, Property
Lot 34 is a three-bedroom terrace in a northern town, guide price £68,000, vacant, sold with a full legal pack available online. You watched three lots go before it, the room is half full and half the bidding is on the telephone. The hammer comes down at £81,000 and the man two rows in front stands up to sign.
He has just exchanged contracts on a house. Not agreed to buy it. Exchanged. Whatever he now discovers about the roof, the title or his lender is his problem alone.
The legal pack is the survey, the search and the contract
Every lot comes with a legal pack assembled by the seller's solicitor, usually available a week or two before the sale and sometimes updated the day before. It typically contains the special conditions of sale, official copies of the title, the searches, any leases and tenancy agreements, planning documents, an EPC, and replies to standard enquiries.
Read it, and have a solicitor read it, before you bid. The fee for a solicitor to review a pack is a fraction of the deposit you will lose if you walk away, and it is the only due diligence that happens in this process.
What they are looking for is the list of things that make a property cheap. A short lease. A restrictive covenant preventing the use you have in mind. A right of way across the garden. No vacant possession, meaning a sitting tenant, possibly on a regulated tenancy at a rent from another era. Missing building regulations completion certificates for the extension. An unregistered title. A flying freehold. Japanese knotweed disclosed in the replies. A property in a conservation area with unauthorised works already carried out.
Then read the special conditions, because that is where the costs move. Auction contracts routinely require the buyer to pay the seller's legal fees, the searches, and sometimes an arrears figure. There is usually a buyer's premium or administration fee payable to the auctioneer on top of the hammer price, which can be a fixed sum or a percentage plus VAT. A £81,000 hammer price can be an £86,000 commitment before you have touched the building. Work out your maximum bid with all of that in it, write it down, and do not exceed it in the room.
Anything changed after the pack was published is announced in an addendum, read out at the start of the sale or published on the day. Check it. People have bought properties on terms they never read because they arrived ten minutes late.
The hammer is exchange
In a traditional auction, contracts are exchanged the moment the lot is knocked down. You sign the memorandum and pay the deposit there and then, normally 10% of the price, often with a minimum figure, and by a method the auctioneer specifies rather than in cash.
Risk passes at exchange, so insure the building that day. If it burns down before completion you are still obliged to complete.
If you do not complete, you forfeit the deposit, and the contract will usually entitle the seller to interest, to costs, and to pursue you for any shortfall if they resell for less. There is no cooling-off period and no survey clause to fall back on. This is the entire reason auction property is cheaper: the seller is buying certainty and you are supplying it.
Anti-money laundering checks apply, so bring identification and be ready to evidence the source of your funds. Registration usually happens before bidding, online or in the room, and many auctioneers now take a payment card detail up front.
Twenty working days, and finance you already have
The RICS Common Auction Conditions set completion at twenty business days after the contract date unless the special conditions say otherwise, which is where the familiar figure of twenty-eight days comes from. Some lots complete in fourteen. Check the particular contract rather than assuming.
No mainstream residential lender will reliably produce a formal offer and release funds inside four weeks on a property they have not valued. That is why auction buyers use cash, or bridging finance arranged in principle before the sale with a lender who knows they are bidding at auction, or a specialist auction finance facility. Have the valuation booked and the solicitor instructed the moment the hammer falls, because the clock started at that second.
Arranging finance afterwards is the classic and expensive mistake. A buyer who loses the deposit on a £81,000 house has lost £8,100 and the fees, which is more than the discount they thought they were chasing.
Note also that the modern method of auction, sometimes called conditional auction, works differently and is often used by estate agents rather than traditional auction houses. There the winning bidder pays a non-refundable reservation fee, frequently a percentage of the price with a minimum, and then has a period, commonly twenty-eight days, to exchange and a further period to complete. It gives you time to arrange a mortgage. It also means paying a substantial fee on top of the price, and that fee is normally not part of the purchase price for stamp duty purposes. Know which kind of auction you are in before you bid.
Guide price is not reserve
The guide price is a marketing figure. The reserve is the confidential minimum the seller will accept, and it can sit above the guide. Where a guide is quoted as a single figure, the reserve will commonly be within about 10% of it; where it is a range, the reserve normally falls inside the range. Either way, the guide tells you what the auctioneer thinks will attract bidders, not what the property is worth.
Do the work the guide is designed to replace. Look at the property in person, and take a builder if the plan involves work. Get comparable sold prices for the street from the Land Registry rather than from asking prices. Price the refurbishment properly, with a contingency, and price the holding costs: council tax or empty rates, insurance, and the interest on the bridging while the work is done.
Set your maximum, including fees and stamp duty with any additional dwelling surcharge that applies, and then behave as though somebody else in the room is willing to overpay, because on most lots somebody is. The discipline of stopping is the only real skill in the room.
Unsold lots are worth watching. A property that does not meet its reserve can often be bought immediately afterwards by negotiation with the auctioneer, sometimes below the reserve, and with rather less adrenaline involved.
Where this shows up in the game
Property arrives in Business Baron with the Property & Construction Track, an add-on to the full game. Buying is a negotiation with a seller who has a hidden reserve and a reason for selling, and cash, no chain and a quick completion are all worth money off. A player with money ready can move faster than one waiting on a lender, which is exactly the advantage cash has in reality.