17 / 100 SEO Score

Is Selling your Property by Auction a Good Idea?

Auctions can be a particularly good idea if you are looking for a quick sale. This is because the process is far less drawn out when compared with using an estate agent.

As the seller, you have the certainty that once the hammer has gone down, the buyer can not back out of a sale.

If you have a suitable property to sell in an auction and provided that you are well aware of the pitfalls of selling at auction, it can be a good idea to sell your property in an auction.

Property auctions can be a minefield for the inexperienced, we have seen unethical sharp practices. To avoid becoming the next victim of auctions, why not get in touch with us to see how we can help?

What are pitfalls for selling at auction?

Naturally, an auctioneer won’t tell you about pitfalls of selling your property into an auction. These include:

  • There is no guarantee of selling your property at auction
  • Not all types of properties are suitable for auction. Nice/semi-nice properties require little to no work will not do well in the auction
  • You have upfront costs to pay.  These include paying for an entry fee, legal fees and searches.  These can run into thousands of pounds.
  • You can’t sell your property into an auction straight away.  Best case scenario is around 3-4 months wait. Let’s say that we are in March and the next auction is in May.  The auctioneer will start advertising your property if you pay their upfront costs in April for the May auction which will complete in June if you sell.
  • Who gets paid first? Believe it or not it is the auctioneer!  This is because the auctioneer takes their fee from the buyer’s deposit, no exceptions.

If you can’t wait 3-4 months to take a gamble with a property auction, we can offer you cash for your property and complete within a couple of weeks. All you have to do is make an enquiry with us.

What type of property is suitable for auction?

If the property you are selling is particularly suitable for auction, such as a property in need of refurbishment or a property that is normally rented out, then the potential high demand for the property, can create a very competitive bidding war that can allow for a great chance of the property selling for a very high price, that can be higher compared with it being sold through an estate agent.

How do you sell a house at auction?

There are various steps to selling a property at an auction. The first one is to approach an auction house for an appraisal, where they will assess the value of your property and whether it is suitable for auction.

After this, you will then discuss fees and commissions with the auction house, which is then followed by an inspection of your property, where elements such structural condition and defects will be checked for, as well measurements being taken.

The property will then be promoted by the auction house, to draw sufficient interest. This will be done through various channels which include online and through auction brochures. Auction houses are able to target specific likely buyers for your property type, within their promotion strategy.

Once the property has been promoted, the auction itself will take place where the property will hopefully be sold. The buyers pay 10% at the auction and have a month to pay the remaining 90%.

How much does it cost to sell your property at auction?

There are certainly costs for the seller involved in selling a house at auction. These include entry fee, commissions and legal costs.

The entry fee covers the admin involved for the auctioneer, which includes the promotion of the property and this fee is usually still payable even if the property fails to sell at the auction. The entry fee can be around £500 or more.

The commissions are only payable if the property is sold. The commission rate is usually between 2% and 3% and can vary depending on the region, property type and auction house.

There are also legal costs to pay which can also expect to pay if the property doesn’t sell at the auction. You will need to obtain a Solicitor to create a legal pack which you can expect to cost around £500 to £1,000, depending on the Solicitor. Your Solicitor will charge you for their time if they attend the auction, however, it is not imperative for them to attend.

How quickly can my property be sold at auction?

Properties are certainly a good option to consider if you’re looking for a quick sale of a property. Selling a property through auction can usually take between 6 to 10 weeks, for the full process to complete.

One particular thing to consider is to enter the property for auction with a good amount of time for the property to be sufficiently promoted, to maximise the chance of a successful sale. Because of this, it is recommended to enter the property at least 4 weeks before the auction date. The sale completes 1 month after the auction date.

If you are looking for a quick sale of your property without the hassle of going to auction, why not make an enquiry with us to see how we can help you.

 

What happens if a property doesn’t sell at auction?

If a property does not sell at auction it will be withdrawn from sale. However, if a property has not sold at an auction, but a bid has been made below the reserve price, then the seller can be given the option to consider this by the auctioneer.

The fact that the property is withdrawn from sale if no bid has met the reserve price, gives the seller peace of mind that they will not be obligated to sell the property for less than the minimum they are prepared to accept for it.

If a property does not sell at an auction then the seller can still re-enter the property for future auctions.  However they would still be required to pay entry fees for all auctions they enter whether the property sells or not.

It is worth taking into account, that the chances of successfully selling at an auction first time are generally 75% to 80%, so therefore even though there is a good chance your property will sell successfully, there is certainly a chance it may not. This is one of many pitfalls of selling at auction.

