Property auction jargon – explained
We know that some of you may be new to property auctions or buying property in general and might be confused by some of the terms used, so we have put together an A—Z guide to help. Click on a letter below to search for the word or phrase that you're looking for.
Actual completion date
The date when completion takes place or is treated as taking place for the purposes of apportionment and calculating interest.
An amendment or addition to the conditions of sale. This may be a written notice as a supplement or in the catalogue, or announced at the auction itself.
Another word for mortgage. You may also find reference to ’principal sum’ and ’capital sum’, which also refer to the mortgage, as does the term ‘legal charge’.
Agency sales fee
A fixed amount or percentage of the value of your home paid to an auction house upon completion.
Agreement in principle
Provided by a mortgage lender which shows any prospective seller that you can actually get a mortgage to cover the purchase price.
Annual percentage rate
(APR) the total cost of a loan, including all costs, interest charges and arrangement fees shown as a percentage rate and easily comparable with mortgage interest rates.
An estimate of the value of a property as determined by an independent agent familiar with local property values. Most homeowners will normally arrange 2—3 market appraisals of their home prior to instructing a selling agent.
An alternative for a builder/developer when a NHBC guarantee is not available for a new home.
Where a special interest rate is to be used, an additional fee is also charged for the arrangement of the loan.
A term used to describe the transfer of the ownership of either a lease or an insurance policy.
A public sale in which property or items of merchandise are sold to the highest bidder.
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 bid prices.
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. ^ Click here to return to the top of the page
A guaranteed payment of funds.
The offer to buy property at a specific price.
The areas around a property, which identify the beginning/end of the land and its ownership.
Where the prospective buyer requires funds to complete the purchase of a property before selling his current property, the short-term loan required is known as a bridge loan.
A fee charged by a broker or other intermediary for advising/negotiating a loan.
The issuers of Insurance for the building
A policy which pays the cost of rebuilding or repairing your house if it is damaged or destroyed.
This means a full survey on the condition of your property (in other words a check). It is useful when buying a property which is older, large or of a non-standard construction or a property which has been modified or extended.
A person looking for a property to purchase or who is currently purchasing a property. ^ Click here to return to the top of the page
There is most often a chain in house buying and selling, for example a first time buyer who starts the chain, the seller of that property is moving to another property and so the chain continues until someone ends.
A charge against a property means that there is a debt. Usually the main charge will be that of the mortgage lender. However individuals can place charges against a property following a county court judgement. Before buying, a conveyancer should check against the land registry’s charges register for all charges, as the new owner will be liable if they are not discharged prior to sale.
On completion of the sale of the lot there is usually a defined time period from the auction to the completion date in which the sale must be finalised. Penalties will be applied if the sale is completed late which can include losing your deposit.
Conditions of sale
Conditions of sale are list all rights and obligations due to the buyer and the seller, and are usually determined by law or by industry regulations or both. Each auction lot is sold subject to these conditions of sale.
Insurance to cover the loss or damage to your possessions in the home. Costs vary according to where you live and the total value of your belongings.
A contract is a legally binding agreement between buyers and sellers for the completion of the sale of a property.
A conveyancer is a qualified advisor of the legal requirements of buying or selling a property.
This is the process of legal work involved with buying and selling property. You could use a conveyancer who specialises in the legal aspects of buying and selling property or a solicitor. If using a solicitor, make sure that they are used to dealing with conveyancing work.
Rules and conditions affecting the property, which are listed in the title deeds or lease. ^ Click here to return to the top of the page
The legal papers which state ownership of the property. If you have a mortgage the lender usually holds the deeds. This ensures that if you default on your payments, they can take back ownership of the property.
A sum of money paid upon contracts being exchanged. Usually 5%—10% of the contract purchase price. If selling another property at the same time, it might be possible to pass onto your vendor the contract deposit that your purchaser pays to you. Check this with your solicitor.
A property, which is, free standing and not attached to any property to the left or right of the building.
A development is a general term used to describe either modernised and renovated existing property or a newly built property.
Dilapidations are any decay, damage, or disrepair in a property.
This is a term used by solicitors for their charges in carrying out the legal work for buying and selling property (conveyancing).
Income that is left after paying your mortgage, life assurances/pensions and other living expenses.
The writing up of contracts by the vendor’s solicitor, which is 'draft' until all parties have checked for any errors. ^ Click here to return to the top of the page
Legal term for the right to use part of someone else's lands e.g. a shared driveway in other words a 'right of way'.
Endowment linked mortgage
The borrower pays interest only to the mortgage lender. The endowment is a form of life assurance policy with a built-in investment element that is designed to pay off the principal sum when it matures. It should be noted, however, that endowments are not guaranteed to be worth enough to pay off the principal sum on maturity.
The net value of a mortgaged property after the deduction of charges/mortgages.
