Selling A House At Auction – Should you consider it?

Opting for an auction can often mean a swifter sale compared to the traditional estate agent route. For homes requiring extensive refurbishments, possessing unique characteristics, or facing challenges in the regular market, auctions might just be the golden ticket.

Here’s the beauty of it: once that hammer comes down concluding the bidding, it’s customary for the winning bidder to promptly front a deposit. Typically, the completion of the sale follows in about 28 days. This agreement is legally binding. If a buyer has second thoughts and backs out, they risk forfeiting their deposit and may be on the hook for additional fees and penalties. Given these stakes, it’s rare for auction sales to fall apart.

For those new to the scene, the thought of auctioning your beloved home might be a tad overwhelming. But let me reassure you – times have changed. The industry has evolved past the stereotypical intimidating auction chambers and aggressive strategies. It’s now a more transparent and user-friendly affair.

There’s also the rising trend of the ‘modern method of auction‘. I’ll delve deeper into this shortly, but think of it as a blend of open market sales and the age-old auction technique. And trust me, its traction in recent times is undeniable.

Choosing An Auction House

Are Property Auctions A Good Method Of Sale?

Our fully inclusive guide on selling property via auction will include information on these relevant sections, and will answer the following questions:

• What is a property auction?
• How does the process of a property auction actually work?
• How long will it take to sell my property at auction?
• The overall process of auctioning property, one step at a time.
• What will the day of the auction look like?
• How much will selling my house at auction cost me?
• Is my house even suitable to sell at auction?
• Which auction company is the most reputable, and should I use to sell my house?
• What to do if you receive pre – auction offers.
• Setting the correct reserve and price at auction.
• Everything else you should consider prior to the auction.

So if any of these have piqued your interest, then read on for our fully inclusive guide on the property auctioning industry.

What Are The Pros And Cons Of Selling My House At Auction?

There’s a certain allure and many benefits to selling a property at auction. The thrill of the hammer, the competitive bidding, and the promise of a quick sale often draw homeowners to consider this method. But like everything, the auction route isn’t without its challenges. While it does offer a unique selling experience not too dissimilar to quick house sale, it’s essential to have a clear picture of what this entails. Let’s dive deep into the advantages and drawbacks of auction sales, so you, the seller, can make an informed decision.

Pros of Selling a Property at Auction:

1. Serious Buyers: Auction attendees are usually business-minded and not just ‘window shopping’. This means fewer time-wasters.
2. No Onward Chain: Buyers typically don’t come with an ongoing chain, simplifying the process.
3. Decisive Buyers: Less nit-picking compared to traditional sales. Buyers usually know what they’re after and go for it.
4. Ready-made Buyer Pool: Renowned auction houses often have a database of genuine buyers and investors.
5. Less Concern Over Property Condition: Auction attendees often buy properties despite their issues, from structural flaws to aesthetic challenges.
6. Tenanted Property Sales: Selling a house with existing tenants? Auctions can be an ideal platform as many buyers are landlords seeking new properties.
7. Perfect for Challenging Properties: Auctions can be ideal for inherited properties, probate homes, or those with structural issues.
8. Attract Capitalised Investors: If you’re selling multiple properties or a portfolio, auctions can be a hotspot for investors with ready capital.
9. Quick Sales in Challenging Times: If you’re undergoing a divorce or separation, an auction can expedite the selling process.
10. Protection from Gazundering: Post-bidding, buyers can’t reduce their offer, ensuring transaction transparency.
11. Year-round Active Buyers: With auctions, every time is a good time to sell.
12. Cash Buyer Dominance: Many auction buyers come with cash in hand, avoiding lengthy mortgage processes.
13. Reduced Fall-Through Risk: Auction sales are more binding, reducing the chances of a deal falling apart post-agreement.

Cons of Selling a Property at Auction:

1. Longer than Anticipated: Traditional auctions might take 3-4 months from start to finish, leading many to opt for online auctions.
2. Pre-Auction Commitments: You might need to accommodate viewings, open days, and surveys, which can be inconvenient.
3. Potential Higher Costs: Some auction houses might charge more than standard estate agents. Always check for a ‘no sale, no fee’ policy.
4. Beware of Hidden Fees: Always read the fine print to ensure there are no unforeseen costs.
5. Setting the Right Reserve Price: If set too high, it might deter potential bidders.
6. Risk of Overvaluation: Some auction houses might overestimate property value to attract sellers, which can be risky if bidders don’t meet that valuation.
7. Risk of Not Meeting Reserve Price: If no one meets the reserve price, you might end up losing time and money.
8. Possible Time Crunch: If you’re looking to quickly clear debts or avoid repossession, the auction timeline might not be quick enough.

What is the Actual Definition of an Auction?