Can you sell a property with tenants in?

Yes, you can. The tenant is allowed to stay at the property after the property has been sold to a new owner if the terms of the tenancy that you have agreed with the tenant permit this.

Selling a property that already has a tenant can be very attractive to any potential buyer because they would not need to find a new tenant themselves and can start earning a rental income straight away.

 

What is the reserve price?

A reserve price is the minimum price that is agreed between the seller and auctioneer, that bidding has to reach before a property can be sold at auction.

Bidders are not made aware of this reserve price, because it is confidential between the seller and auctioneer.  The seller is not allowed to increase the reserve price once it has been set, however, they can lower it.

What is the guide price?

A guide price is the perceived price of what a property is worth, which will be based on various factors such as property condition, location, size and number of bedrooms etc.

This guide price is used to help the seller and auctioneer determine a reserve price, which must be no more than 10% above the guide price.

At an auction, the buyer will pay what they are prepared to, based on their personal perceived value of the property. This can be significantly more than the guide price, particularly if the bidding at an auction has been very competitive and pushed the eventual buyer to the limit of what they are prepared to pay. This is therefore beneficial for the seller.

 

Do auction houses sell for less?

No, not necessarily, there is a good chance that a property can sell for more at an auction compared to being sold through an estate agent.

The tactics for selling a property at auction, differ from selling a property through an estate agent. An estate agent will typically initially set a price higher than the market value of the property. However, they very rarely sell the property at the initial asking price, as most buyers will not put in an offer at that level. The estate agent will then continually lower the price until a sale is achieved.

Auctions work the opposite way around. The property bidding will start with the guide price of the property, which will be expected to be lower than what the initial asking price from an estate agent would be. This guide price is an appealing price to generate interest, to get the bidding started. Once the bidding is started, this can push the eventual sale price to be higher than what the property sells for through an estate agent.

How quickly will the sale proceed after the auction?

The sale completes very quickly after the auction as long as the property has been sold. The sale will complete up to 28 days after the auction and in some cases be as quick as 14 days.

The buyer will have up to 28 days to pay the full amount of the property, after paying an initial 10% deposit at the auction. Therefore if the seller is also the occupant of the property, they will then need to make sure they have made the necessary arrangements to have vacated the property in time.

Can an auction sale fall through?

Once the hammer has fallen for the winning bid at auction, the sale is legally binding and the buyer is committed to completing the sale. This differs from selling through an estate agent, where the buyer can still pull out after their offer has been accepted, right up until when the contracts are finalised.

This gives the seller far more certainty the sale will complete successfully when selling through an auction.

If the buyer was to pull out of completing the sale after bidding successfully at auction, they will always have to forfeit the 10% deposit as well as any other potential costs.

It is likely they will have to face legal implications imposed from the auctioneer and the seller will likely be entitled to impose legal implications on the buyer. However it is very rare for buyers at auctions to pull out.

If you need a quick sale of your property then we can help.

What happens at exchange and completion?

At property auctions, the exchange takes place once the winning bid has been accepted and the relevant documents are signed and the 10% deposit is made.

The completion is the agreed date that the ownership passes from the seller to the buyer and the buyer receives the keys and is then entitled to physically move into the property. The buyer will have needed to have paid the full amount by this date.

 

Can I accept a bid before property auction?

Yes, you can. If you are selling a property through auction, then auction houses are legally obligated to put forward any offers that are made to you, including any offers that may be potentially made before the auction.

If you accept the offer then the property will be withdrawn from the auction. All of the same rules and terms and conditions of the auction will apply, which will include that once the sale is agreed then the buyer is legally obligated to complete the sale.

As a seller, you may find it particularly beneficial to accept a pre-auction offer if the offer is a particularly attractive one that is suitably above the reserve price. The seller will also enjoy the benefit of a certain quick sale.

Do I have to accept the highest bid?

You do not have to accept the highest bid if no bids have met the reserve price by the end of the auction.

The auction house is still obligated to make you aware of the highest bid if the reserve price has not been met, so you still have the option to accept it if you so choose to.

What percentage does an auction house take?

If the property successfully sells at auction then the auction house will receive a commission of around 2% to 3% (including VAT) of the total sale price.

Are auction deposits refundable?

No, they are not. Once the deposit is paid, the buyer is committed to completing the sale. Therefore if the buyer was to back out of completing the sale, they will not get the deposit back. This gives far more certainty of completion compared with using an estate agent.

Can the reserve price be changed before an auction?

