The difference between traditional and modern property auctions
What are called “modern auctions” or “conditional auctions” are becoming more popular. What is the difference between modern auctions and traditional auctions?
The traditional (unconditional) auctionsTraditional auctions are exactly what most people think of when they talk about auctions. The property auction is held in the traditional sense with an auctioneer in a room with parties bidding on lots. The hammer falls when a successful bidder is the last one bidding. At that point the bidder pays their 10% deposit and the property then completes on pre-determined terms, normally within 28 days.
The purchase is unconditional in the sense that the successful bidder is contractually bound to complete the sale. If they don’t, they are in breach of contract and can lose their deposit and face action for breach of contract.
Modern (conditional) auctionsThese are a relatively new type of auction which is held online. Property lots are there for people to bid on. As with a traditional auction, the highest bidder is successful in securing the lot. Bids can take place over much longer periods than traditional auctions.
When there is a successful bidder, they pay a fee to the auctioneers. That then secures the property to them but subject to entering into a contract with the seller. The seller’s solicitor would then send out a contract pack. Different modern auctions have different terms and conditions but usually the buyer has to complete the purchase within a set number of days of receiving the draft contract from the seller’s solicitor. Usually the period is something like contracts must be exchanged 28 days after the draft contract is received, with completion being 14 days after the exchange of contracts.
Modern auctions are conditional in the sense that the buyer is not obliged to enter into a contract to buy the property. They are legally able to decline to sign the contract but if they do they will lose their fee which they have already paid to the auctioneer.