haart's Selling Process Guide:
Selling your house at auction
When the hammer falls on residential properties on TV programmes, you may have wondered: is that really what happens at house auctions? Why do people choose this way of selling their house? Selling a house at auction is in fact a more complex process than it may appear, but it does sometimes offer homeowners the opportunity to achieve a quicker sale.
In this article we look at what’s involved in buying and selling at property auctions, the costs involved, the benefits and drawbacks, online property auctions and whether it is the right thing for you to consider if you are thinking of selling your house this way.
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How do house auctions work?
Selling a house at auction is a process that can take several months. An auction house will put together a marketing catalogue, published two or three weeks before the auction date.
At this stage, prospective buyers are permitted to arrange viewings of the auction properties and even pay for early-stage surveys to ascertain if there are any structural issues that could cost a fortune to repair. Open houses may be arranged. Buyers can also request a comprehensive legal pack, to better understand the legal particulars of the plot.
Each property will have a guide price listed in the catalogue. A guide price is what the auction house believes it could be worth on the open market, but you are within your rights to set a reserve price once the bidding process begins. The reserve is the lowest sale price the seller will accept, which is often kept confidential from prospective buyers.
Can you auction your house?
Not all houses will be suitable as auction properties. However, if there is anything that makes your property challenging to sell on the open market, then an auction could be right for you. For example, a private buyer on the open market is more likely to be put off or make a lower offer for a more run-down property than an auction buyer or developer who is looking for investment properties.
Selling property at auction
If you decide to sell a house at auction, you’ll have to choose an auction house to sell your property with. There are many auction houses throughout the UK, so it’s best to choose one that’s a member of the National Association of Valuers and Auctioneers (NAVA), which ensures the auctioneer adheres to NAVA’s code of conduct and best practice.
The auction itself will either be held in person or, as has now become common, online property auctions give buyers the chance to bid without having to leave their own home.
On the day of the auction, potential buyers will receive a bidding number, which acts as their identification during the bidding process. If someone cannot attend the auction, potential buyers can often make proxy or telephone/online bids. Typically, once the bidding has ended and the hammer falls on a deal at a specific price, the buyer will be required to put down a 10% deposit on the sale price of the property that day, followed by the remaining 90% within 28 days.
How much does it cost to sell a house at auction?
Let’s be clear, property auction fees aren’t cheap. Although there are no hidden costs, with all necessary charges visible up front, it’s a lot to consider whether it’s cost-effective to auction your house. Typically, you’ll be required to cover the following auction costs:
An auction house will charge a flat fee for including your property in their catalogue. This will vary from auction house to auction house, but it will be payable at the point of instruction to sell, although it can be deferred in the case of probate properties until post-sale.
One of the major outlays when selling your house at auction is the commission owed to the auction house. Most auctioneers will charge 2.5% commission plus VAT on the sale price of the property. The auction house may also charge for advertising and marketing your property in its catalogue.
Auction legal pack
Your chosen solicitor will also need to prepare a legal pack when you auction your house, detailing the top-line things buyers will need to know before making an offer. The legal pack often contains lease information (if leasehold), the title plan and confirmation of the plot size.
Once you have selected a solicitor to handle your house sale at auction, you will have to cover the costs of their conveyancing services once a sale has gone through.
Other legal fees are those that are standard with any conveyancing process, such as the solicitor’s administration costs.
Stamp duty and other taxes
Buyers will of course be liable to pay stamp duty as part of your purchase, so may be a factor when thinking about your guide price.
Online house auctions
Online property auctions have become increasingly popular in recent years, particularly when social distancing guidelines restricted attendance at in-room auctions, or were not able to be held at all. Some auction houses run their online house auctions on a rolling basis, rather like eBay auctions, with restricted periods to bid on lots; others hold auctions as online events that take place at a specific time and day.
The same rules apply for sellers at traditional auctions with regards to reserve prices, guide prices and maximum bids. Catalogues will be produced before the auction and viewings can be arranged for prospective bidders. Unsold properties will still be available for bids after the auction has ended.
What happens if my property doesn’t sell at auction?
In the event of the maximum bid not meeting the reserve price, the house will be withdrawn from the auction and it becomes an unsold lot. This does not always mean that your chance to sell your property has gone. The auction house may invite offers from any interested buyers and agree a sale afterwards. A buyer who attends the auction but does not offer a competitive bid may be hoping to secure the sale by this means.
Should you auction your house?
If the answers to any of these questions are ‘yes’, then selling a house at auction could be for you.
- Do you need a quick sale, for reasons of probate or to fund investment in another property?
- Is your property in need of major refurbishment, modernisation or repair?
- Will it be in demand commercially?
- Does your property have a niche interest?
Benefits of property auctions
- The simplest way to ensure a chain-free sale
- Buyers are legally obliged to complete the purchase within 28 days of the auction
- Well-suited to houses that require significant renovations
- You could get a higher sale price at an auction because of competitive bidding from rival buyers
Drawbacks of property auctions
- If the property doesn’t sell, you will still be liable for the auction and solicitor fees
- Auctioneer commission fees can eat into your sale price, and are considerably higher than the average estate agent’s fee
- If you are still living in the property, you’ll have to move out fast as soon as it has sold at auction
- All house sales at auction are final once the hammer falls
Selling a property at auction advice
- Be sure to set a reserve price that’s realistic in the current market
- Double and triple-check your property’s listing in the auctioneer’s catalogue before it goes to print. Any errors could deter prospective buyers and scupper the chance of a sale
- Select an auction house that is not only reputable and regulated, but one which has experience of selling your type of property
- Make sure your property is looking its best prior to any open days for viewings from potential buyers
Get an initial market appraisal
If, after reading this guide to selling auction properties, you feel that selling your home through an estate agent might be a safer bet, at haart we’re ready and waiting to sell your property for the right price at the right time.
With coverage of almost 5,000 postcode districts across England and Wales, our property professionals can get you moved smarter than before. Get the ball rolling with a free initial property valuation from your local haart estate agents and discover more about our selling process today!
Process for selling