Selling your house by auction
You may have seen residential properties go under the hammer at auction on television programmes that glamorise the concept and wondered how they work. The truth of the matter is that some homeowners choose to sell their properties at auction because it sometimes allows them to achieve a quicker sale.
There are various other reasons why selling a house at auction can be just as attractive as selling it privately on the open market. This article is designed to equip you with all you need to know about property auctions, along with the pros and cons to help you decide how to play your next property sale.
How do house auctions work?
There is a string of property auction houses located across the UK. These auction houses generally plan their upcoming auctions several weeks, even months in advance. Each auction house will typically have a portfolio of properties ready and waiting to be sold at auction. These are usually packaged up into marketing catalogues, to enable potential bidders to have a good look at the available houses and absorb all the available information, from the age of the property to its energy performance.
At this stage, prospective buyers are permitted to arrange property viewings and even pay for early-stage surveys to ascertain if there are any structural issues that could cost a fortune to repair. Buyers can also request a comprehensive legal pack, to better understand the legal particulars of the plot.
Within these auction catalogues, auction houses will tend to publish ‘guide prices’ for each upcoming property. A guide price is basically what the auction house believes it could be worth on the open market. The guide price of an upcoming auction property is different to a ‘reserve price’. The reserve is the lowest sale price the seller will accept, which is often kept confidential from prospective buyers.
Potential buyers will head to the auction house on the day of the auction, receive a bidding number, which acts as their identification during the bidding process, and sit and wait for the auctioneer to start the auction. If a potential bidder cannot be physically present at the auction house, they can often make telephone or proxy bids. Typically, once the bidding has ended and the hammer has gone down on a deal at a specific price, the buyer will be required to put down a 10% deposit on the property that day, followed by the remaining 90% within four weeks.
How to sell a house at auction
First and foremost, if you decide to sell a house at auction, you’ll have to choose an auctioneer to sell your property with. This is no longer an easy task, given there are many auction houses dotted throughout the country. 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.
Once you’ve selected an auction house for selling your house at auction, your home will then be marketed to prospective buyers via the auctioneer’s catalogue. ‘Open’ viewing days may be arranged in close liaison with you prior to the auction date, allowing potential buyers to see the property for themselves before parting with their cash.
The auction house will set a guide price for your property, but you are within your rights to set a reserve price once the bidding process begins. If the property doesn’t sell on the day, you may be given the option of selling after the auction, particularly if there is an interested party prepared to pay just below your reserve price.
The costs of selling property at auction
There’s no two ways about it, 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:
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.
- 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.
- Auction Commission
The other major outlay 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. For example, if your house sold for £150,000 at auction, the auctioneer would be owed £3,750 of the sale proceeds. The auction house may also charge for advertising and marketing your property in the first place in its catalogue.
Advice on selling a property at auction
- Be sure to set a reserve price that’s realistic in the current market, particularly if you are looking for a sale and not putting it up for auction speculatively.
- 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.
- Selection 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, in order to ramp up interest and competition on the day of auction.
Auctioning a house pros and cons: Is it right for you?
- It’s the simplest way to ensure a chain-free sale of your house.
- Buyers are legally obliged to complete the purchase of your house within 28 days of the auction, on average.
- Auctions can be well-suited to houses that require significant renovations that are a magnet for property investors looking to maximise their returns.
- If the property doesn’t sell, you’ll still be liable for the auction and solicitor fees, leaving you out of pocket for nothing.
- Auctioneer commission can eat into your sale price, minimising the funds at your disposal to put towards your next property.
- Auctioneer commission fees 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 has gone down. This means there’s no going back and it’s too late to back out of the sale if your circumstances change.
If, after reading all this, 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!