Property Auction Glossary
Confused by auction and property speak? No problem now with our A to Z guide to auction and property jargon.
Do not even think about bidding before you are 100% sure of all the costs involved. See our FREE! and easy to use Property Auction Calculator which take out the guess work. There are many important costs you need to consider when buying a property at a auction. Our free calculator is simple to use - just fill in the figures and everything is calculated for you. We believe an educated bidder is a smart bidder.
Do not be one of the many people who pay too much as auction. It's well documented on television programmes that cover property auctions such as "Under the Hammer" that people lose thousands because they have not structured their thinking to consider all the costs involved.
If you're considering purchasing a property or house for auction you should always consult with auction professionals and solicitors. This article is intended as a guide only.
Actual completion date
The date when completion takes place or is treated as taking place for the purposes of apportionment and calculating interest.
Addendum
An amendment or addition to the conditions contained in a supplement to the catalogue. This may be a written notice in the catalogue, or announced at the auction.
APR (Annual Percentage Rate)
The APR is the annual percentage rate of interest charged by the lender. It is higher than the SVR (Standard rate of interest lenders charge) because it includes one-off charges like arrangement and valuation fees.
If a mortgage starts with a fixed rate of interest that will change to the SVR after a specified number of years, the lender must include this in the APR calculation.
This means that the APR should give a more accurate picture of how one mortgage compares with another. The APR should always be shown clearly on any information that you are given about a mortgage.
Arrangement Fee
This fee may be charged on specific products and is either payable in advance, added to the loan or deducted from the advance on completion. It covers the administrative expenses incurred whilst processing an application
Auction
A public sale in which property or items of merchandise are sold to the highest bidder.
Auctioneer
The person who conducts an auction. The auctioneer introduces each lot offered for sale, acknowledges bids, and announces whether lots are sold or unsold and their final auction house bid prices.
Auction catalogue
The catalogue gives a description of the property, details on how to view each property and the General Conditions of Sale. These are prepared by the auctioneer, stating the basis on which the auction is carried out.
Bank base rate (BBR)
The bank base rate is the rate of interest set by the Bank of England. If you hear on the news that interest rates have gone up or down, they will usually be referring to the bank base rate.
Bid
The offer to buy property at a specific price.
Bidding by Auctioneers
The auctioneer is able to take bids from:
- People who are not present but have made proxy bids
- People who are bidding by telephone
- People who have instructed him by letter or fax to bid up to a certain sum on a lot
- Himself on behalf of the vendor
- Himself on behalf of himself or his firm.
Broker Fee
A fee charged by a broker or other intermediary for advising / negotiating a loan.
Bridging Finance
A short-term loan, usually at a higher rate of interest and with higher fees. Find out more about the best choices for property financing.
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Buildings Insurance
A policy which pays the cost of rebuilding or repairing your house if it is damaged or destroyed.
Completion
On completion of the sale of the lot there is usually a defined time period from buying a house at auction to the completion date in which the sale must be finalized. Penalties will be applied if the sale is completed late which can include losing your deposit.
Make sure you have the financing in place before you bid at an auction. You'll only have a short period of time to come up with the cash. Find out more about this and other things you must know in our property auction beginners guide.
Compulsory Purchase Order
Local authorities and government agencies in England have powers under various acts of parliament, to buy land that is not necessarily for sale by the owner.
These are called 'compulsory purchase' powers and are important for local authorities and other public bodies to use in order to buy land that is needed to help deliver social and economic changes.
Conditions of Sale
Conditions of sale are normally the General Conditions of Sale, The Special Conditions of Sale, The Addendum and any Amendments. Can also have Extra Conditions or other conditions under any other name. Each Lot is sold subject to these conditions of Sale.
Contents Insurance
Insurance to cover loss or damage to your possessions in the home. Costs vary according to where you live and the total value of your belongings.
Emergency Repair Insurance
This type of coverage will provide assistance for the landlord and the tenant in the event of an emergency at the property such as:
- Failure of the electricity supply
- Failure of the cooking facilities
- Lost keys
- Plumbing problems
- Leaking roofs or guttering
- Security of doors and windows
It should be stressed that all of these policies cover EMERGENCY ASSISTANCE not a repair service through lack of routine maintenance. Get other important information and helpful hints if you're buying a property at auction to let.
