How to Sell Your House at Auction
Selling your house at an auction often allows for a quicker sale. However, before committing to selling at auction, you will need to have a solid idea of what the process entails.
Usually, properties in good condition are sold on the mainstream market via estate agents. These usually fetch higher prices than they would at auction. However, an auction provides the opportunity to sell a home which is in a poor or “unmortgageable” condition.
From the fees you’ll need to pay, to whether your home is suitable for an auction house, our guide will prepare you for selling your home at auction.
- What is an Auction?
- Why Sell Your House at Auction?
- How Does the Process Work?
- Do I Need a Conveyancer?
- How Much Does it Cost?
- How Long Does It Take to Sell a House at Auction?
- Is Your Property Suitable for an Auction?
- Advantages vs. Disadvantages of Selling Your House at Auction
- Reserve Price vs. Guide Price
- How to Find and Choose an Auction House
- Next Steps of Selling House
What is an Auction?
An auction is a process of selling an item by bids. There’s usually a set starting price for the item (the reserve price) and the winner is whoever submits that highest bid.
The more desirable an item is, the more it’s likely to receive multiple bids, increasing the price it sells for. One type of auction you could choose is sealed bidding.
Around 80% of properties sell at auction. Most of the remaining 20% fail to sell because bids have not reached the reserve. In many cases, the properties return to a future auction to try again.
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Why Sell Your House at Auction?
Selling your house at auction is ideal if you’re looking for fast conveyancing for a property in less than desirable condition.
Auction House UK states that selling a house via auction can take as little as 8 weeks from the initial enquiry to sale. This is largely due to the fact that the buyer is required to pay 10% of the price on the day of the auction and must provide the remaining amount within 28 days.
Another reason sellers look to auction houses is the prospect of a bigger sale price.
Despite not being the conventional method of selling a property, there has been a peak in interest in property auctions. Auction House reported that 2019 was its most successful year to date, selling more than 3,800 lots across the UK, at an increased success rate of 77.3%.
How Does the Process Work?
Selling a house at an auction will differ in many ways compared to selling a home through an estate agent. Below we look at the key steps in the process:
1. Appraisal
An appraisal is when an approved auction valuer assesses your property, outlining how much you can expect to sell it for. As part of this process, they’ll be able to advise you with regard to a reserve price, to ensure your home isn’t sold for substantially lower. If the reserve is not reached in the auction, the property is withdrawn.
There is no obligation to go ahead with the auction at this stage. Use this as an opportunity to ask as many questions as possible and get an idea if auctioning is the right move for you.
2. Instruction
Once you’ve decided to go ahead with your chosen auction house, you will be asked to sign terms and conditions ahead of the auction.
At this point, you’ll need to provide all certification and documentation required to sell your home. A draft description of your property will also be sent to you prior to marketing your property.
3. Legal
Make sure you hire a conveyancing solicitor to handle the legal side of the house sale. This is especially important at the end of the auction when the rights of the property will be handed over to the highest bidder. Be sure to compare conveyancers so that you get the best deal.
4. Marketing
Ideally, you want to work with auctioneers with the best marketing tactics in the profession. Features in specialist publications, newspapers and details in their auction catalogue and website will reach a wide selection of potential bidders. The success of the auction will largely depend on having the most potential buyers in the room on the day of the sale.
5. Reserve price
Taking into account the advice from the appraisal, set a reasonable fixed reserve price to entice buyers. You want to make sure your house doesn’t sell for below its worth. However, bidders may be put off by a high reserve price so keep this in mind.
6. Auction day
On the day of the auction, potential bidders will register and the auction house will run checks and take copies of identification. The bids will start at your set reserve price and bidders can bid upwards from there.
As soon as the auction is over, contracts are usually exchanged immediately with the winning bidder paying 10%. There is no requirement for the seller to attend the auction itself.
7. Completion
Once the auctioneer’s gavel falls, a binding contract is effected. At this point, the buyer is required to pay 10% of the property price immediately, with the remaining 90% to be paid within 28 days of the auction date.
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Do I Need a Conveyancer?
Yes, enlisting the services of a good conveyancing solicitor is crucial to selling your house at auction. It is especially important to find the right conveyancer who is experienced in your kind of property sale.
Your conveyancer will need to be part of the process early on as they will need sufficient time to prepare the pre-auction legal pack required. This is in addition to any other legal work required before the auction takes place.