Yes it can. The reserve price cannot be changed without the permission of the seller. If you are selling a property at auction, then the level of interest that the property is generating could prompt you to want to change the reserve price. You would need to re-sign the reserve document, if you are the seller and change the reserve price prior to the auction.

What happens if the reserve price is not met?

If the reserve price is not met, then the property will be withdrawn from the auction as unsold. This is because the reserve price is the minimum amount that has to be bid for, for the property to be sold. This means the seller will not sell the property for less than what they are prepared to.
Unconditional Auction (sometimes called a traditional auction) is where a collection of properties are offered for sale in an auction room with contracts being exchanged to the highest bidder on the fall of the gavel. The auctions team bring together all entries into a catalogue, actively promote the properties, host open house viewings where possible, get legal packs created and made available, and cultivate interest from as many buyers as possible. Competitive bidding in the room will usually see the property sell at a price above the seller’s reserve.

Should I sell at auction?

It is certainly worth considering selling a property at auction if you are looking for a quick sale and want the certainty that the sale will complete once the winning bid has been accepted.

As a seller, you also have the satisfaction of knowing the agreed price will not change once the sale is agreed, due to any further events such as survey results.

Property auctions can certainly be a preferable option, for a seller looking for a quicker and simpler way of selling a property. This can particularly be the case, for certain properties that lend themselves to being suitable for auction, such as inherited properties where the seller will not want to continue incurring the costs from maintaining the property, whilst waiting to finally sell it.

 

How long after the auction do I have to vacate?

After selling a property at auction, you will need to have vacated by the sale completed date, which will be 1 month after the auction. Therefore you will need to make sure, you make the necessary arrangements of where you’ll be after the completion date.

 

How do online property auctions work?

Online property auctions work by prospective buyers bidding online within a set allocated time, for all bids to be made by. This allocated period of time is usually 30 days, and the highest bid by the end of this time wins the property sale. The bidders will be able to see a timer, showing the remaining time they have to have bid by and are able to bid 24/7.

This is beneficial for the seller because the property being auctioned online, allows for more exposure of their property, to allow for potentially more and higher bids. The period of 30 days, also gives the opportunity for competition to increase. The seller still has the same level of security as traditional auctions, because the successful bidder is still committed to completing the sale. 

What is an auction legal pack?

If you are selling a property at auction you will be required to provide a legal pack, which will be created by your solicitors. This legal pack contains various documentation relating to the property, such as property information form, fixtures and fittings form and land registry etc. It must be made available to all prospective buyers, to provide them with transparency.

 

 

Do I need a solicitor?

Yes, you will require a solicitor, if you are selling a property at auction. They will deal with all of the conveyancing and they will prepare the required legal pack.

First of all the reserve price cannot be any higher than 10% of the guide price. When you are selling a property at auction, you want to set a reserve price that you are still prepared to sell at, if a higher price hasn’t been reached.

At the same time, you do not want to set a reserve price that is so high that it can negatively affect the auction. The bidders are made aware once the reserve price has been met (but not of the reserve price amount) and certain bidders may not step in until this point, particularly if they will only bid, once they know the property is definitely going to be sold. Therefore if it is taking too long for the reserve price to be met, it can stifle the competitive atmosphere of the auction, which is required to help to drive the bidding up.

As a seller, you should also take into account the level of interest in your property (if you have carried out the research to ascertain this), when setting a reserve price. For example, if you are aware that there is a lot of interest and demand for your type of property in your geographical location, then this may give you the confidence to set a higher reserve price.

 

How to set a reserve price?

First of all the reserve price cannot be any higher than 10% of the guide price. When you are selling a property at auction, you want to set a reserve price that you are still prepared to sell at, if a higher price hasn’t been reached.

At the same time, you do not want to set a reserve price that is so high that it can negatively affect the auction. The bidders are made aware once the reserve price has been met (but not of the reserve price amount) and certain bidders may not step in until this point, particularly if they will only bid, once they know the property is definitely going to be sold. Therefore if it is taking too long for the reserve price to be met, it can stifle the competitive atmosphere of the auction, which is required to help to drive the bidding up.

As a seller, you should also take into account the level of interest in your property (if you have carried out the research to ascertain this), when setting a reserve price. For example, if you are aware that there is a lot of interest and demand for your type of property in your geographical location, then this may give you the confidence to set a higher reserve price.

How are auction properties marketed?

Auction houses will promote your property before the auction to generate interest. They will advertise your property in their own brochure and website as well as external property websites.

They may target specific potential buyers from their own databases, who are likely to be interested in the type of property you are selling, by contacting them directly through email or any other contact method. Social media may also be used as well.

