The Benefits of Selling Property At Auction
There are three main benefits to selling a property at auction. These are:
- You can sell a property quickly – The auction process is often quicker than the normal house sales process. Most of the work is carried out before the auction and once the hammer falls, exchange of contracts happens straight away and completion happens within 28 days.
- You can achieve a higher selling price – The auction process can often help you to achieve the highest possible sale price for your property. This is especially true if two or more buyers enter a ‘bidding war’ which drives up the price of your property.
- It’s the perfect market for particular types of property – An auction can be a much more suitable marketplace for particular types of property. We look at what types of property sell well at auction next.
TV presenter Lucy Alexander says that an auction is ideal if you want ‘a quick and uncomplicated sale’.
What Property Sells Well At Auction?
Properties are typically put up for sale at auction because the seller needs to sell. Often sellers will be landlords who need to offload properties and want the guarantee that an auction will result in a sale. Sometimes properties will be auctioned due to bankruptcy or repossession while properties of a deceased people often sell at auction.
While not unheard of, it is unusual for private residential homeowners to place their homes into a property auction.
The types of property that generally sell well at auction include:
- Properties that are hugely in demand or have a large number of interested parties
- Repossessed homes that need a quick sale in order to repay a debt
- Properties for which it is hard to find a buyer through a more traditional route
- Properties in poor condition that require renovation
- Unique or unusual properties which are hard to value
Where To Find The Right Auction House
There are a number of auction houses available. Many specialise in auctions while others are traditional estate agents with an auction division.
In the same way as choosing an estate agent, you should shop around to find the right auction house for you. Bear in mind that this may not necessarily be the cheapest company. It is more likely to be the one that is most appropriate for the type of property that you’re looking to sell.
One good way to compare auctioneers is to look at their website and their auction catalogues. This helps you to see the standard of their publication and advertising and you’ll get an idea of whether your property will be well marketed.
Using a more established auction house can also be an advantage as they often have the largest database of potential purchasers. This will mean that the details of your property will be seen in advance by more people and this will hopefully lead to greater success on the day of the auction.
You should also be careful to choose an auctioneer who has experience of selling your type of property. If most of the properties for sale in an auction are small homes in poor condition it may not be the best place to sell a large detached house.
According to RICS, auctioneers have to follow a number of statutory regulations, including the Estate Agents Act 1979. So, choose a reputable auctioneer that works to these standards.
Fees For Selling A House At Auction
Selling your property at auction is not necessarily cheaper than selling through a traditional estate agent. Indeed, you can often find that selling at auction comes with a wider range of fees. Fees for selling a house at auction include:
- Commission – you will generally pay a commission of around 2.5 per cent of the sale price although this differs from company to company
- Advertising costs – you are often liable for the costs of marketing your property
- Room hire fees – many auctioneers charge you a portion of the auction room hire fee
- Admin fees – some auctioneers will charge you an admin fee if you don’t find a buyer
- Legal costs – you will have to pay fees to your own solicitor to prepare contracts and the legal pack
Setting Your Reserve and Guide Price and Preparing Your Property for Auction
Before putting your property up for auction, you should discuss the sale with a qualified property auctioneer. You should ask the auctioneer’s advice about the potential saleability of your property and what they would recommend as the guide and reserve prices.
The BBC defines the ‘guide price’ as ‘an indication of the price that the property is expected to sell for and what the vendor is hoping to achieve.’ A guide price is for information only and should not be confused with any ‘reserve price’.
The ‘reserve price’ is the lowest price the vendor will accept. This is agreed between the vendor and the auctioneer, is confidential and is not disclosed to any interested parties. Most auctioneers will not allow the reserve price to be set too high in order to give the property a good chance of selling.
Before the auction, you must also instruct your solicitor or conveyancer to prepare a contract and details of any special conditions of the sale. These will be included in the agent's catalogue.
You have to make your property available for open viewing to the prospective buyers who may be interested in buying the property. You also have to allow access to surveyors from those people who have viewed the property and wish to further their interest
What To Expect When Selling Property At Auction
The hammer falling at an auction signifies the agreement of a binding contract between the buyer and the seller. The buyer must pay 10 per cent of the total sale price of the property before leaving the auction house and should complete within 28 days.
If the buyer fails to pay the remaining balance within 28 days, you can sue them. You should be able to recoup the difference between the agreed sale price and the amount you eventually sell it for plus any expenses and costs that you incur.
Once the auction is complete, you solicitor will take care of the commission and auction expenses, the outstanding mortgage debt, and their own fees.
What Happens If The Property Does Not Sell?
If the lot doesn’t reach your reserve price, you need to know what the auctioneer’s procedure is for dealing with unsold lots.
Generally, any buyer who is interested in the property is encouraged to register their interest with the auctioneer. You may then be able to negotiate a sale with a potential buyer outside the auction room.
Alternatively, you may want to put the property back into another auction at a later date – perhaps with a reduced reserve price.
Additional Information About: Selling A House At Auction