How to Sell Your House at Auction
When it comes to selling your home, not everyone thinks about selling at auction. Usually, properties in normal condition are sold on the mainstream market (formally called ‘by private treaty’) 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: in these cases, you may also receive a higher price for your property than via a more traditional selling route.
Before committing to selling at auction, you will want to have a solid idea of what the process entails. Compare My Move work with property and legal experts to bring you the best advice when it comes to selling your home.
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.
Why Sell Your House at Auction?
Selling your house at auction is ideal if you’re looking for a quicker sale. Once the auction ends, the buyer must pay 10% of the property price immediately and is required to provide the remaining 90% within 28 days.
Selling at auction is often a good route if your property is in bad condition or needs some TLC. Many auction-bidders, such as developers or builders, are on the lookout for a “fixer-upper”. This is ideal if your property is considered “unmortgageable” due to its condition - for example, if it has subsidence or has been empty for many years.
Another reason sellers look to auction houses is the prospect of a bigger sale price than via a traditional estate agent, with the hope that a bidding war could boost the selling price.
Despite not being the conventional method of selling a property, there has been a peak in interest for property auctions.
One operator in the market, Auction House reported that 2019 was its most successful year to date, selling more than 3,800 lots across the UK from its network of 40 regional salerooms, at an increased success rate of 77.3%.
Advantages of Selling a Property at Auction
- A “Chain-Free” Sale: Property chains are often the biggest cause of delay in buying and selling houses. When selling your house at auction, there is no property chain to hold up the process
- Potential for a Higher Sale Price: Bidders may compete against one another, resulting in a higher sale price.
- A Quicker Sale: Selling at auction allows you to sell your property quickly, which is ideal if you are keen to go ahead with an onward sale.
- Selling Property in Poor Condition: Properties that would struggle to sell for a decent price (or at all) via traditional selling methods may do well at auction. Builders and developers are often on the lookout for a “fixer-upper” which they can add value to.
- The Seller Stays in Control: Once the sale is agreed at auction, a buyer cannot negotiate or pull out of the deal without financial or legal penalty. This differs from a traditional house sale, where the buyer can negotiate the price right up until the completion date.
Disadvantages of Selling a Property at Auction
- Bargain Hunters: Many bidders will be looking for a bargain so you may not get the price you wanted for your property when sold at auction.
- Higher Selling Fees: In some cases, auction house fees can be more expensive than an estate agent, so make sure you factor this in when deciding if an auction is right for you.
All Sales Are Final: Although this is also an advantage, as the buyer cannot negotiate the price or pull out of the deal without penalty, it also means that the sale is final for the seller. This means that even if the sale price is less than you’d hoped for, there is no going back.
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Is Your Home Suitable for an Auction?
Auctions are ideal for properties which are difficult to value. Unusual and dilapidated properties can attract experienced landlords or developers who aren’t put off by problems. Many are actively looking for renovation projects they can add value to.
An auction is also one way of selling your Buy-to-Let property, as other landlords will be looking to add to their portfolio. 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 more traditional route. “Unmortgageable” homes or homes in poor condition can do well at auction, far better than if sold via an estate agent.
With this in mind, if your home is in great condition and a solid investment, you may not get the amount you want for it at auction, with many bidders looking for a project at a bargain price. Homes that lend themselves to be a renovation or building project are far more suited for an auction house.
How to Find and Choose an Auction House
Do your research on a variety of auction houses, from small and local auctioneers to the bigger name businesses.
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.
It is also worth researching auctioneers which specialise in the type of property you are selling, be it size, era or condition.
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.
Increasingly, auction houses also operate ‘virtual auctions’ allowing internet bidders as well as those in the physical auction room itself; it’s been judged that around 10% of homes sell to online bidders so check your chosen auctioneer includes this service.
How Does the Auction Process Work?
Once you have decided on selling your house at auction, and at which auction house, it is vital that you are clear on the process before proceeding. 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:
An appraisal is when an approved auction valuer assesses your property, outlining how much you can expect to sell it for. They will be able to advise you with regard to a reserve price, to ensure your home isn’t sold off for a substantially lower price. 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.
Once you have 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 will need to provide all certification and documentation required to sell your home - a conveyancing solicitor will help ensure you have all paperwork sorted. A draft description of your property will be sent to you for ahead of marketing.
Make sure you hire a conveyancing solicitor to handle the legal side of the house sale in preparation for the end of auction where 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.
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 on their website will reach a wide selection of potential bidders.
Taking into account the advice from the appraisal, set a reasonable fixed reserve price. You want to make sure your house doesn’t sell for below it’s worth. However, bidders may be put off by a high reserve price so keep this in mind.
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.
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, with the remaining 90% to be paid within 28 days of the auction date.
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How Much Does Selling at Auction Cost?
Regardless of the way you sell your home, there will be costs associated with it. In some cases, selling a house at auction may exceed the costs of estate agents fees. Make sure you’re prepared and have factored in all the costs associated with the auction.
Auctioneer fees and solicitors fees will be the biggest cost when selling a house at auction, so make sure you factor these in when reviewing the cost of selling your home.
On average the auctioneer will take 2.5% of the sale price. This high cost for selling your home is another reason to set a realistic but solid reserve price for your home, to ensure the costs are covered.
Be aware that there may be additional advertising and marketing fees associated with the auction so make sure you are 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.
You will need to hire a conveyancing solicitor as part of the house selling process. These fees will entirely depend on your chosen solicitor but can cost between £350 to £500 to produce a pre-auction legal pack which includes the title plan, lease details and any other vital information required for the sale.
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 two months. Your property must be up for auction at least six weeks in advance and the full sale should take 28 days from the auction itself.
If Your House Does Not Sell
Remember that 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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