Your property can be marketed nationally, regionally or locally depending on the auction house you use. If you use a good auction house, then you would expect a very broad and extensive marketing strategy to sell your property.

Can the sale price change after the auction?

No. Once the winning bid has been made the successful bidder is committed to completing the sale at the price they bid for. This is not open for renegotiation under any circumstance. This gives the seller far more security. The buyer, therefore, should carry out all diligence before bidding, including carrying out any surveys if they require.

What is an auction valuation?

If you are thinking of selling a property at auction, then the first step is to arrange for an auction house to send someone to carry out a valuation of the property. This is to determine if it is suitable for auction and to help establish a suitable guide price.

During a valuation, information such as measurements and structural condition will be obtained. This information will also be used to assist with the promotion of the property, prior to the auction.

What to do before Auction?

Before the auction you should have a property valuation, to see if your property is suitable for auction and to help determine a guide price. You will also be required to have a legal pack prepared by a solicitor.

You should expect the auction house you are using to market your property for you, however, you can still additionally market the property yourself to maximise interest. This can be done by use of social media and using any websites not used by the auction house.

You can make your property available for viewings, to any interested buyers. If you are doing this, then it is a good idea to make your property as attractive and clean as possible.

Can I choose the price I am willing to sell at?

Yes, you can. This is called the reserve price, which you agree with the auction house, prior to the auction. If the bidding does not meet this reserve price during the auction, then your property is not sold. Therefore you will have the comfort of knowing that your property will not sell for less than what you prepared to.

Are there any costs to pay if a property fails to sell at auction?

If your property fails to sell at auction, you will still need to have paid the entry fees and for the legal pack, however, there will be no commissions for you to pay. The auction house may allow you to re-enter the property for future auctions, without you having to re-pay the entry fee. It would, therefore, be a good idea to check with any prospective auction houses, to see if they do this before using the.

Is my property suitable for auction?

If your property is a certain type, for instance if there is potential for development or need of refurbishment, then selling it at an auction can certainly be the best option. In fact there is a very good chance your property can sell at a higher price at an auction, compared with selling it through an estate agent.

Generally speaking, any property can be sold at an auction. However certain property types, lend themselves to being more likely to be successfully sold at auctions, compared with others. Below we go into a bit more detail about these property types:

  • Properties in need of refurbishment, including ones with structural issues can be in very high demand for property developers. This high demand amongst developers can create some very competitive bidding amongst them, to potentially cause the property to sell at a high price.
  • Properties that are rented out to tenants can do very well at auctions. Auctions are usually well turned out by buy-to-let investors and rental properties with a good rental yield can do particularly well.

Selling tenanted properties is particularly convenient at auctions                if the tenants are currently still living in the property. This is                          because the existing tenants just carry on paying rent to the buyer              after the exchange has taken place

  • Mixed-use properties, such as ones that combine both a commercial and residential space are often well-sought after at auctions. The versatility of these properties can attract interest from various different types of bidders, such as buy to let investors, business owners and owner/occupiers.
  • Unique properties such as barn conversions or windmills can be difficult to sell in traditional markets. Therefore these property types can do better at auctions. The uniqueness of these properties can make them difficult to value and an auction can allow for the property to be sold for the perceived value by its target market.
  • If a property is unmortgageable, then the auction will typically be the best option to sell the property. Properties can be unmortgageable for various reasons, such as short lease, no kitchen or bathroom, severe damp or the value being below a certain threshold.
  • Developers and investors who are able to fix the issue which is making the property unmortgageable, to then later sell the property on for a profit, would be interested in buying these types of property at auction.
  • Properties with development potential, such as ones that would benefit from modernisation, or properties with room for an extension, also do very well at auctions. These properties are very appealing to developers who can increase their value, to sell on at a profit.
  • Auctions are also very good for selling land. Because selling land is a niche area, certain auctioneers are able to specifically market to prospective buyers within this niche. This helps with a quick sale, as well as making selling the land more competitive, to again make it likely the land will sell for a high price.
  • Probate and inherited properties are very suitable for auctions. These types of properties can usually require refurbishment or have development potential, which are attractive to investors.

Also if you are trying to sell one of these types of properties, you may typically be looking to achieve a quick sale which auctions certainly allow for, compared with selling through an estate agent, where the process is likely to be very drawn out.

.

How to pick an auctioneer to sell your property?

To maximise your chances of successfully selling a property at an auction for the best price you can get for it, picking a suitable auctioneer is critical.

