What happens if you can't complete

At a traditional auction, the fall of the hammer creates a binding contract. If you cannot pay the balance on the completion date, the consequences can be serious. This is a general overview: the exact position depends on the conditions in the legal pack for your lot.

What standard conditions allow

Many auctioneers use the RICS Common Auction Conditions. Under the 4th edition, if completion is missed, the seller can serve a notice to complete within ten business days. If the buyer still does not complete, the seller can:

• end the contract;
• keep the deposit and any interest on it;
• resell the property;
• claim damages from the buyer.

The last point matters. If the property resells for less, or the seller has extra costs, they may try to recover that loss from you as well as keeping your deposit.

Late completion

Even if you complete late, you may owe interest. Under the same conditions, unless the special conditions say otherwise, the rate is the higher of 6% and 4% above Barclays Bank base rate, charged from the agreed completion date until you complete. Special conditions can add other charges.

Conditional auctions

If you pull out of a conditional (Modern Method of Auction) purchase before exchange, you will usually lose your reservation fee. After exchange, you are in a binding contract in the same way as any other purchase.

How to reduce the risk

• Have your funds in place, or a firm lending plan, before you bid.
• Get a decision in principle and talk to a mortgage broker about timescales.
• Keep a backup, such as savings or bridging finance.
• Check the completion date in the special conditions. It may be shorter than usual.
• Have a solicitor review the legal pack before auction day.

If things go wrong

Tell your solicitor straight away and do not ignore any notice you receive. Your solicitor may be able to ask the seller for more time, though the seller does not have to agree and may ask for something in return. Check with a solicitor about your own position.