Once the hammer falls at the end of the auction, the buyer is legally committed to the purchase. Your solicitor will handle all the legal aspects and details of the sale from this point onwards, liaising with the buyer’s solicitor.
How Much Does it Cost?
When it comes to selling your house at auction, you will need to be prepared for the costs involved, including auctioneer and solicitors fees. Make sure you factor these in when reviewing the cost of selling a house and be aware that the auctioneer will take a percentage of the sale.
Auctioneer Fees
On average, the auctioneer will take 2.5% of the sale price. This is often higher than the average fee for a traditional high street estate agent. This high cost is another reason to set a realistic but solid reserve price for your home.
Be aware that there may be additional advertising and marketing fees associated with the auction. Make sure you’re clear on all costs involved before proceeding.
It is also worth noting that an auction house may take a fee even if the house doesn’t sell.
Solicitor Fees
It can cost between £350 to £500 to produce a pre-auction legal pack. This pack includes the title plan, lease details and any other vital information required for the sale. The rest of your solicitor fees when selling the house will entirely depend on your chosen solicitor.
Following the auction, you will be required to pay your solicitor a fee for the conveyancing in order to complete the sale. Depending on the price your property sells for, these fees can range between £450 and £750 plus VAT.
How Long Does It Take to Sell a House at Auction?
Selling a house at auction can often be quicker than selling your home via a more traditional route. In some cases, it may be as quick as 2 months.
Your property must be up for auction at least 6 weeks in advance and the full sale should take28 days from the auction itself.
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Is Your Property Suitable for an Auction?
Auctions are ideal for properties which are difficult to value. Unusual or abandoned properties can attract experienced landlords, developers or anyone looking for a “fixer-upper”.
An auction is also one way of selling your Buy-to-Let property, as other landlords will be looking to add to their portfolios. A property with sitting tenants also means that the new owner can collect rent from day one.
Houses sold at auction are often properties which cannot be or would not fare well if sold through a traditional method. “Unmortgageable” homes or homes in poor condition can do well at auction, far better than if sold via an estate agent.
If your home is in great condition and a solid investment, you may not get the amount you want for it at auction. In this case, selling at auction would not be for you.
Advantages vs. Disadvantages of Selling Your House at Auction
Some houses are better suited to an auction than others. Also, some sellers will be concerned about the risk of the house selling at less than market value.
Below we’ve outlined the advantages and disadvantages of selling your house at auction:
| Advantages | Disadvantages |
|---|---|
A quicker sale and process | Bidders are looking for a bargain |
The sale is legally binding once the hammer falls | Auctioneer fees can be higher than that of high street estate agents |
An “unmortgageable” home may fare better at auction | Once the auction has ended, you are legally obliged to sell the house for what it sold for - regardless of whether you are happy with the amount |
No property chain | |
Your property may fetch higher at auction than with a traditional high street agent |
Reserve Price vs. Guide Price
The reserve price will be the lowest price you are willing to accept for your property. You want to ensure you don’t price this too high, as it could put off potential bidders.
However, you also want to be prepared for your house to sell at this amount and therefore be content with the figure. It’s important to note that this could be 70-80% of the market value.
The guide price, on the other hand, is what you hope bidders will bid up to - or higher. This is a marketing figure, used to guide potential buyers as to how much the property may be worth. Be aware that this is not the figure that the property will necessarily sell for.
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How to Find and Choose an Auction House
The first step is to do your research. Some of the bigger and more established auction houses may come with larger fees. However, their reputation, knowledge and database of potential bidders may well be worth the higher cost.
That said, smaller and local auction houses may have lower fees and will potentially be more flexible.
It’s also worth researching auctioneers which specialise in the type of property you’re selling, be it size, era or condition. Look at upcoming auctions to find an auction house which is known for selling properties like yours. The ideal auction house will need to have good and recent experience in selling similar properties.
Contact auction houses and provide them with a description of your property. They will then be able to tell you if your property is suitable for auction and discuss a reserve price. At this point, the auctioneers will arrange to inspect your property.
Some auction houses will operate ‘virtual auctions’ allowing online bidders. Around 10% of homes sell to online bidders, so check if your chosen auctioneer includes this service.
Next Steps of Selling House
This article is part of our selling a house guide. In the next article, we explore everything you need to know about Selling a Property with a Help to Buy Equity Loan
