Selling property at auction: Everything you need to know
This guide to selling a property at auction will help you understand more about what to expect before your home goes under the hammer.
There are several reasons why you might want to sell a property at auction rather than put it up for sale on the open market in the traditional way. Our guide takes you through the auction process, what to expect on auction day, and the pros and cons of going down the auction route.
Why sell your property at auction?
If you’re looking for a speedy sale and certainty that a buyer won’t bail on you, auctions can be a good way to go.
Once the hammer falls the buyer has to put down a 10% deposit, they then have a month to give you the remaining 90%.
Auctions can also help drive up the price of your property if there’s demand from multiple buyers who are all in the room together.
If you have an unusual or run down property you may find it hard to advertise to conventional buyers, but auctions are often attended by expert buyers or people looking for a project to work on.
So if you need to sell up quickly or need the money urgently, an auction may be the key for you. This is as long as there’s enough interest and you’ve set a realistic price though.
What is the process of selling a property at auction?
The first step to selling a house at auction is an appraisal. Your auction house will tell you whether your property is suitable and how much it’s worth. Have an idea about the value of your home beforehand so you know what to set your reserve price at.
After your auction appraisal, you’ll find out the auctioneer fees and commission. Remember, even if your property does not sell at auction, you may still be expected to pay these.
Surveyors will be sent to examine your home and part of this process means that photos and measurements will be taken.
These will be used to market your property, which will be done through the press, online and of course auction catalogues. Auctioneers will then report interest in your home back to you. This should help create a lively property auction, where bids can come in person, online or even via telephone.
How much does it cost to sell at auction?
Before you decide to auction your house, consider the cost of doing so. Auction fees will vary and you’ll need to pay both an entry fee and a commission fee.
Entry fees depend on the auction house, and commission fees are a percentage of your sale price (typically 2.5%). But these are not the only auction fees you will need to pay. Other costs include legal fees as you’ll need a solicitor to go over the legal pack, which can be anything up to £500.
You will also need to pay for conveyancing, which is paid to your solicitor and could be up to £750. Add to this the fact that your solicitor must attend the property auction with you and that you’ll need to pay them for this time, and you can see how costs can escalate quite quickly.
Can I accept offers in advance of the auction?
The short answer is yes. You can complete a sale during the property auction process or before the auction takes place. However, you will not be refunded by the auction house and could lose thousands of pounds.
Taking this into account, it doesn’t make sense to do both but then again, just relying on an auction sale is a huge risk.
How do I set the reserve and guide price at auction?
Your reserve is the lowest price you will accept, which is kept private between you and the auctioneer. If all the offers are lower, the auctioneer will withdraw the property from the auction.
If someone offers your reserve price or above, the auctioneer will drop the hammer and you won’t be able to back out.
If your house has been on the market already and you haven’t had any offers for the price you wanted, you might be being unrealistic.
Don’t worry if you realise you’ve set your reserve a bit too high, you can still negotiate with a buyer after the auction.
As for the guide price, your auctioneer will help you with this. This is the price that the public is allowed to know and is used to lure buyers in. Essentially it’s an idea of what the house is worth, so even if you put it lower than the reserve, you won’t have to accept it.
What else should I consider prior to the auction?
The auction house should be doing its best to market your property, but don’t assume that they’re going to do all the work for you. If the right kind of buyers aren’t in the room on the day you could lose out.
It’s in your interest to make sure the property is looking its best and open for viewings from prospective buyers in the weeks leading up to the auction.
You should also do your part to make sure the news gets out to as many potential buyers as possible. Publicise your property to your friends on social media and put the word out to your family and colleagues.
How long does it take to sell at auction?
The length of time it takes can vary, but it may be as quick as two months. You must put your property up for auction at least six weeks in advance, and once the hammer falls sale completion should take 28 days.
This is because someone buying a house by auction must commit to paying a 10% deposit upfront, with just one month to pay the remaining amount.
What happens if the property doesn’t sell at auction?
Auction sales can be an exciting way to sell your home, but they aren’t always the most reliable. On average 25% of properties fail to sell at auction, so it’s important to be prepared for a disappointing result.
When bidding fails to reach the reserve price at a property auction, a property will be classified as unsold. There are a number of reasons why this might happen, usually because the legal pack wasn’t ready in time for auction day or there was a low level of interest in the property.
If the auction house legal pack hasn’t been prepared in time for auction day, then potential buyers won’t have the vital information they need to place a bid with confidence. Make sure that you have this sorted before you arrive at the auction house on the day.
- Auctions can save time as the buyer has to make a 10% deposit immediately, with one month to deposit the remaining 90%.
- If more than one person is interested, the reserve price can far exceed your expectations.
- If your reserve price isn’t met, you won’t be forced to take a lower price for your property.
- Once the hammer has been dropped, the property is sold, so buyers can’t back out at the last minute.
- If you don’t sell because your reserve price is too high, there is always the potential to negotiate after the auction has finished.
- Selling at auction can deter some buyers because of the competitive nature of the bidding process.
- Potential bidders must register to attend an auction and this may also put potential purchasers off.
- There’s no guarantee that your property will reach its reserve price or sell at all, and re-listing will incur further costs.
- The price you receive may not fully satisfy your expectations.
- The costs of selling at auction may exceed those of using an estate agent, and you’ll pay the auctioneer’s fees if you sell or not.
- On the day of the auction, your solicitor must attend with you. You’ll need to pay for their time and attendance too.
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