There are certain factors you should consider when picking an auctioneer and some of these will depend on property type and your target buyer. Below we delve into these factors:-

  • A good advantage of using auctions is that auction houses can specialise in certain types of properties. For example, an auction house can specialise in commercial properties and another auction house may specialise in land sales.

This means they will have a good knowledge in their specialist                    area, such as knowing current market trends to allow for an                        accurate valuation, as well as knowing how to market to the likely              buyers of the property, you are trying to sell.

  • Local vs National auction houses is a factor worth considering. Local auction houses will have good local knowledge, which can be particularly useful when selling an unusual property.

This local knowledge will help your property to be sold for a good              price. For example, if the auctioneer is aware your property is in                  an up and coming area, this can be marketed to increase the                      price.

National auction houses, however, can advertise nationally or                      regionally and often hold the auctions at larger venues. This                        can allow for a much bigger pool of buyers bidding for your                          property, which will likely drive up the competition to increase the              sale price.

Therefore when deciding whether to use a national or local                          auction house, you will need to weigh up these factors to                              determine what works best for you.

  • The reputation and knowledge of the auction house is very important and must be considered. The knowledge of any prospective auction house can be gauged by viewing the content within their website, asking to look at their brochures or by speaking to them (by telephone or web chat etc) and asking them all questions that you have.

What is the difference between auction and selling via an estate agent?

There are a number of differences between selling a house at auction or selling via estate agents.  These include:

  • Auctioning a property gives you more certainty that a sale will complete. This is because property auctions have a fixed timescale for completion of the sale. The buyer pays a 10% deposit on the auction day if your property sells. The balance is payable within 28 days after.
  • When you use an estate agent to sell your property, sadly there are no timescales, several pitfalls and no certainty.  This is because 1 in 3 sales collapse in the UK property market according to Rightmove. The best-case scenario is that it will take several months for the sale to complete.

Worst-case scenarios include, the surveyor reducing the                          valuation of your property which opens up the possibility that                  the buyer will renegotiate the price. It will take several months                if there are chains involved and that’s if all chains go through.

Their solicitors may be slower to act, therefore adding                               frustration and delay to your sale.

  • The way auctions and estate agents approach valuing a property differs.

An estate agent will usually suggest a higher price and seek                    offers from buyers at or below the asking price. They may, after              an initial period, advise the seller to lower the asking price step              by step, until buyer interest is generated.

By comparison, an auctioneer will guide a property at a more                  attractive price which generates interests from multiple buyers              and using the bid up process in an auction environment. The                  final selling price for suitable auction lots, will be similar to, or                exceed those achieved via estate agents.

  • Once the property has been sold at auction, the buyer cannot ask the seller to make or pay, for any additional improvements as the property is sold as it is. Therefore the buyer should    always carry out their research before purchasing at an auction.

In contrast to this, if selling through an estate agent, the buyer                can request for improvements to be made or even offer a lower              price, if a survey shows that improvements are needed, even                  after the sale has been initially agreed.

  • Because of the competitive nature of auctions and the sense of urgency they create, this can result in the buyer paying the absolute maximum if not more, of what they were originally intending to pay.

This can result in the seller achieving a higher sale price                          compared with selling through an estate agent, as well as                        making it more likely the property will be sold for its true fair                    value.

  • Because of the nature of auctions, there is no negotiation involved for the seller. The property is simply sold for the highest bid, after the reserve price has been met. Where as with using an estate agent, the seller has the opportunity to negotiate if, if they feel an offer is too low.
  • Using an estate agent enables the seller more flexibility. Because of the quick process of an auction, this can make it harder for the seller to time the sale to suit the purchase of their next property, if they are the occupier of the property they are selling.
  • When using an estate agent, the seller can withdraw from the sale at any point, right up until completion if they are not satisfied with the price the buyer is offering. When selling through an auction, once the hammer has gone down , there is no going back.

Often the decision to sell by auction is determined by factors associated with the property or the seller’s circumstances.  Auction provides speed and certainty; an auction property will usually be sold with an immediate exchange of contracts within 3-6 weeks of it being entered, with completion normally taking place 4 weeks later.

Many people will typically use an estate agent to sell a property, purely because this is the only method they are familiar with.  With a bit of research and diligence, you may find that auction could turn out to be more beneficial for the particular property you are selling.

It is a matter of weighing up what you believe works best, after taking into account the various factors. For example, having more say over the final sale price and being able to better plan the sale of property around the purchase of a new house, may result in you to preferring to use an estate agent over an auction.

Likewise, the certainty and quickness of an auction may offset against any flexibility that using an estate agent may bring. Using an auction can certainly take a lot of the stress and hassle away from selling a property, compared with using an estate agent.