Before going any further, we feel it is important to literally define what a generic auction is, just to avoid any confusion or misunderstanding further down the line.

Very simply, the act of auctioning is the buying and selling of goods and services of some sort, and the financial offers being made for them by bidding. The person in charge will take all of the bids into account, and highest bidder will win ownership of the item, service – or in our case, property. easy enough so far, right?

So, when it comes to any kind of auction, they are usually opened with a lower price, purely with the intention of bidders increasing on it. In doing this, the bidders will bid openly against one another, and each bid has to be a continual gradual increase on the previous. So basically, the price goes up and up, until no one is willing to extend on the final price that’s been bid.

Auctions are commonly used for the quick sale of many items, and are even used at certain events in order to raise money for charity. These items can include things like cars, livestock, antiques, and of course, property.

That’s a Generic Auction. How Does a Property Auction Work? Is it Any Different?

First things first, always remember the following:

In order to secure the sale at a property auction, the property bidder must put down a 10% deposit if they’re interested in purchasing the property. Usually, following this, the sale is completed within a month, and this is when the remaining 90% of the funds are transferred.

That is one of the main ways in which the auctioning of property differs from the auctioning off of other goods.

So, at the auction itself, the buyers who are interested in your property will still try to outbid one another, and the highest bid itself will still win the property auction. As soon as the hammer strikes – as with all auctions – your property is now considered to be the equivalent of “under offer”. At this point, the winner is then required to actually purchase the property by putting down the 10% deposit in order to secure the sale, and then within a month, the remaining 90% of the funds should be paid, just like we said above.

The great thing about selling property at an auction, is that it can generate a lot of interest amongst potential buyers – and this is then likely to boost up the price of the property. If you’re lucky enough to be selling to a room full of buyers who are keen not to miss the opportunity to buy property quick and below the market value, then this is usually the case.

However, it is worth mentioning that the vast majority of the time, it takes a specific kind of property to sell successfully at auction. A lot of homeowners may struggle to sell run down or unorthodox properties on the generic housing market, and therefore proceed to sell through auction instead. The reason why auctions can be successful for these kinds of properties, is because they attract a different audience of potential buyers, including developers and experienced landlords who have a different sort of requirement, and are willing to put in the work needed into properties deemed problematic by others.

Typical problem properties that sell well at auction are:

• Properties that have been devalued by estate agents or lenders.
• Park homes or mobile homes on land.
• Airey Properties and other non-standard construction builds.
• Properties with septic tanks.
• Properties that have Japanese Knotweed.
• Properties with severe damp issues.

How Long does it Usually Take to Sell a Property at Auction?

Usually, selling a property at auction can be an overall quick process, and it’s a possibility that your property could be sold in its’ entirety in as little as two months. Typically, however, it can take anywhere between six to ten weeks.

If you are looking for a quick sale option, then an auction could be ideal for you. So long as there is enough genuine interest in the auction room itself, then your property should sell here. You should also always be sure to set a realistic reserve price on your property, which will usually be somewhere between 75% and 80% of the market value.

A Step by Step Guide to the Auction Process

Next up, we’re going to be providing you with a fully inclusive step by step guide on the property auctioning process in its entirety.

In total, the property auctioning process tends to include seven major steps. This will take you right from the appraisal of the auction to the actual completion of the sale.

STEP ONE: AUCTION APPRAISAL

The first step in the process of putting a property up for auction, is the auction appraisal.

Once you’ve made the decision that, yes, you’re going to sell your home via auction, you then need to decide what kind of auction you’re actually going to sell your home at. You should do your research, and see what kind of auction will be best suited to you dependent on which ones specialise in the type of property you are selling, or at the very least sell them regularly. This is just to ensure that your property will be seen by the right target audience of buyers.

After this, your property will need to be appraised. Usually your auction appraisal will be completed by the company that you’ve chosen to work with, and it will involve an approved auction valuer to come out and value your property according to their guidelines. In doing this they should outline and highlight all of the positives to selling your kind of property at auction, as well as how much you should expect to sell it for, and they will advise you on a reserve price.

Remember that at this stage, you are under no legal obligation or pressure to go through with the auction in its’ entirety. Use this as an opportunity to gather research and find out everything you can about the process.

STEP TWO: INSTRUCTION

If after this initial stage you decide on going ahead with selling via auction, you will then be asked to sign to the terms and conditions. Following this, it’ll be requested that you provide all documentation and certificates that are required in the sales process. A draft description of your home will then be created by the auction company, and sent to you for approval.

STEP THREE: LEGAL PACKAGE

Now you’re at the point where you need to instruct a solicitor to aid you in the sale of your home through auction. Your solicitor should draw up a legal package, in which they should include items like title deeds, conditions of sale, searches if applicable, and any other conditions of your sale. These official documents will put you in the legal position to hand over your property and its’ rights to the highest bidder.

