Property auction glossary

The jargon made simple: To help you understand the new terms used around auction sales this is a simple glossary of common terms with an explanation behind each one.

C

Capital Yield

When a property increases in value over time, it is known as capital growth. Capital growth also known as capital appreciation, is the price appreciation on an investment relative to the amount which was initially invested. For example, if a property was bought for £100,000 and the value increased to £150,000, the capital gains yield is 50%. Capital gains yield = (market price of a property – original purchase price) divided by original purchase price x 100

Cash Buyers

This is the term used to describe buyers who are funding the purchase from their own resources and not having to look to banks or other funding sources. It must be stressed they are not arriving at an auction with suitcases of cash - as under the Money Laundering Regulations, auctioneers cannot accept amounts of cash in excess of £9,000 and most will not accept any amount of cash as a deposit.

Catalogue

The catalogue gives a description of the property details and how to view each property and the general Conditions of Sale.

Certainty Of Sale

When buying a property at auction, so long as the highest bidder is at or above reserve, the 'deal is done'. There is no scope for gazumping or gazundering, it's yours, as exchange of contracts takes place on the fall of the gavel or in the case of 'sold prior' and 'sold post', the exchange takes place when both parties have signed the memorandum.

CHAPS

Clearing House Automated Payment System - the system allows for the payment of any amount to be transmitted electronically by one bank or branch to another on the same day. This is the most common method of transferring funds between lawyers on completion of a property purchase.

Clawback Conditions

Special conditions that may form part of a contract of sale. This is quite common with land being sold at auction. For example, a vendor may require the buyer to make additional payments if and when planning permission is obtained for development, or when such a planning permission is carried out. The payment is in addition to the agreed purchase price and is usually a % of the increase in the value of the land.

Cleared Funds

Funds available immediately. Cheques will be special cleared following the auction so you must ensure you have the funds immediately available to cover the deposit.

Commercial Lending

The term used for business bank loans. Commercial lending can be placed on the property purchased at auction, or it can be charged against a different asset by the borrower. This allows the borrower to ‘drawdown’ funds to purchase a property, but does not necessarily mean the loan is secured on the property bought.

Completion Date

The date by which the sale scheduled to be finalised. There is usually a defined time period from the auction to the completion date. The purchase price is paid in full by the buyer’s conveyancer and received by the seller’s conveyancer. Completion can take place at the same time as the exchange of contracts but is usually 4 weeks later. The seller must move out of the property on this date and release the keys to the buyer, who may move into the property. Penalties will be applied if the sale is completed late which can include losing your deposit.

Conditional Auction

In a conditional auction if the highest bidder is at or above reserve at the close of the auction, the buyer must place a non-refundable reservation fee to secure an option to exchange contracts on the property. The buyer is then given 28 days to exchange contracts and a further 28 days to complete the purchase. Failure to exchange contracts within the prescribed time frame may lead to the purchaser losing their deposit.

Contingency Sums

Usually 10-15% of the total budget to cover any unforeseen issues.

Contract

A signed agreement in writing for the sale of the land agreed between the Buyer and Seller containing all the terms agreed between them.

Conveyancing

The transfer of legal title of property from one person to another, or the granting of an encumbrance such as a mortgage.

The cost of the conveyancing work will vary according to the value of the property and the amount of work which is required.

Covenant

An agreement which is contained in the deeds where a person agrees either to do or not to do something in relation to the property.