Anyone who's done it will agree: Bidding on a house at auction is biggest thrills you can have in property. Not even Vegas comes close.
But when that hammer falls, reality sets in and you actually need to pay for the place! So how long do you have to pay after winning a house at auction?
In a Traditional property auction you’ll need to pay a 10% deposit on the same day. This is because exchange takes place immediately with the fall of the hammer. You’ll then have to pay the remaining 90%, plus any fees, within 28 days. This can be different when buying through “modern” or “conditional” auction though.
Because the rules between Modern Auction and Traditional Auction are different, it's important to understand how the payment terms differ between the two. We'll cover all that in this article.
It's also handy to understand what happens if you can't pay by the deadlines. We've covered that in a related article here: What happens if you win an auction and can't pay?
Let's get into timeframes.
1. How long do you have to pay after a property auction?
For a seller, one of the biggest benefits about selling a house at auction is the certainty that it offers them. Auction sales are far less likely to fall through than traditional estate agent sales.
This is because of how auctions work:
- Buyers do their due diligence before auction.
- So by the time the winning bid is placed, all the legal "ifs and buts" are taken care of. The deal is done.
- This means auction sales are legally binding upon the fall of the hammer...
- ... And with this comes an obligation for the buyer to pay up.
So on auction day you'll need to pay a hefty deposit or reservation fee for the property. When you register to bid, some auction houses will even take your debit card details and then charge your card shortly after the hammer falls...
(So when I say you have to pay "immediately" upon the fall of the hammer, in some cases that's very literal!)
You'll also have a set date you'll need to complete the purchase by, which is when you'll need to pay up the remainder of the funds.
The specifics change depending on whether you're buying through a Traditional auction, or through the Modern Method of Auction (MMoA). It's worth talking through each one separately so we can get into a bit more detail on them.
1.1. Traditional Auctions: How long do you have to pay?
Traditional auctions are the ones you see on Homes Under The Hammer. They're unconditional auctions. In terms of timeframes, here are the key points:
Exchange on the day, deposit to pay
Exchange takes place immediately upon the fall of the hammer. This means you'll need to pay a 10% deposit on the same day, else you'll be in breach of contract.
Check the auction terms to see if any fees are due on top. (For example, Agents Property Auction charge the winning bidder an additional £1,000+vat fee on auction day).
Usually a 28-Day Completion Deadline
Traditional auctions then have a standard deadline of 28 days. You'll have to pay the remainder of the funds by this date.
This can include the completion date, giving you either more or less time to complete. Check for any additional fees payable too.
As you can see, "checking the terms" is an important part of finding success at a property auction. It's no fun (In fact, I've included a gif below just scrolling through the auctioneer's standard terms... This doesn't even get into the legal pack!), but it's extremely important.
1.2. Modern Auction: How long do you have to pay?
Modern Method of Auction (also sometimes called "conditional auctions") differ from traditional ones in two main ways:
- Contracts: Rather than exchanging upon the fall of the hammer, the seller and buyer enter a legally-binding contract instead.
- Timeframes: Modern auctions usually give buyers longer to complete - often up to 8 weeks. This gives buyers time to get a mortgage.
This impacts how much you need to pay, and when, in two main ways.
The reservation fee
When the hammer falls, instead of having to pay a 10% deposit you'll need to pay a reservation fee instead. This is because you don't legally exchange when you win a property in modern auction. You enter a contract instead.
The reservation fee varies depending on the auction house. Typically, you should expect to pay 2-4%+vat of the purchase price, subject to a minimum fee of about £5,000+vat.
Be sure to check the auction terms closely for the exact fees.
Sadly, some auction houses have decided to take a really sneaky approach with their costs, and bury them in small print. Some will even write the costs in words rather than figures, making it harder to spot. (For example, "five thousand pounds plus vat" is harder to spot in a long paragraph than "£5,000+vat". It's a horrible practice, but it's happening).
28-56 Day Completion Deadline
The completion date will vary too with modern auctions. Some will be 28 days, but others will be longer. Often it will be up to 8 weeks.
The idea is to give buyers enough time to secure a mortgage afterwards. This is because mortgage buyers tend to pay the highest prices.
This gives the seller a better chance of achieving the price they need (which gives the auction house the opportunity to take on more sellers, and do more business).
1.3. Traditional Auction Vs Modern Auction: Payments and Timeframes Compared
Here's a handy table to show the difference between modern auction and traditional auction, in terms of payments and timeframes:
2. What happens if you win an auction but can't pay?
If you're a bit concerned about how long you have to pay, you might be worried about what would happen if you end up not being able to.
We've written a handy article to cover this in detail. Click below.
Recommended: What happens if you win an auction but can't pay?
Auctions are serious business. When that hammer, if you're the highest bidder then you're legally-bound to the purchase.
This means you have to pay a deposit or reservation fee immediately. It then means completing on or by the deadline set out in the legal terms.
If you can't come up with the money, or decide not go ahead, you'll be in breach of the contract. We've written more about the consequences here:
Recommended: What happens if you win an auction but can't pay?
So the real key takeaway is this:
If you're buying at auction then do you due diligence before bidding. This includes having your solicitor review the legal pack, and having a survey is also recommended. Finally, make sure you have your financing in place before auction day.
By Matthew Cooper, Founder of Home Selling Expert