STEP FOUR: MARKETING

So, once all of the instructions and the legal packages are signed and confirmed, the auction company will then start in the process of marketing your property. This is with the aim of generating interest amongst potential buyers, and encouraging them to come and big when the day of the auction comes around.

The vast majority of auctions nowadays will use resources such as auction boards, social media and other forms of publication to advertise your property effectively. The auction company should keep you fully informed throughout this process.

STEP FIVE: RESERVE PRICE

After the auction appraisal results have been received and there has been some form of effect from marketing, the auction and the seller will be able to decipher on a reserve price. Before fixing a reserve price, ensure it’s reasonable by seeking appraisal advice, and assessing the results of your marketing campaign. This is essentially the starting bid price.

Be sure that you have a good idea of what you should set this price as. This is because on top of all of this, you’ll still have to pay the auction company fees – even if no one bids on your home. Remember that bidders may be put off by a high looking reserve price, whereas if the price looks low in comparison, they’ll be more likely to want to fight other bidders for your property. Sometimes, it’s all about being tactical, so price it right. Not too high to risk buyers losing interest, and not too low so you’re underselling.

STEP SIX: AUCTION DAY

It’s the moment you’ve been working towards – it’s finally auction day!

When the big day arrives, there will be potential buyers who will come and register to bid in the auction. At this point, the vast majority of auctions will ask for copies of ID, as well as carrying out other legal processes. This is to prevent any money laundering or fraud taking place.

After all of this is sorted out, buyers will start to bid on your property, and this will start at the pre-agreed reservation price. When the winning bidder puts their price down, usually the contracts are exchanged with immediacy. This is the point at which they’ll have to pay the deposit of 10% of the selling price. Following this, they’re usually given a month in order to pay the remaining 90%.

Auction day can be extremely nerve wracking, and we don’t dispute that, but remember that as a seller you don’t even have to attend if you really don’t want to.

STEP SEVEN: COMPLETION

It usually takes around a month for the sale to reach completion following the auction and the exchange of contracts. The auction company will usually get in touch with yourself and your solicitor, and together you’ll confirm appropriate dates of completion. This is also when other parts will take place, for example, the hand over of the keys.

And that’s about it!

The Auction Day Itself

We mentioned it briefly above, but remember that you are under no legal obligation to attend the day of the auction as a buyer, whatsoever. A lot of people don’t actually like attending the auctions because they’re often so nerve wracking. A lot of the time, however, sellers can’t actually attend auctions due to personal reasons such as prior work and family commitments. The good news here is that nowadays you can actually log onto the auction through smartphone or computer in order to watch it live, so if you want to check in, you can!

Remember that property buyers can also log in and watch the auction taking place too – and they can even make proxy bids! This means that the bids are coming from all angles, literal and virtual.

Fingers crossed that your property will sell fast at auction if this is how you choose to proceed! It’s not the end of the world if it doesn’t, however, because there is still the option of selling after the auction. This is so long as you’d be willing to take less than the reserve price.

How Much Will It Cost me to Sell my House at Auction?

Unfortunately, selling a property at auction doesn’t always work out as a cheap process. You’re likely to have to pay up to £1,200 plus VAT for your solicitor, as well as 2.5% on top of that for the auctioneer fee. That’s the price you might have to pay if your sale is time sensitive.

The two main costs you need to account for are the auctioneer and solicitor fees, so here is a little more info on both of these.

Auctioneer Fees

Usually there shouldn’t be any hidden costs. Do expect as a home owner, however, to have to pay the auctioneer somewhere around 2.5% of the overall sale price. Remember that even if your property doesn’t sell at auction, you are still going to owe the auction company a fee.

We would recommend double checking with the auction company whether there are going to be advertising costs for the selling process, as this could also result as an additional expense you have to consider.

Solicitor Fees

Another expense you should be considering is the fees your solicitor will charge for their services. The solicitors are hired specifically to create the legal pack in this process, which is usually reviewed by the buyer before they make an offer. For this service, you’ll typically have to pay somewhere between £350 and £500. This pack, as we mentioned earlier, will include things such as lease information if applicable, title plans, and any other sort of information that could have an impact on deciding the value of the property.

On the actual day of the auction occurring, as soon as the hammer is hit and the offer is accepted, this is actually legally binding. On top of what you’ve already paid by this point, you’ll then have to pay an additional fee to your solicitor, as they will now carry through the process of conveyancing to get the sale of the property through to completion for your buyer. Conveyancing fees do tend to differ from area to area, however generally speaking we would estimate the price range being somewhere between £450 and £750, and then VAT on top of that. It all depends on the price of the property.

