Auction Tips: If I Buy a House at Auction, When Do I Pay?

Posted by Clive Emson Auctioneers on 23rd December 2024 -

Buying a property at auction has become increasingly popular due to the speed, efficiency, convenience, and competitive pricing commonly available. One of the primary variables between a property auction and a conventional purchase is the timing—something we often speak to prospective buyers about.

In most cases, auction property buyers pay a 10% deposit immediately, with the final balance payable within four weeks or 28 working days, depending on the auction type and any conditions included within the legal pack.

While auction bidding can be exciting and attract dynamic bidding, it remains essential for every buyer to set a clear ceiling price, understand when the payments will fall due, and have the financing in place to meet their obligations.

Key Takeaways:

• When purchasing a property at auction, the norm is to pay a 10% deposit there and then – you need to have your down payment ready to go before making a bid.

• Buyers usually pay the balance within 28 working days, although there are some auction formats and conditions of sale that can offer a variable final payment date.

• Failure to pay the balance may result in forfeiture of the deposit, which can be complex since bidding at auction and winning form a legally binding contract.

• Reputable auctioneers always clarify any variations on the standard timeline or payment dates included within the legal pack—this should be reviewed carefully before proceeding with an auction purchase.

Paying a Deposit for a House Purchased at Auction

Let's start with the deposit payment. In most cases, you must pay a 10% deposit on the same day as the auction concludes—this rarely changes. When you place the winning bid, you become obligated to proceed with the transaction.

Additional costs, such as any administration fees borne by the buyer and a potential buyer's premium, are also due there and then, with all these details included in the listing and legal pack where applicable.

Payment Due Dates for the Balance on an Auction Property Purchase

As noted, the 90% balance of the agreed purchase price falls due within 28 working days or four weeks. There are some exceptions, and a property sale can carry extra conditions.

If you, as the buyer, have further financial obligations to complete the transaction, these will typically be payable at the same time as the balance.

Your solicitor will usually manage the transfer of funds on your behalf, whether you are buying an auction property outright, using an auction property mortgage, or have an alternative financing product in place.

Differences in Payment Timeframes for Traditional and Modern Property Auctions

Buyers are sometimes confused by the contrasts between a traditional or standard property auction and a modern or conditional auction. The nature and format of the property auction you participate in have a bearing on how quickly you will need to have the funds available.

As a brief snapshot:

• Traditional or unconditional auctions are popular with investors and experienced buyers and provide an expedited turnaround time for both parties. The payment system is as covered, with a 10% deposit and a 90% balance within 28 working days.

• Conditional auctions are more flexible but take longer to finalise, with most auctions running for up to around a month. The winning buyer tends to pay a reservation fee of approximately 5% rather than a deposit.This does not go towards the purchase price and in some cases can mean large stamp duty levies. They then have up to 56 days to finalise the purchase.

Conditional auctions have less certainty but enable the buyer to pay the 10% deposit within 28 days, followed by the balance within another 28 days. There is greater scope to put mortgage financing in place, but there are drawbacks, especially for sellers keen to complete the sale as quickly as possible.

Buying a House at Auction: Payment Timings

Property auctions are designed to provide an efficient, seamless experience for all parties, with a minimal likelihood of a sale falling through. This benefit is often why sellers opt for an auction sale rather than risk delays or failed sales, which can be costly.

Buyers should expect to conduct their due diligence before the auction and should have no reservations about how much they are prepared to bid.

When the hammer falls, physically or digitally, the sale is legally binding, which means the seller is obligated to sell at the final bid, and the buyer is obligated to pay the agreed amount. The normal timings are as follows.

Traditional property auction:

• 10% deposit on the day of the auction

• 90% balance within 28 days 

Conditional property action:

• Reservation fee of roughly 5% or a fixed value, often a minimum of at least £5,000 + VAT, payable on the day which does not go towards the sale figure

• Balance is due within four to eight weeks, depending on the auction terms

To avoid complications, every buyer must understand their payment obligations and have either a pre-agreed financing solution or already know they have the capital to cover the amounts plus auction fees.

If the winning bidder cannot pay or changes their mind, they may forfeit their deposit, be subject to legal action and incur further financial penalties. Sometimes, sellers can pursue the buyer for their costs and any additional losses.the value bid.

Failing to pay the deposit on the day of any auction could result in the seller engaging a solicitor to raise a legal case for the amount owed. Participating in the auction means the buyer has already agreed to the terms of the sale.

Likewise, failing to pay the balance often means the seller's solicitor will serve a legal notice to complete the transaction, with a 10-working day deadline, after which the buyer may face significant costs.

The Importance of Having Financing Prepared Before Buying a House at Auction

As we've seen, bidding on a property at auction isn't a move to take lightly. If you have any doubts about whether you wish to proceed with the purchase or will be able to finance the amount bid, it is advisable to take a step back and put the right planning in place.

Buyers should expect to pay an immediate deposit on the same day as the auction and to have the funds available to remit the final balance within a month.

Reviewing the legal pack, checking the terms of the sale, and analysing any specific conditions remains key. This ensures you can go into an auction with clarity and make informed decisions about how much to bid and how that factors into your budget.