Key topics: Traditional auction and deposits
Award
no award
What happened?
The complainant said:
- they placed the winning bid for the property at an auction
- the seller withdrew before completion
- they requested their £21,600 deposit be refunded
- they accept they are responsible for paying the administration fee to the agent
The agent (auctioneer) responded, saying:
- the auction terms confirmed that completion must take place within 28 days
- the complainant was unable to complete the purchase due to funding issues
- the seller allowed extra time, but the funding was still not sorted
- due to non-completion, the complainant forfeited their deposit and fees, in line with the memorandum of sale and auction terms and conditions
What evidence was provided?
Auction terms and conditions, common auction conditions, memorandum of sale, emails, bank statement
What was decided and why?
- The property was being sold at auction on condition that completion take place within 56 days. The seller had agreed to give the buyer (complainant) a 28-day extension to sort out their funding.
- The complainant knew the sale was conditional. They had to carry out their due diligence and confirm a legitimate source of funds for the purchase.
- No evidence was provided to show that the complainant:
- was able to prove their funding source
- was fully prepared to proceed with the purchase and complete
- The complainant was responsible for making sure they were in a position to complete the transaction. As completion did not take place before the extended deadline had passed, and in line with the auction terms and conditions, the deposit was not refundable.
- While the deposit was held by the agent as stakeholder, it was the seller’s money and the seller’s decision whether to refund it or not, even if the terms allowed the seller to retain it.
- As the complaint is about the deposit and this is a dispute between the seller and the buyer, Property Redress is unable to decide on contract disputes between sellers and buyers.
- What we can investigate is the service provided by the agent who acted reasonably by:
- completing the auction process
- communicating properly with the parties
- pro-actively trying to move the process forward, which ultimately stalled due to the complainant’s funding situation
- With no evidence showing the agent provided poor service, no award could be made.
How can you avoid this happening in future?
- Traditional auctions allow very little time to organise funding so make sure you are fully prepared to comply with the auction conditions
- All prospective buyers should make they read contracts thoroughly and understand their responsibilities and any consequences of buying a property at auction
- Members should:
- make sure contracts are clear on responsibilities and contain fair and reasonable timescales
- keep prospective buyers updated and explain the consequence of not meeting their contractual responsibilities
- keep communicating with all parties
Our ‘Buying and selling at auction’ guide offers facts and help with understanding the types of auctions available, what to consider before deciding to buy or sell at auction and the pros and cons of each.