So, altogether? We’re talking paying somewhere in the region of up to £1,200 for your solicitor, plus 2.5% of the sold value of the property to the auctioning company. This can give or take in either direction from situation to situation, but that’s a general summary of how you can expect the costs to add up.

Is my House Suitable to Put Up for Auction?

If we’re being perfectly honest, the vast majority of properties are suitable to be put up for auction. There are some who thrive more in an auction environment than others, however. These include:

• Niche properties.
• Run down and dilapidated properties.
• A property in high demand.
• A property with tenants in it.

We have mentioned before, but it reigns true that the vast majority of sellers will turn to selling their property at auction when their property has certain aspects or features that make it difficult to sell on the traditional market. Auction bidders are usually willing to pay a better price. That’s not to say auctions are for everyone, and some vendors actually make several mistakes when going to auction.

Of course, you can sell most properties through auction, as we’ve said, but the four types listed above are particularly well suited to this process because they make selling complex / difficult for the average buyer. The reason they do well at auction, is because the buyers at auction aren’t usually looking for somewhere to move into and live, but instead are looking for projects that they can work on and re-sell for a higher profit.

So, if your property has features which either make it a complex sale, or considered to be conventionally unattractive, then you’re likely to get a better price selling it through auction than you would on the traditional property market. Auction buyers are often looking for potential – not a perfect home to move into – remember that.

Which Auctioning Company Should I Use to Sell my Home?

There are so many auctioneers throughout the UK, that it can be difficult to pick just one – but like estate agents, they can make or break the sale. This is why it’s so important to choose the right one.

Generally speaking, we would recommend always going for a larger and more established auctioning company, because they have access to a wider database of property buyers.

If you really need to sell your home quickly – which presumably you do if you’re looking into auction selling – then it’s always a good idea to choose a company who specialise in the kind of property you’re trying to sell. Some estate agencies even have specialist auction divisions, and it’s these kind of auctioning professionals who will have a thorough understanding of the market, and therefore will be in a better position to gain a higher price for your property.

Remember that selling your property at auction isn’t always guaranteed – and that even if it isn’t sold, you’ll be charged the fees for it. We would recommend giving yourself the best possible chance of your auction sale being a success, by going with a well – reputed and already established company, mainly because of their extensive databases.

What If I Receive Pre – Auction Offers?

Remember that before the auction day, your property will be marketed to a wide range of potential buyers. Because of this, there is a chance that you’ll receive some offers before the auction day actually arrives. Our advice if this happens to you? Let those who are interested fight it out on the day of the auction.

It all depends on your own circumstances, of course, and if you need the money quickly then accepting an offer would be fair enough, but if you can afford to, wait. Remember you’ve already paid out on the auction and solicitor fees at this point, so you might as well see it through.

Remember this: if there is a lot of interest in your property before auction day, then there is also likely to be so on auction day. Letting these interested parties bid against each other on the day will generate a sense of competitiveness between them, and could result in them making a higher offer in their endeavour to outdo one another.

Setting a Reserve and Guide Price for Auction

Before the auction day arrives, you, your solicitor and the auctioning company must set a reserve price.

What is a Reserve Price?

Very simply, the reserve price is the minimum amount that the seller will take for the property, so the real starting bid price. This price stays confidential between yourself and the auctioneer, and once bidding starts and exceeds this price, the sale must go forwards. Remember to set this at a realistic level for the best results.

Setting a Reserve Price

All auctioneers are different, however usually you can set a reserve price of up to 10% of the guide price. This can be changed either way before the auction.

What is a Guide Price?

A guide price is just the estimated market value or “worth” of the property. This is set by the auctioneer themselves in order to start the bidding process. They will ensure that the price is just at the right level to entice buyers to begin their bidding.

Final Things to Consider Prior to Auction

That’s pretty much it for the ins and outs of property auctioning, however we do think there are a few final things you should consider prior to the property going up for auction, in order to make sure it goes as smoothly as possible.

Your Home’s Presentation

If you’re unlucky and don’t have the right audience of bidders in the auctioning room on the day, and you haven’t considered home presentation, then you could be in trouble.

For this very reason, do make the effort to ensure that your property is well presented on open days prior to auction, in photographs and so on. This is mainly to do with cleaning and decluttering.

Advertising

Finally, as well as ensuring the property sells itself, you have to ensure that you’re up to date in the marketing of your property.

It’s not just about leaving the auctioning company to get on with it. Utilise tools such as social media yourself in order to ensure your property is reaching as many audiences as possible. Only then do you really go the extra mile, and ensure that your sale is a success.

Thank you for reading. We hope we have been some help in informing you on the overall process, the ins and outs and the do’s and don’ts of selling your property at auction. We hope that when you sell your property, however you do it, that it’s a success.