Winning an Auction –
What Next?

Winning your first property at auction can be an incredibly exciting moment. You’ve competed against other bidders and now have the thrill of owning a new home. However, the auction process doesn’t end with the fall of the gavel. There are still important steps to take afterwards to ensure the purchase goes smoothly.

This guide will walk you through the key processes following a successful auction bid, whether traditional or modern. By understanding what happens next, you’ll be fully prepared to navigate what occurs after your winning auction bid.

What Happens When You Are the Winning Bidder?

Immediately after winning an auction bid, a member of the auction house team will approach you and guide you through the next steps:

  • You will be taken to the contracts desk to provide identification and personal details, such as proof of ID, address, contact information, and any other specifics required.
  • You will then pay the deposit amount stated in the auction terms, typically 10% of the purchase price. You will also pay any applicable fees or taxes. Ensure you have these funds available.
  • You will sign the memorandum of sale, which is the binding contract between you and the seller. Thoroughly read this before signing.
  • You will be given copies of all documents, which you must pass to your solicitor straight away. They will handle the conveyancing and legal work.
  • The auction house will provide written confirmation of your successful purchase and outline the next key dates and deadlines for exchanging contracts, finalising payment, and completing the sale.

Your solicitor will work with the seller’s solicitor and keep you updated on progress.

Knowing what to expect will help the post-auction process go smoothly. The auction staff will guide you through the required steps once your bid wins.

You Are Bound by the Sale

As soon as the gavel falls to accept your bid, you are required to sign the contract and pay the deposit. This makes the sale legally binding based on the property’s terms and conditions. Do not underestimate the consequences of trying to withdraw from the sale after this point. Depending on the circumstances, you may forfeit your deposit or face additional fees. The auction house has the right to pursue legal action against you for failing to honour the contract.

Therefore, be certain you understand and can comply with all financial and legal obligations before placing a bid. If you have any doubts, consult with your solicitor about the binding nature of the auction contract. It is key to remember that you are committed to buying the property once your bid wins.

Be Prepared for the Deposit and Payment Terms

Once your bid is accepted, be ready to provide the required deposit immediately. Have these funds easily accessible so the process is not delayed. You will also need to pay applicable taxes and fees such as stamp duty on the day of auction. Know the full costs and have the additional funds prepared beyond just the deposit amount.

If seeking financing, ensure you have already secured a mortgage in principle or have spoken to lenders about your financing options. You typically need to complete the sale within 28 days, so the financing must be ready to go.

Winning a Property Auction – What Next?

Can You Withdraw Your Bid?

By placing a bid and winning the auction, you agree to pay the deposit and complete the purchase. If you withdraw for any reason other than extenuating circumstances, your deposit will be forfeited.

The only exceptions are very specific conditions, such as:

  • The seller misrepresented the property details.
  • Major issues were not disclosed, like structural problems.
  • The title deed has restrictions that limit use of the property.
  • There are valid concerns with the contract itself.

Unless your solicitor confirms you have legitimate grounds to withdraw without penalty, you remain committed to buying the property once your bid wins. Do not bid with the assumption you can easily pull out later with no consequences.

Arrange Searches and Surveys

Instruct your solicitor to begin work on conveyancing and essential searches right after the auction. The conveyancing process confirms the legal title and transfers it to you. Searches check for issues like mining subsidence and flood risk. Start this process immediately, as conveyancing and searches can take 4-6 weeks or longer.

Consider arranging your own property survey to uncover any serious property defects in a more thorough and timely manner than the standard searches. This helps to put any doubts about your purchase to bed, or will raise valid issues that may allow you to back out of the sale.

Required Documentation and Signing the Contract

Once you win the bid, be prepared to provide identification, proof of funds, and any other necessary documentation to the auction house promptly. This may include:

  • Photo ID and proof of address
  • Bank statements showing you have funds for the deposit
  • Mortgage agreement if purchasing with financing
  • Additional paperwork if it is a probate or investment property

Today’s Auction Format

The modern method of auction follows an online, conditional format that differs from traditional auctions in several key ways:

  • Auctions are held online over a longer period, typically lasting over 1 month rather than a single day. This allows more time for bidding.
  • The auctions allow both cash buyers and mortgage buyers to participate, unlike traditional auctions which are usually cash only.
  • Bidders can place bids online at any time during the auction period, rather than having to attend a live event.
  • At the end of the auction, the winning bidder pays a reservation fee of around 5% rather than 10% deposit.
  • After paying the reservation fee, the buyer has 28 days to officially exchange contracts and pay the full 10% deposit.
  • Completion takes place within a further 28 days.
  • If the buyer withdraws from the sale, they lose the reservation fee. The buyer is committed once the fee is paid.

The modern method gives buyers more flexibility in bidding and securing financing if needed. It is worth noting that some traditional auctions might still entertain mortgage financing, but it usually requires pre-approval and the ability to close quickly. However, once the reservation fee is paid, you are under contractual obligation to complete the purchase. Understand the conditions before bidding.

Allow Time to Get Prepared

Winning a property at auction is exciting, but requires being prepared for the legal and financial steps afterwards. Be ready to act fast, sign the contract, pay the deposit, arrange financing if needed, and work with your solicitor to complete the purchase. Knowing what to expect will ensure your auction success from the fall of the gavel to getting the keys on completion day.