As large amounts of money change hands at a property auction, the bidding process needs to be properly regulated and managed. Auction houses must apply clear rules regarding buyer and seller conduct – and everyone involved must understand their role in the process well.
For example, those planning to make an offer on auction property need to know if their bid has been accepted. If so, they will be legally obligated to pay the amount within a set time frame once the hammer falls.
Failure to do so can result in major legal and financial penalties. But does this mean you can never withdraw a bid?
In this article, the auction specialists at Property Solvers explore this question…
Is Withdrawing a Bid at a Property Auction Legal?
You should only place a bid when you are confident that you wish to. What’s more, you must have the amount available to make the required payment.
However, it is still possible to withdraw a bid under certain circumstances.
Specifically, you will be permitted to retract a bid as long as the item has not yet been announced as “sold” and the hammer has not yet fallen.
This is governed by Section 57(2) of the Sale of Goods Act 1979:
(2) A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.
Once you have withdrawn your bid, the auction will continue with the next highest bidder “in the lead”.
Conditional or Modern Method online auctions are somewhat exempted from the above rule. In instances of this kind, the highest bidder is not legally bound to complete the sale. However, as mentioned above, they will have paid a reservation fee at the close of the auction. This will not be refunded should they withdraw.
Why Would You Want to Withdraw a Bid During an Auction?
There are several reasons you may suddenly decide to pull out of the auction bidding process:
- The buzz of the auction environment has caught you up in the heat of the moment
- You see something in the auction brochure or catalogue that you didn’t before bidding
- Someone contacts you during the auction and changes your mind
- You realise that you don’t have sufficient funds to complete on the sale
- Your auction finances are not prepared sufficiently
- A joint venture partner or other financial backer decides not to proceed
- You cannot afford the auction fees
- You bid accidentally – such as scratching your head at a live auction or clicking the wrong button when bidding online
- The auctioneer has demonstrably misled you and/or other bidders
- You’ve simply had a change of heart
What Happens if You Want to Withdraw Your Bid After an Auction?
In most cases, the auctioneer and seller will expect you to proceed with the sale. Indeed, you now have a set legal obligation to complete.
Failure to do so, therefore, would result in a loss of any deposit paid (ranging from 5 to 10% of the final bid price) in addition to the auctioneer’s abortive charges and legal fees. We’re also aware of cases where sellers have sued withdrawing bidders for depreciation of the property’s value.
One exception is when the buyer discovers undisclosed defects within the property after the auction. Say, for example, the property is of non-standard construction or unmortgageable in some other way. The auctioneer had a legal obligation to display the facts in the listing / promotional material.
In this scenario, as a buyer, you have full entitlement to withdraw. However, you will need to clearly demonstrate this was the case.
Other times, auctioneers have not adopted the 4th edition of the Royal Institute of Chartered Surveyors (RICS) Common Auction Conditions (CACs). Should there be any ambiguous clauses that, from a legal interpretation point of view, are considered unreasonable, the buyer could withdraw and claim back any fees / deposit funds paid.
Issues like these are governed by Section 3 of the Misrepresentations Act 1967.
However, if you’ve simply not read the legal pack or got cold feet, there really is no other option.
Bid at Property Auctions The Right Way
The best way to minimise the risk of withdrawing from a property auction is to prepare yourself as best as you can.
Do plenty of research (due diligence) into the property. Arrange at least one viewing with the seller. Where possible, book a survey or – at the very least – view with a competent buildings expert.
It’s also crucial you view the auction legal pack with a fine-tooth comb. Although there may be a charge, it’s also worth consulting a conveyancing solicitor.
Above all, budget and plan your bids carefully. Ensure that you stick to a clear limit (maximum price). If you make a bid, you need to be able to confidently stick with it.
Traditional Property Auctions
In order to bid at a live property auction, you must arrive in plenty of time in order to register and receive your paddle. Once you have positioned yourself within the auction room, you can then wait for the event to start. Pay attention to find out when your lot will be available for bidding.
When it is time, the auctioneer will start the bidding at a certain price. You must clearly indicate your bid using your paddle.
Upon reaching the highest bid, the auctioneer will announce the lot as sold. Contracts on the property sale are exchanged at this point.
The winning bidder must then report to an administration desk where they will pay the desired deposit and provide all required details.
After this, completion must happen within a set period – usually between 15 to 28 days, but possibly longer. Commercial property auction conditions, for example, often have 42+ day completion timeframes. The buyer must pay the full purchase price within this set time period.
Modern (Conditional) Method Property Auctions
We often describe modern method property auctions as a cross between an estate agency sale and an auction – but with added security.
Generally, bidding timeframes are also often longer relative to traditional “In the Room” auctions. It’s, therefore, easier to withdraw before the hammer falls.
Bidders must register with the site and then enter the amount they are willing to pay for the property.
Once the lot has ended, the winning bidder must immediately pay a reservation fee. After that, the auction buyer usually has an “exclusivity period” of up to 28 days (20 business days) to exchange contracts.
The buyer usually organises a survey, lines up mortgage finance and undertakes other related tasks. No one else can bid on the property at that time. The seller must stick to the arrangement as agreed at the auction.
Once the exclusivity period is over, the buyer must exchange contracts and the typical auction completion period begins. The buyer another 28 days (20 business days) before they must pay the amount offered.
If the buyer cannot meet these deadlines or decides to withdraw, the auctioneer will keep the reservation payment. It’s at the seller’s discretion to provide more time, negotiate the price or open up the property for more bidding. The auctioneer can also contact previous bidders who can potentially “take over” the sale.
Reach Out to Property Solvers Auctions
You’ll find a wide range of superb properties on Property Solvers auction pages. Browse today to discover everything we have available.
If you wish to learn more about our services, don’t hesitate to contact our friendly team today. We’re always happy to assist…