Selling a House at Auction? Have You Considered Alternatives?
If you’re looking to secure a quick house sale, selling a house at auction may seem like the natural choice, but what exactly are the benefits of selling a house in this way?
This article outlines the process of selling a house at auction, gives you an idea of what fees are involved and highlights the potential benefits and pitfalls surrounding selling a house at auction.
Why sell a house at auction?
There are many reasons why homeowners choose to sell their properties at auction. Here are the most common reasons:
- Homeowners looking to sell their house quickly are likely to try selling their house at auction to eliminate property chains and the risk of their sale falling through.
- Homeowners selling an unusual or rundown property that might struggle to sell on the open market may choose to sell through an auction house. Auction Houses are notorious for attracting multiple, professional buyers looking for their next big project, so your chance of achieving a successful house sale increases!
- Having multiple buyers in one room can potentially create a bidding war for a property. If you’re lucky enough, this scenario can quickly drive up the sale price.
- Mortgage lenders also use property auction houses to sell repossessed houses quickly. Repossessed houses will often have a low reserve price, as lenders are keen to recover their losses.
What is the process of selling your house at auction?
The process for selling your home at auction is fairly straight forward.
Choose an auction house
There may be a choice of auction houses in your area. If this is the case, research them carefully to decide who you’d like to auction your property with. Look at their brochures and websites. Ask questions about how their auctions are advertised to buyers. This will help you to assess who you feel would do the best job at attracting potential buyers for your property.
Request appraisals from a few different auctioneers. You could do this while you are researching which auction house to use. Each auction house should provide what they deem to be a good reserve price and details of what fees are payable.
Instruct your chosen auction house
Once you have chosen your preferred auctioneer, you will need to instruct the company and sign any relevant contracts (this is similar to instructing an estate agent to sell a house) At this point you will be expected to pay any associated admin and marketing fees.
Prepare the legal pack with your solicitor
You’ll need to instruct a solicitor to put together a legal pack for the property you are selling. Legal packs generally contain copies of the properties title deeds, any special conditions of sale, land registry search, lease (if applicable) and other relevant documents. Legal packs are then available to potential buyers to inspect right up to the day of the property auction.
Set a reserve price
You’ll need to set a reserve price in advance of the auction. This price can be discussed with the auctioneer. The reserve price you set is the minimum amount you are prepared to accept for the sale of your property.
Auction house to market property
Once the auction house has been instructed and they have your legal pack, they will begin marketing your property. They should discuss the different types of advertising and any associated costs with you before the marketing of your property begins.
Day of the property auction
You may want to be present when the auction takes place, however, this is not mandatory as the auction house will give you an update of the sale outcome once complete.
The auctioneer will normally commence by inviting bids lower than the reserve price, allowing potential buyers to start a bidding war to secure the property. As well as bidders who are physically present, the auctioneer can also take commission bids from buyers unable to attend. In this situation, the auctioneer will bid on behalf of the absentee up to their maximum bid. If your property receives any bids above the reserve price, a sale to the highest bidder will become legally binding.
What if the property fails to sell at auction?
It is important to note that there is no guarantee that you will successfully sell at the auction! In fact, only 75% of property auction listings achieve a successful sale. Regardless of whether your property sells or not, you will have to cover the costs the auction house has outlined to you.
What happens when your property sells at auction?
If the reserve price has been met and the hammer goes down, the house sale is legally binding. On top of any marketing and listing fees the seller has already paid, the auctioneer will charge a commission on the sale (typically around 2.5% of the sale price). The commission is paid to the auction house upon completion of the property sale.
Winning bidders must provide proof that they have cash funds available, or a mortgage in place at the point of auction. If the sale is successful, the purchaser will have to pay a 10% deposit on the day, with the remaining 90% payable within 28 days of the auction.
What are the benefits of selling a house at auction?
When an auction goes well, competition between bidders can drive up the property price, sometimes well above the reserve price. Selling a house at auction can also eliminate the lengthy delays associated with the traditional property market.
What are the down sides of selling a house at auction?