If you are the successful bidder at the auction sale, 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. When contracts have been exchanged, the transaction between the buyer and the seller is now legally binding. Completion usually takes place on an agreed date for example two weeks later. ^ Click here to return to the top of the page
Fixtures and fittings
These are items within the property, for example light switches, radiators, towel rails etc. Make sure you are very clear about what will be left at the property. Your solicitor/conveyancer will be given a list of fixtures/fittings, which the vendor will have filled out.
The interest rate is fixed at a certain level for a specific number of years. After that interest is charged at the variable rate unless the lender agrees to another period of fixed interest at the rate that is appropriate at that time.
A mortgage that allows for agreed increases or decreases in the repayments to be made.
Technical term describing the ownership of the property, meaning that it belongs to the owner without the limitation of time.
First time buyer. ^ Click here to return to the top of the page
This is the term used to describe a situation where the seller of a property accepts a higher purchase offer, having already accepted a lower offer from another potential buyer. In other words the seller changes his allegiance to a second buyer who offers more money. A buyer with ready cash will be in a position to gazump someone who has to raise money through a mortgage. This can happen, as the seller is not legally committed to the sale until contracts have exchanged.
Lowering the amount of an offer to a vendor, usually just before exchange of contracts.
General conditions of sale
General conditions covering all properties at the auction house sale. Normally found at the back of the auction catalogue.
This is usually charged on properties such as flats usually leasehold flats. The landlord or leaseholder makes this charge.
A guarantor agrees to pay the borrower's debt if the borrower defaults on the loan.
Most properties have guide prices published in the auction catalogue. Generally speaking Guide Prices are provided as an indication of each seller's minimum expectation. They are not necessarily figures which a property will sell for and may change at any time prior to the auction. Virtually every property will be offered subject to a Reserve (a figure below which the Auctioneer cannot sell the property during the auction) which we expect will be set within the Guide Range or no more than 10% above a single figure Guide. ALWAY CLARIFY AND CONFIRM THIS WITH THE AUCTIONEER PRIOR TO BIDDING ON A PROPERTY.
The guide prices of the properties that are listed in our database may be subject to change, so we advise that you contact the auctioneer directly to confirm the guide price prior to the auction day. Remember, 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. ^ Click here to return to the top of the page
HM land registry
A government owned department, which registers all details of any land transactions and issues to do with ownership in England and Wales. A professional surveyor will carry this out. It is a report telling you the details regarding the condition of a property.
Homebuyer's survey and valuation (house/flat buyer's report)
This type of survey does include a valuation of the property. This survey is designed to provide a general assessment of the condition of the building and highlights any significant problems that may affect the property value. It is particularly useful for properties of conventional design, built within the last 150 years. ^ Click here to return to the top of the page
Individual savings account (ISA) mortgage
An interest-only mortgage linked to an individual savings account (ISA) fund. It is designed to pay off the loan at the end of the period.
Effectively an auction by envelope where a property is marketed for a set time then, at a specified date bids are required from all interested parties. The sellers can then pick the best bid (knowing that they have the best price that the market is prepared to pay) and enter into a contract of sale. There is no formal reserve and no obligation to sell, so if the sellers are not happy with the highest bid, they can simply decide to withdraw the property.
Interest charges (mortgage)
Interest charges are the percentage of the amount borrowed that the Lender then charges to the borrower.
Interest only mortgage
With this type of mortgage interest payments only are made to the lender. The loan itself is paid by an investment plan into which regular payments are made. This will be designed to pay out when the mortgage is due to end. Professional advice should be sought if considering this method of repayment.
In the room
A bid from someone in the room (not by phone). ^ Click here to return to the top of the page
The property's head lessor or freeholder is the landlord.
A contract for the occupation of a property.
Denotes that ownership of a property is by way of a lease. 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 vendor's solicitors prepares 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.
Leaseholder – the owner of a leasehold property.
Landlord – the person who grants a lease and enforces its terms.
This is where a property is linked to neighbours via the garage.
A building protected from demolition or any alteration (without local government permission) due to its being of special architectural or historic interest value.
The ratio that expresses the size of loan that can be borrowed as a percentage of the valuer’s valuation of the property. For example, most lenders will grant up to 95% of their valuer’s estimate of its value – the remaining 5% deposit to be found by the borrower. Some lenders will advance 100% of loan to value, but usually charge a higher interest rate.
Local authority search
A search by the buyer's solicitor for any outstanding enforcement or future development issues affecting a property or its immediate vicinity.
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. ^ Click here to return to the top of the page
A maisonette is a portion of a house that covers more than one floor and is accessible by private entrance.
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.
A building which was originally used for keeping horses but is now usually converted into dwellings. They are normally situated in a courtyard or along a short narrow lane.
A building, which provides both commercial and residential accommodation.
A sum of money lent by a bank or building society and repaid over a fixed (and usually long) period of time where the loan security is the property.
The lender of the mortgage (usually a bank or building society) is known as a mortgagee.
The mortgage deed legally sets out the terms of the mortgage and the lender's interest in the property.
The formal offer of mortgage defines the amount that is to be paid together with all other terms of the loan, including the term and initial interest rate etc.
