Understanding auction terminology
If you're new to auctions or selling property, you may come across words that you've never used or heard of before. As there are some specific terminologies used for property sales alone, along with some used specifically at auctions too.
Auction terminology explained
What does entering a property mean
Entering a property is a term used for putting a property up for sale at an auction.
At Barney Estates, we will be with you throughout the process from start to finish. We generally help sell properties of all types.
What is a guide price
A guide price is a phrase used to show the seller's minimum expectation and therefore, is not to be mistaken as the value of the property's worth.
Indicating a guide price allows bidders to know what the seller expects as a starting point when bidding on the property.
At some auctions, you may also sometimes see a minimum and maximum guide price, which allows the auctioneers to better suggest expectations.
What is a reserve price
The reserve price is a figure often undisclosed and agreed privately between an auctioneer and the seller.
Given the fast nature of auctions, the reserve price figure is used to help an auctioneer sell at a minimum, without having to consult the seller after every bid.
In 2014, an ASA ruling stated that reserve prices must sit at no more than 10% of the property's guide price. Therefore, buyers can often use this to measure to indicate what a property’s highest reserve price figure may look like.
What does it mean when a property has been withdrawn
Withdrawn means that a property has been taken off from the auction prior to it starting, meaning that no one can bid on it within the current auction.
Properties can be withdrawn for many reasons, due to second thoughts, legality issues or perhaps even offline interest. Auctions are not likely to disclose these reasons to buyers, in order to better protect their sellers.
What is a bid
In short, a bid is an offer presented by a buyer, with the intention to purchase a property from the seller.
A bid can either be accepted if it is the highest bid and then formally accepted once a reserve price has been met. Therefore, a bid can also be declined if it is lower than the current highest bid, and furthermore, formally declined if a reserve price is not met.
It is also worth noting that bids are legally binding. Therefore, buyers who have bid on a property are legally bound to purchase it, should the bid be accepted. This can be seen as advantageous for sellers, due to the security.
What is a lot
The phrase, "lot", often refers to the package of what's being auctioned.
In property auctions, often a single "lot" is a singular property, or perhaps a piece of land that is being auctioned off, unless specifically specified within the legal documentation.
"Lots" also have numbers associated with them, allowing the auctioneers, buyers and sellers better understand the order of the auction and which "lot" to look out for, rather than remembering the full property address.
What is a legal pack
A legal pack is a pack of legal documentation provided by the seller's solicitor.
The legal pack includes everything from title documents, searches, special conditions and various other relevant documents.
It is important that both you and your solicitors go through the entire auction legal pack to ensure everything is in there, in order to accurately and better market the property, prior to it entering the actual auction.
What are standard conditions of sale.
Standard conditions are legal papers that are attached and form a part of the condition of sale.
The standard conditions of sale cover most foreseeable eventualities arising from a property transaction.
These conditions come into effect when contracts are exchanged.
What are special conditions of sale
Special conditions are the unique conditions of sale that relate specifically to each and every lot and may vary to general conditions.
It is common practice to include special conditions, however, they may differ from contract to contract, or may be worded slightly differently in each contract.
If your property has special conditions, it's crucially important that your auction legal pack includes these for potential buyers to note.
These conditions come into effect when contracts are exchanged.
What does exchange (of contracts) mean
An exchange of contracts takes place right after the final bid has become successful. Meaning the reserve price has been met and the bid has been formally accepted.
A Memorandum of Sale (confirmation of the property transaction) is both handled and signed by the auctioneers, as they already have the seller's permission, given that the reserve price has been met.
This is what makes buyers and sellers legally bound after bids have been placed and formally accepted (bids which meet or exceed the reserve price of a lot).
What does completion mean
Completion is a formal process that helps to transfer property from one entity to another.
After an exchange of contracts has happened (which is instantly after a buyer has successfully won the highest bid on a lot and the reserve has been met), completion is the next step.
Completion can generally take up to 28-days (or longer) and purely depends on a case-by-case basis.
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* Generally speaking Guide Prices are provided as an indication of each seller's minimum expectation, i.e. 'The Reserve'. They are not necessarily figures which a property will sell for and may change at any time prior to the auction. Virtually every property will be offered subject to a Reserve (a figure below which the Auctioneer cannot sell the property during the auction) which we expect will be set within the Guide Range or no more than 10% above a single figure Guide.