Environmental Search
An Environmental Search may be necessary to ascertain whether the property you are intending to purchase may potentially be affected by factors such as flooding, subsidence or landslip.
The search provides information on these factors together with information regarding air quality, landfill sites, waste sites or contaminated sites near the property. This again is a paper based search and usually costs in the region of £40.
Exchanging contracts
If you are the successful bidder at the house for sale auction, the sale is binding on the fall of the hammer and you will then be asked to sign and exchange contracts in the auction room.
Exit Fee
Exit fees when you pay off your mortgage or other form of financing are following the same path as upfront arrangement fees: they've gone through the roof over the past year. The good news is that UK financial watchdog the Financial Services Authority (FSA) has warned mortgage lenders that it views this practice as unfair.
Freehold
This means that you own the property outright as opposed to leasehold where you own the rights to occupy a property for a specified period of time.
Full Structural Survey
Comprehensive report on the nature of the structure and any problems.
General Conditions of Sale
General Conditions covering all properties at the auction house sale. Normally at the back of the auction catalogue.
Gross Yield
(Annual rental income × 100), divided by purchase price.
The net yield, however, the income minus all overheads and costs, including fees and taxes – is the critical figure. Learn more about important figures if you’re buying a property at auction to let.
Ground Rent
This applies only to leasehold properties and is a sum paid annually to the freeholder by the leaseholder.
Guide price
A guide price gives an indication of the price that the property or house for auction is expected to sell for and what the vendor is hoping to achieve.
Guide prices are for information only and shouldn’t be relied on as an indication of reserve price, or representing professional valuations for any purpose. Purchasers are deemed to have relied on their own knowledge or obtained the independent, professional advice of others.
HM Land Registry Fees Per registration
A charge incurred when buying a home for registering the title of a property under your name. This is usually dealt with by your solicitor or conveyancer.
House/ Flat Buyers Report and Valuation
Intermediate report that costs less than a Full Structural Survey. Does not provide as much detail as a full structural survey.
In the room
A bid from someone in the room (not by phone.)
Interest rate
The monthly effective rate paid (or received if you are a creditor) on borrowed money. Expressed as a percentage of the sum borrowed.
Borrowing £1,000 at a 6% interest rate means that you would pay £60 in interest.
Jump Bid
Making a bid that is higher than that the auctioneer has just asked for. Learn more about how to bid at auction.
"Knocked down Prior"
See Pre-Auction Sales
Legal pack
The vendor's solicitors prepare a legal pack containing copies of all the legal papers that you and your solicitor are likely to need to make an informed decision about your lot. The pack should include (where applicable) copies of: special conditions of sale, title deeds, leases, office copy entries, searches, replies to pre-contract enquiries.
All legal packs will be available for inspection at the auction room. You must be aware that you buy subject to all documentation and terms of contract whether or not you have read them.
Leasehold
When you buy a leasehold property essentially you are buying nothing more than the right to occupy a building for a given length of time.
You will have to pay ground rent and maintenance in addition to a one-off payment that buys ownership of the lease until it is sold or runs out.
The amount of alterations you can make to the property varies accordance with the lease and you may well have other conditions imposed upon you by the landlord.
Legal protection Insurance
Legal Protection Insurance covers your property against risks such as the legal costs that may arise if your tenants breach the terms of their tenancy agreement with you by providing cover for legal expenses and disbursements.
Land Charges Act Search
Fee charged by a solicitor or conveyancer for checking the validity of the title on a property and whether the 'owner' is in a genuine position to sell.
Lot
Each separate property described in the catalogue or (as the case may be) the property that the seller has agreed to sell and the buyer to buy.
Memorandum of Contract ( Sale)
The Memorandum of Sale is a record of the terms by which the purchaser has bought at the fall of the gavel. It’s usually printed in the Auction Catalogue and usually details the lot number, the property, the price, the deposit, the name of the purchaser and other charges.
Net Yield
The net yield is the income minus all overheads and costs, including fees and taxes – it is a critical figure. Find out how to get the correct net yield with our FREE! and easy to use Property Auction Calculator
"Off the chandelier" or "Off the Wall"
If the bidding has stopped more than one increment below the reserve, the auctioneer can take a bid off the chandelier on behalf of the vendor up to one bid below the reserve.
Paddle System
The paddle system is one method used to register prospective bidders. Each bidder is given a numbered bidding paddle. Find out more about how to bid at auction.
