reserve price (the minimum the seller will accept). In practice, guide prices are often set artificially low to generate interest — a property with a guide price of £150,000 may have a reserve of £165,000 and eventually sell for £185,000.
The reserve price is confidential — only the auctioneer and seller know it. If bidding doesn't reach the reserve, the property is 'not sold' (passed in) and may be available for negotiation after the auction. This is sometimes where the best deals are found — a seller whose property fails to reach reserve may accept a lower post-auction offer to avoid the cost and uncertainty of re-auctioning.
Set your maximum bid before the auction and do not exceed it. Auction rooms are designed to create urgency and emotional bidding. The atmosphere, the speed, and the competitive dynamic all push you to bid higher than you planned. Write your maximum on a piece of paper and stick to it absolutely. If you're new to auctions, attend one as an observer before bidding at one as a buyer.
Financing an Auction Purchase
For traditional auctions, you need your financing arranged before you bid. This means either cash in the bank or a mortgage agreement in principle. However, an AIP isn't enough — you need to be confident the lender will actually offer a mortgage on the specific property, which requires a valuation. Some experienced auction buyers arrange a survey and provisional valuation before the auction date.
Bridging finance is common for auction purchases. A bridging loan provides short-term funding (typically 3–12 months) to complete the purchase quickly, giving you time to arrange a conventional mortgage afterwards. Bridging loans are expensive — interest rates of 0.5–1.5% per month are typical — but they solve the 28-day completion problem. Factor the bridging costs into your maximum bid.
For modern auctions, the longer completion period (28–56 days) makes conventional mortgages more feasible. However, some mortgage lenders are cautious about auction properties — particularly if they've failed to sell on the open market, have structural issues, or are non-standard construction. Get your lender's agreement in principle specifically confirmed for the property type before bidding.
- ▸Cash purchase: Simplest approach — prove funds, exchange on auction day, complete in 28 days. No lender complications.
- ▸Mortgage pre-approval: Need AIP and ideally a pre-auction valuation. Risk: lender may down-value or decline after auction, leaving you committed but unfunded.
- ▸Bridging finance: Short-term loan at 0.5–1.5% per month interest. Completes the purchase, then refinance to a standard mortgage. Adds £2,000–£10,000 in costs.
Risks and Why Properties End Up at Auction
Properties go to auction for reasons that range from benign to deeply problematic. Probate sales, repossessions, and local authority disposals are common and relatively straightforward. But properties also go to auction because they're unmortgageable (structural issues, Japanese knotweed, non-standard construction), have legal complications (disputed boundaries, incomplete title, planning enforcement), or have failed to sell on the open market despite multiple price reductions.
The 'as seen' nature of auction purchases means the buyer takes on all risk. Unlike a standard purchase, there's no opportunity to renegotiate if the survey reveals problems — because you typically don't have time for a survey before a traditional auction. What you see (and what's in the legal pack) is what you get. Budget a contingency of 10–20% above the purchase price for unexpected repairs.
Failed completion is the biggest financial risk. If you win a traditional auction and can't complete within 28 days (mortgage falls through, funds don't arrive, solicitor discovers a problem), the seller keeps your 10% deposit and can sue you for any additional losses — including the difference between your bid and the eventual sale price if they re-auction for less. This can result in losses of tens of thousands of pounds.
Key Takeaways
- ✓Traditional auction sales are binding when the hammer falls — you pay 10% immediately and must complete in 28 days with no way to renegotiate
- ✓Modern auctions give you 28–56 days to complete but charge a non-refundable reservation fee (4–5%) on top of the purchase price
- ✓Always have a solicitor review the legal pack before bidding — it reveals why the property is at auction and what risks you're taking on
- ✓Guide prices are often set 10–15% below reserve to generate interest — research comparable sales to determine true value
- ✓Set your absolute maximum bid before the auction and do not exceed it — auction rooms are engineered to encourage emotional overbidding
- ✓Budget a 10–20% contingency above the purchase price for unexpected repairs — auction properties are sold 'as seen'