As large sums of money are exchanged at a property auction, ensuring the bidding process is properly regulated and managed is important. Auction houses must impose clear rules for buyers and sellers to follow, and everyone must know their role in the process.
For example, those looking to bid on a property need to know whether their offer has been accepted. If it is, they will be legally obligated to pay the amount stated once the auction is completed. If they fail to do so, this can result in serious legal and financial repercussions.
But can you ever withdraw a bid? This is something our auction specialists at Property Saviour explore in this article.
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Is Withdrawing a Bid at a Property Auction Legal?
You should only make a bid if you are certain you want to. Make sure you also have enough money to make the payment.
You can still withdraw your bid under certain conditions, though. This is allowed as long as the item has not been declared “sold” and the auction has not been finalized.
This is according to Section 57(2) of the Sale of Goods Act 1979: A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in any customary manner. Until that announcement is made, any bidder can retract their bid.
Once you have withdrawn your bid, the auction will continue with the next highest bidder in the lead. However, this does not apply to so-called ‘conditional’ or ‘modern method’ online auctions.
In these cases, the highest bidder is not legally obligated to complete the sale, but they will have paid a reservation fee at the close of the auction. This fee will not be refunded if they decide to withdraw.
Why Would You Want to Withdraw a Bid During an Auction?
There are several reasons why you may choose to withdraw from an auction bidding process:
- The auction atmosphere may have caused you to become overly enthusiastic and you may regret your bid.
- You may have noticed something in the brochure or catalogue that was previously overlooked.
- Someone could have contacted you during the auction and changed your opinion.
- You may not have had the necessary funds to complete the sale.
- Your auction financing may not have been arranged properly.
- A joint venture partner or other financial backer may have decided to not move forward.
- The auction fees may have been too costly.
- You may have bid by mistake – such as scratching your head at a live auction or pressing the wrong button when bidding online.
- The auctioneer may have misled you or other bidders.
- You could simply have changed your mind.
What Happens if You Want to Withdraw Your Bid After an Auction?
In the majority of cases, sellers and auctioneers will expect you to carry through with the sale. This means that you are now legally obliged to go through with the purchase.
If you fail to do so, you could end up losing the deposit, which is usually 5-10% of the final bid, as well as the auctioneer’s abortive charges and other legal expenses.
Furthermore, there have been cases of sellers suing buyers who withdraw their bids for depreciating the value of the property.
One exception is when the buyer discovers that the property has undisclosed defects after the auction. For example, if it is of non-standard construction or is unmortgageable in some way.
In this case, the buyer has the right to withdraw, but they must be able to prove that this is the case.
Auctioneers may also not have adopted the 4th edition of the Royal Institute of Chartered Surveyors (RICS) Common Auction Conditions (CACs). If there are ambiguous clauses which are deemed unreasonable according to a legal interpretation, the buyer can withdraw and get back any fees or deposit funds they have paid.
This is governed by Section 3 of the Misrepresentations Act 1967.
However, if the buyer has not read the legal pack thoroughly or simply changed their mind, there is no option available to them other than to go through with the purchase.
Bid at Property Auctions The Right Way
To minimise the risk of withdrawing from a property auction, it is essential to be as prepared as possible. Do thorough research into the property and arrange at least one viewing with the seller.
Whenever possible, book a survey or at the minimum, view the property with someone knowledgeable in building construction.
Carefully read through the auction legal pack and consider consulting a conveyancing solicitor, even though there may be a fee associated with it. Most importantly, budget and plan your bids wisely.
Set a clear maximum price and be sure that you can confidently commit to the bid if you make it.
Traditional Property Auctions
To participate in a live property auction, you must make sure to arrive early and register to get your paddle. Take a seat in the auction room and wait for the proceedings to begin. Pay attention to when your lot is available for bidding.
The auctioneer will start the bidding at a certain price, and you should raise your paddle to make a bid. When the highest bid has been reached, the auctioneer will announce the lot as sold. Contracts for the property sale are exchanged at this point.
The successful bidder needs to proceed to the administration desk to pay the deposit and provide all necessary information.
Completion of the sale must occur within a certain period, typically 15-28 days, though it may be longer for commercial property auctions (42+ days). The full purchase price must be paid during this timeframe.
Modern (Conditional) Method Property Auctions
Modern property auctions are often described as a combination of estate agency sales and auctions with extra security. Bidding times are usually longer than in traditional “in the room” auctions, giving bidders more time to withdraw before the hammer is dropped.
To participate, bidders must register on the site and submit the amount they are willing to pay for the property.
Once the lot ends, the winning bidder must immediately pay a reservation fee and they will have an “exclusivity period” of up to 28 days (20 business days) to exchange contracts.
During this time, they will arrange for a survey, secure mortgage finance, and complete any other tasks related to the purchase.
No one else can bid on the property during this period and the seller is expected to remain by the agreement made during the auction.
After the exclusivity period is over, the buyer must exchange contracts and they will have a further 28 days (20 business days) to pay the amount they offered. If the buyer cannot meet the deadlines or decides to withdraw, the auctioneer will keep the reservation payment.
The seller can then choose to offer more time, negotiate the price, or reopen the property for more bidding. The auctioneer can also contact previous bidders who may take over the sale.
Sell to us!
If you think this is not for you. Reach out to Property Saviour! We’re here to help. If you’d like to learn more about our services, feel free to get in touch with our friendly team. We’re always happy to assist.
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