The standard variable interest rate all mortgage lenders use as the basis for their discounted mortgage rates. This tends to vary according to the Bank of England base rate.
The time over which the mortgage is to be repaid in regular payments, or the time at the end of which the mortgage is repaid in its entirety.
When several agents' market the property and the one that sells it receives the commission. ^ Click here to return to the top of the page
If the outstanding value of the mortgage exceeds the market value of the property, the borrower is said to have negative equity.
Any part of a premises not used for residential purposes ^ Click here to return to the top of the page
The offer is the buyer's proposed sum to pay for a property.
An independent organisation that investigates professionals such as estate agents, or solicitors when complaints are made by their customers.
Open market value
The open market value is the expected price of a property in the marketplace. ^ Click here to return to the top of the page
A payment break is a window in flexible mortgage repayments that allows borrowers to suspend payments for a fixed period of time.
Penalty charges are incurred by borrowers when they either transfer mortgages to different lenders or fully repay the loan before the end of the term.
Peppercorn ground rent
A basic (and usually annual) rent the freeholder charges to the leaseholder.
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.
The sale of a property at a price agreed by the seller and the buyer or their agents.
There is often a chain in house buying and selling process such as the first time buyer who is starting the chain, the seller of that property is moving to another property and so the chain continues until someone ends it, perhaps with an empty property where someone has died.
These are legal papers, which state the owner of the property. If you have a mortgage, the lender will often hold the deeds.
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 to on the form and the auctioneers will bid on behalf of the buyer, up to, but not beyond, the stated price.
Public liability insurance
Public liability insurance covers injury or death on or in the vicinity of a property.
Someone who is looking for a home to purchase or who is in the process of purchasing a home. ^ Click here to return to the top of the page
Re-mortgaging occurs when a property is used to finance a second mortgage if the property has risen in value since the initial mortgage was agreed. Otherwise, this describes the transfer of an existing mortgage to a new lender.
Distinct from an interest-only mortgage, this is a mortgage requiring monthly payments that cover both interest and principal so that the amount of mortgage gradually reduces until redemption.
The lender's assumption of the ownership of a property once the borrower is deemed unable to pay the outstanding mortgage.
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.
Right of way
This is an area of land such as a path or driveway, which the general public may cross whenever they wish. ^ Click here to return to the top of the page
Commonly for self-employed people with a large deposit but limited earnings track record. (Inaccurately) known as a "non-status" mortgage. Some lenders will accept the applicant’s assessment of their net profits.
A building or block that is either detached or otherwise capable of being redeveloped as if it were.
A person(s) selling a property.
A property, which is attached to another one on one side only.
A charge for maintenance and insurance of communal areas, which is normally only applicable to flats.
This means an agreement to sell your property through one agent only, usually for a fixed period e.g. 12 weeks.
Special conditions of sale
These 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.
The duty paid to the government for purchase of your property.
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.
A studio flat has one bathroom/shower room and an open-plan living area that incorporates kitchen and bedroom facilities.
Subject to contract
This is a very important phrase to use when buying and selling a property. It means an agreement, which has been made, but that the contracts have not yet been exchanged.
This is a check on a property's condition. A survey is useful when buying a home, which is old or of non-standard construction, extended or modified etc. There are three types of survey, one a homebuyer, valuation survey and a full structural survey.
A professional person who can act on your behalf to assess the condition of a property. Surveyors should belong to either the RICS or ISVA. ^ Click here to return to the top of the page
A telephone bid, made by a member of staff from the 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.
Contracts to occupy or lease the property subject to rent. A lot may be sold subject to existing tenancy agreements.
Tender (or formal tender)
A hybrid, sitting between an informal tender and an auction. In a formal tender the property is marketed and bids are submitted in the same fashion as an informal tender. The difference between the two methods is that in a formal tender bids have to be accompanied by a deposit for the property and contracts are exchanged immediately on acceptance of the highest/best bid. With this method purchasers tend to have finance in place and surveys undertaken before bidding.
The tenure is the length of the lease by which a property is held.
A terraced house forms part of a connected row of houses.
These are legal documents, which prove the ownership of the property and normally set out details of anything, which may affect the property e.g., rights of way etc.
This is a government owned department, which records all details of any land transactions and issues to do with ownership in England and Wales.
Transfer deeds are documents from the land registry that transfer legal ownership to buyer from seller. ^ Click here to return to the top of the page
A property is 'under offer' when a seller has accepted a buyer's offer but has yet to exchange contracts.
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. ^ Click here to return to the top of the page
The previous occupants must vacate the property before you move in. This includes any tenants.
An estimated price that your property is worth.
Variable base rate
A basic rate of interest (charged on a mortgage) that may rise or fall according to market conditions. Therefore monthly payments can rise or fall accordingly.
A person(s) who is selling a property. ^ Click here to return to the top of the page
The income from a property calculated as a percentage of its value. ^ Click here to return to the top of the page