Jargon Buster
Method of sale – Auction (Modern Method)
Buyers under the modern method of auction pay a non-refundable reservation fee but have longer to pay their full deposit and complete their purchase, leaving time to complete a mortgage application. The buyer also pays the auctioneer fee, rather than the seller.
Method of sale – Auction (Traditional Method)
Traditional method auctions are those usually held in person in an auction house. Sales become legally binding once the auctioneer’s hammer falls and buyers must pay their deposit and sign a contract immediately, alongside paying a fee to the auctioneer.
Once the deposit has been paid and exchange of contracts has taken place in the auction house, the buyer and seller have another 28 days to complete the sale. This means buyer funding must be completed before they attend the auction.
Method of sale – Formal tender
Formal tender is a complex sales process and is therefore very rarely used in the UK. It refers to properties that are marketed with a deadline for buyers to submit bids. Each buyer’s tender document should include a full contract and banker’s draft as a deposit. The seller will then select the best bid, accept the banker’s draft, and exchange contracts with the successful bidder immediately.
A date is appointed for completion of the sale, which the buyer must stick to or otherwise forfeit their deposit and incur further costs.
Method of sale – Informal tender
Informal tender is used when competition from buyers is strong, if a property requires intense modernisation, or if a specific closure date is required by the seller.
Properties have a guide price rather than an asking price. Buyers then submit offers by sealed bids up until a closing date, after which time the seller will open all sealed bids and select their chosen ‘best bid’.
Unlike formal tender, informal tender offers aren’t legally binding upon the seller selecting their best bid. Instead, the sale proceeds as ‘subject to contract’.
Method of sale – Private treaty
Private treaty sales see the agent prepare marketing details and advertise the property for sale alongside an asking price. Interested buyers then view the property and make an offer to buy it if they wish.
If an offer is acceptable to the seller, the sale proceeds on a ‘subject to contract’ basis until exchange of contracts. In a scenario where more than one buyer is interested in the property, the seller can request ‘best and final’ offers.
Most homes in the UK are sold via private treaty.
Mortgage offer
The binding offer made by a mortgage lender to a buyer to loan them money to buy a property. Mortgage offers usually come with conditions.
Mortgage retention
If a lender keeps a certain portion of a mortgage loan while work to a property is carried out by a buyer, this is known as ‘mortgage retention’.
Mortgagee
The term ‘mortgagee’ refers to the lender issuing the loan.
Mortgagor
‘Mortgagor’ is the term used to describe the person receiving a mortgage to buy a property.
Multiple Occupation
Properties with more than one tenant which aren’t used as a single home are known as Houses in Multiple Occupation (HMOs).
Tenants in HMOs share facilities but rent bedrooms on an individual basis.
Negative equity
When a property’s value or sale price is lower than the mortgage secured on it, the owner would be in ‘negative equity’. Someone in negative equity who sells their property, therefore, would still have an ongoing debt to their lender.
Negotiations
Negotiations are the discussions between buyers and sellers over the purchase price, completion dates, and fixtures and fittings.
These negotiations are usually carried out through third parties like estate agents and conveyancers.