The biggest negative when selling a house at auction is that there are no guarantees a house sale will be achieved! Even if you don’t sell, you will still have to pay the auction house marketing and listing fees. So worst case scenario, you take your property to auction, pay the auction house the fees to list, it doesn’t sell and you’re back to square one and out of pocket!
There’s also a common misconception that selling a house at auction is quick. On average, from start to finish, you’re looking at 2-3 months to achieve a house sale at auction. When you compare these timescales to a cash home buyer who can complete the entire process in 7 days, there’s no comparison!
What costs are involved when selling a house at auction?
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 (these will vary, so it’s vital to do your research before choosing an auction house).
A seller will typically need to pay the following before the day of auction:
- Advertising costs – This cost is paid directly to the auction house to cover the cost of marketing your property prior to the auction.
- Admin costs – Most auction houses will charge an admin fee which is payable regardless to the outcome of your house sale.
- Legal costs – As with any house sale, there will be legal costs to consider. Firstly, you will need to pay your solicitor to draw up the legal pack prior to the auction. If you sell your property, you will also need to cover the costs for your solicitor to complete on the sale, similar to a traditional house sale.
What price can I expect to achieve if I’m thinking of selling a house at auction?
That really depends on how much interest the property generates and how many people attend the auction. If your property sparks a bidding war you could end up achieving a great price for the property.
However, if there’s little interest, your property could end up selling for considerably less than its worth, or fail to attract a buyer at all.
Unfortunately, you can’t predict how the auction will go. If you do decide to sell at auction, think carefully before setting your reserve price and consider what position you may be in if your property does not sell.
How long does it take to sell a property at auction?
Timings can vary, but generally the time taken from auction to completion is around 28 days. You’ll also need to factor in marketing time in the lead up to the auction.
The auction house will need time to generate interest in the property if you want to maximise your chances of achieving a good price. All in all, you’ll probably be looking at 2-3 months from the point of deciding to sell at auction to completion, assuming you’ve found a buyer.
Is selling a property at auction the best way to achieve a quick house sale?
Unfortunately not. Although property auctions do provide the potential to sell a house fast, they offer no guarantees.
We recently had a customer approach us looking for a quick house sale after unsuccessfully attempting to sell her property at auction. After having her property independently valued at £155,000, the auction house advised our customer to offer a reserve price of £100,000 to attract interest.
Not feeling comfortable with accepting such a low offer, our customer opted to put the reserve price at £120,000. The property was advertised for two months before the auction, but on the day only received bids under £100,000. The homeowner was left to pay £500 in fees, with an unsold property and having wasted more than two months.
What are the alternatives of selling a house at auction?
If your main reason for considering selling at auction is the desire to achieve a quick house sale, you may want to consider a professional house buying company.
As the UK’s original and leading home buying company, Quick Move Now offers a great alternative to selling your property at auction.
Quick Move Now has over £6 million available to directly purchase properties. When selling your house to Quick Move Now, all fees associated with the sale are covered by us! We cover all legal fees, surveys and EPC’s, meaning the price we offer you is the price you end up with on completion!
Also, unlike an auction, a house sale to Quick Move Now is guaranteed! In fact, if you choose to accept a cash offer from Quick Move Now, we work around your completion timescales. The money can be in your bank in as little as 7 days!
With no viewings, no fees and no obligation at any point of the transaction, why not see what Quick Move Now would offer for your property?
To get a cash offer for your property, simply complete our online form or call our friendly property team on 0800 068 3366.
Every property that goes to auction will feature a ‘guide price’. This information is available to buyers to give them an indication of what price the property will sell for on the day of auction.
A reserve price is the minimum amount the seller is prepared to accept for their property. The auctioneer will not be able to sell under the reserve price. Reserve prices are often around 10% higher than the guide price but this information is never disclosed to buyers.
Buyers who are unable to attend the auction can submit a ‘commission bid’. By completing a commission bidding form and entering their maximum bid, the auctioneer will bid on the absentee’s behalf up to their maximum.
The legal pack is compiled by the seller and a solicitor and contains all the legal documentation a buyer would need to ascertain whether they want to commit to the property purchase. Legal packs generally contain copies if the properties title deeds, any special conditions of sale, land registry search, lease (if applicable) and other relevant documents. They are normally available for buyers up to 7 days before auction day.