Traditional or Conditional? Two types of online property auctions
When it comes to online property auctions, did you know that there are two different auction methods? Properties can sell either through a traditional auction or a conditional auction. But what does it mean if the auction is traditional or conditional? We’ll share with you the differences and similarities between the two.
Both tradition and conditional auctions work with the same auction logic. The highest bid wins the property, providing it meets the reserve price. What sets the two auction styles apart is what happens once the gavel falls - or in our case when the timer reaches zero.
Traditional auctions will be more familiar to most as they are the style in which ballroom auctions are conducted. If you’ve watched ‘Homes Under the Hammer’ then you’ve got a pretty good idea of how it all works. With a traditional online auction, exchange occurs online immediately at the end of the specified auction period. This means that the buyer and seller have now entered into a binding contract. The winning buyer now has 28 days to complete the sale. Buyers who use this method are likely to be cash buyers or buyers who have pre-arranged financing. As there is a hard deadline for completion, buyers have a tight timescale to get a mortgage arranged.
Conditional online auctions (also known as the modern method) work slightly different as exchange does not occur immediately at the end of the specified auction period. What happens instead is that a reservation agreement between the buyer and the seller. This gives the winning buyer 28 days to exchange upon the property. Buyers will have breathing room to get their finances in order and organise a mortgage for the purchase.
There is no right or wrong method when it comes to auctions as it all boils down to individual circumstances. Both the tradition and conditional auctions attract different buyer groups and also appeal to different sellers. Of course for buyers, both methods share the benefit of being able to avoid being gazumped*. Depending on how you intend to finance the purchase, one method will be more suitable for you than the other.
Here at Bamboo Auctions we offer both methods as we aim to increase the awareness of auctions to the wider public. With only ~2% of properties sold using auctions in the UK, there is tremendous scope for growth. By giving people more options through different auction styles, recognition and accessibility will increase amongst buyers and sellers.
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*For those not familiar with the term, gazumping is where the buyer makes an offer on a property that the seller accepts but later loses out on the purchase as the seller accepts a better offer from another buyer.