Selling a house at auction

If you’re looking for a quick sale, selling a house at auction may seem like the natural choice.  But what exactly does selling at auction involve?

Selling your house at auction

What is a property auction?

A property auction is a way of selling a home.

On a specified date, potential buyers will bid against each other to purchase your property. The person who makes the highest bid will secure it.

Why sell a house at auction?

Selling a house at auction has many potential benefits, if done successfully. The key to a successful property auction sale is creating demand and competition. If your property is well-marketed and attracts a lot of attention, competing buyers may push the price of the property up beyond the level buyers would be willing to pay via an estate agent.

Auctions typically attract investors and buyers looking for a ‘project’. If your property is run-down, unmortgageable, or would appeal to buy-to-let investors, selling at auction could be a good option.

Another benefit to selling your house at auction is that it offers a definite ‘end date’ to the process. Unlike selling on the open market, the auction date will be set from the start of the marketing process. Any successful auction sale will then need to complete within 28 days. Contracts exchange at the point of the hammer falling, and a deposit is payable on the day.  This reduced the chances of the sale falling through before completion.

How to sell your house at auction

Choose an auction company to sell with

Choose your preferred auction company and instruct them to act on your behalf, as you would an estate agent. You will likely need to sign a contract with the auction company and pay upfront for your listing or advertising costs. 

Prepare the legal pack with your solicitor

You will need to instruct a solicitor to put together a legal pack for the property you are selling. A legal pack generally contains copies of a property’s title deed, special conditions of sale, land registry search, lease information (if applicable), and other documentation relevant to the sale.

Legal packs must be available for prospective buyers to inspect in the lead up to auction day. 

Set a reserve price

You’ll need to set a property reserve price in advance of the auction.  This figure can be decided with the advice of the auction company and is the minimum amount you are prepared to accept for your property.

Marketing

Once you instruct your auction company and they have your legal pack, they will begin to market your property. They should discuss the different types of advertising and any associated costs with you before the marketing of your property begins.

It’s worth noting that most auction companies will insist on marketing your property for a full month ahead of the auction day. These timescales need to be factored in if you are looking to achieve a quick house sale.

Auction Day

You may want to be present when the auction takes place, however this is not essential as the auction company will give you an update on the sale outcome once the auction is complete.

The auctioneer will normally start by inviting bids lower than the reserve price. This will allow potential buyers to start a bidding war to secure the property.  As well as bidders who are physically present, the auctioneer can take commission bids and telephone bids from buyers who are unable to attend. In the case of a commission bid, the auctioneer will bid on behalf of the absentee up to their maximum bid.  A telephone bidder will have the assistance of an auction house employee to communicate their bids. If your property receives any bids above the reserve price, a sale to the highest bidder will become legally binding.

How much does it cost to sell a house at auction?

Auctioneer’s fees for selling house:

You can expect to pay around 2.5% of your property sale price to the auctioneer as commission.  In addition to this, you will need to pay advertising costs. Advertising costs (or entry fees, as they’re sometimes known) will vary from auction company to auction company, so it’s important you find out about all of the costs involved before proceeding.

Other fees to consider:

You will also need to factor legal fees into the cost of selling a house at auction.  You will need to pay a solicitor to prepare the legal pack in advance of the auction and to handle the legal completion of the sale after the auction.

How are the reserve and guide prices set?

The reserve price is usually set by the property owner, in consultation with the auctioneer. The reserve price is normally within 10% of the guide price.
The owner and auctioneer will also decide on the guide price – the price the property is advertised at. Your auctioneer will be able to offer you advice on the guide price they think will attract the most interest from potential buyers.

What’s the difference between the reserve price and the guide price?

The guide price is the figure the property will be advertised at in the lead up to the auction. You want your guide price to be low enough to attract a lot of attention, but high enough that the people attending the auction will be serious about paying what the property is worth.

The reserve price is the lowest figure you’re prepared to accept for your property. If you fail to receive any bids at or above the reserve price, your property will remain unsold.

How many houses sell at guide price in auction?

A guide price should not be confused with a property valuation. A property is only worth what someone is prepared to pay for it, and that will be determined at the property auction. Some properties will sell for far more than their guide price, others will fail to reach their guide and around 28% won’t sell at all. It all depends on how much demand there is for your property.

Do houses sell for less than market value?

Although it is possible for desirable properties to sell for more than they would on the open market, properties that go to auction typically sell for an average of 10-15% below market value.

If your property is mortgageable and you can afford the time to sell on the open market, it is generally the best way to achieve the highest price. This is because selling on the open market means you can reach the largest possible audience.

Auctions tend to attract a certain type of buyer. A property bought at auction will usually need to be paid for in full within 28 days of the auction date. This can make it tricky to buy an auction property if you require a mortgage or are part of a property chain.