Pre- Auction Sales
Negotiating and buying the property before the auction.
Previews or exhibitions
A viewing of the property held in advance of the auction. Pre-auction viewings are open to the public and may be attended at no charge.
Private treaty
The sale of a property at a price agreed to by the seller and the buyer or their agents.
Proxy bid
The auctioneers can undertake bidding on behalf of buyers unable to attend the auction in person. The buyers must contact the auction house prior to the auction to obtain an official, proxy bidding form. This must then be returned to the auction house with a deposit cheque within the time specified by the auctioneers. The buyer writes the maximum amount they will bid up to on the form and the auctioneers will bid on behalf of the buyer, up to, but not beyond, the stated price of the flat or house on auction.
Rent Indemnity Insurance
Our invaluable Rent Indemnity covers you, the landlord, against non-payment of rent. Find out other important tips if you are buying a property at auction to let.
Reserve
A reserve price is the lowest price the vendor will accept. This is agreed between the vendor and the Auctioneer. Most properties entered into the auction have a reserve price. This is confidential and not disclosed to any interested parties.
Service Charge
This pays for maintenance and insurance of communal areas and is usually only applicable to flats.
Slush Fund or Contingency
An amount kept in reserve to guard against possible losses.
Special Conditions of Sale
Special Conditions of Sale relate to each lot and are available upon request from the Auctioneers or the Vendors Solicitor prior to the Auction.
They are above the General Conditions of Sale and relate to a specific property. Your solicitor must read these.
Purchasers will be deemed to have inspected these Special Conditions of Sale and will be legally bound by these conditions which will form part of and will be attached to the Memorandum of Contract.
Standard variable rate (SVR)
The SVR is the standard rate of interest that the lender charges. This usually goes up and down in line with any change in the bank base rate.
Stamp Duty (Rates as at 17 Dec 2005)
The most galling thing about buying a property is not paying the estate agent’s fees, but signing the cheque for the stamp duty.
Sadly, it’s unavoidable: your solicitor can’t complete the
transaction without collecting the duty on behalf of the government.
Up to £120,000 - nil
£120,001 to £250,000 - 1%
£250,001 to £500,000 - 3% of the purchase price
More than £500,000 - 4% of the purchase price
Find out more about all the fees and costs you need to take into consideration when buying property at auction with our FREE! and easy to use Property Auction Calculator.
Telephone bid
A telephone bid, made by a member of staff from the property auction house. The staff member telephones the client from the salesroom to bid on particular lots and relays the client's bids to the auctioneer during the bidding on those lots.
Tenancies
Contracts to occupy or lease the property subject to rent. A lot may be sold subject to existing tenancy agreements. What else do you need to know when buying a property at auction to let?
Unsold Lots
Lots that have failed to reach the reserve price at auction. You can try to negotiate a price to buy them at the auction or afterwards. Discover all the ins and outs of how to bid at auction.
Vacant Possession
The previous occupants must vacate the property before you move in. This includes any tenants.
Valuation Fee
The fee paid by the prospective borrower for the lender's inspection of the property. Normally paid upon loan application
Voids
A letting void is any period when the property is not subject to tenancy and therefore the landlord is not receiving any rental income.
During any such periods not only is the landlord not receiving an income but also his costs will increase.
In addition to insurance and mortgage payments that he may have to make, he may incur costs in respect to connected utilities and will be responsible for Council Tax and Leasehold Ground Rent and Maintenance charges.
There are two void periods that an investor must take into account:
- The period between completion of the purchase of the property and the first tenant moving in. Given the time taken to re-fit the property for tenancy, a period of 3 to 4 weeks should be allowed.
- The period between a present tenant moving out and a new tenant moving in. Typically, the industry allows a period of 4 weeks per year.
Water Authority Search
A fee charged by a solicitor as part of his conveyancing work for checking the infrastructure of the local water system and sewerage.
Get answers to your questions about:
- Learn more about how our FREE! and easy to use Property Auction Calculator can help you determine all the costs involved and calculate exactly how much you can bid and still make a profit.
- FEE FREE Property Auction Bridging Loans and Mortgages Enquiry Form
- How to choose the best property auction financing
- How to bid at a property auction
- How to select the right property at a property auction
- Buying property for auction to Develop and Sell
- Buying property at auction to Buy to Let