Selling at auction may mean that your property achieves less than it would on the open market, and therefore less than its perceived ‘market value’. However, for properties that are particularly unusual or difficult to mortgage, auction offers a method of sale that can reach the type of buyer most likely to be interested in your property.

How long does it take to sell a house at auction?

Your property will usually be advertised for 4-6 weeks before the property auction. On the date of the auction, if your property sells, your buyer will pay a 10% deposit. The remaining balance must be paid, and the sale must be completed, within around 28 days of the auction date. From the point of listing your property with an auction house, a sale will usually complete in 8-10 weeks.

How do I choose a property auction company?

There may be a choice of property auction companies in your area. If this is the case, it’s important to research your options. It’s a good idea to request to see examples of their marketing materials. Also, find out where and how properties and auctions are advertised. You can also ask about properties that have recently sold through the auction company to see how much experience they have selling properties like yours. Finally, decide if you are confident that this auction company will do a good job of marketing and achieve a good price for your property.

What happens after a house is sold at auction?

If the reserve price has been met or exceeded, the property sale is legally binding when the hammer goes down.  The buyer will be required to pay a 10% deposit on the day of the auction. They will also need to prove that they have the cash available or mortgage in place to pay the rest. The remaining 90% within 28 days. Contracts will be signed and exchanged on the day of the auction.  You will then be required to pass the contracts on to your solicitor, who will handle the sale through to completion at the end of the 28-day period. 

What happens if your house doesn’t sell at auction?

If your property doesn’t attract bids above the reserve price you have set, the property will remain unsold.  Regardless of whether your property sells on auction day, you will still be required to cover the costs outlined to you by the auction house.

You may change your mind and decide you are willing to sell at a lower figure than your reserve price. If this happens, you may be able to get in contact with people who bid on the day and negotiate a sale after the auction has ended.

What are the pros and cons of selling a house at auction?

Is selling your house at auction a good idea?

Selling your property at auction can be a great option for those trying to sell an unusual or unmortgageable property. However, it’s important to be aware that property auctions do not offer a guaranteed sale. 

So, what happens to houses that do not sell at auction?

If your house does not sell at auction, it may be difficult to then secure a sale on the open market. Potential buyers may have seen your property advertised at the low guide price and will notice the property failed to sell at auction. As a result, this may result in fewer buyers being willing to pay the guide price figure or higher.

It is estimated that only around 72% of the properties listed at auction actually achieve a sale.  Unfortunately, if you’re one of the 28% that fail to sell, it is likely to seriously affect your property’s saleability on the open market, and ultimately the price you achieve for the property when you do sell it.

Choosing to sell your property at auction will also have time and privacy implications. You are required to let any interested parties (and their surveyors) view the property before the auction. If the property receives a large amount of attention, that could mean a lot of property viewings.

What are the alternatives to selling a property at auction?

If you need a quick house sale but you’re not sure an auction is the right option for you, a professional home buying company could offer an attractive alternative. 

Unlike a property auction, a genuine professional home buyer will be able to offer you a guaranteed sale. They can also complete the sale on a date of your choice, which can be in as little as a week if needed. A genuine professional home buying company can offer this level of speed and certainty because they will buy your property directly with their own cash funds.

When you sell to a cash home buying company, you’re likely to achieve a similar price to selling at auction (average offer is around 85% of market value). However, with no marketing or listing fees to pay, selling to a property buying company could work out a more financially attractive deal. Most genuine cash home buyers will also cover your solicitor fees.

Budgeting is also easier with a direct sale to a home buying company. From the point of accepting a formal offer, you’ll know exactly how much you’re getting for your property. This can be a lot less stressful than waiting to see how much people bid for your property on auction day. You can also avoid the hassle of an endless stream of potential buyers coming to view your house. Reputable home buying companies won’t start marketing your property on the open market until after your sale to them is complete and the property is vacant.

How does selling a house at auction compare to other methods of sale?

Here’s an example of how selling a property at auction might compare to selling on the open market or to a home buying company:

Open MarketProperty auctionCash home buying company
Estate agent valuation£300,000£300,000£300,000
Price achieved at sale£290,000£255,000 – £270,000£240,000 – £255,000
Selling fees£5,260 (estate agency fees and legal fees)£7,575 (auction entry fees, legal fees and commission)£0 (reputable companies won’t charge a fee and most will cover legal costs)
Amount you walk away with£284,740£247,425 – £262,425£240,000 – £255,000
Property viewings required?YesYesNo
Time to sell32.6 weeks (7+ months)8-10 weeks1-2 weeks (or on a date of your choice)

If you want to find out how much Quick Move Now could offer to buy your property directly, simply call our professional, friendly team on 0800 068 3366 or complete our online form to get a free cash offer today.

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Author:

Beth Lane

Beth Lane

As an integral part of the marketing team, Beth is responsible for creating Quick Move Now’s external communications and dealing with national and regional press enquiries.

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