If you have a property that’s proving tricky to shift, need a quick sale, or just want to experience the thrill of some bidding action, could it be time to head down to the auction room? Here's everything you need to know on how to sell your house at auction.
Thinking of selling your property at auction?
Buying and selling houses at auction is still considered by some to be a rather risky business that should only be undertaken by experienced property investors, developers or builders. However, property auctions are an increasingly popular way for people to sell their family home, a second property or a buy-to-let.
In fact, there are many advantages to selling a property via auction. There’s no chain, no risk of delays or gazumping, and the whole auction process can take as little as six weeks. And, while it’s often thought that selling at auction means you’ll get less for your property, you may achieve at least the same as selling via an estate agent, or perhaps even more. If a couple of keen buyers decide to compete for the sale, they’ll drive up the price. Plus, If you’ve been struggling to sell, it’s reassuring to know that once the auctioneer’s gavel falls, your property is sold.
Reasons why you might sell a house at a property auction
If you have a slightly unusual property, or a fixer-upper, it might be overlooked by conventional buyers. Or if there are issues – such as a short lease, structural problems, or it’s a building that a traditional mortgage can’t be secured on – auctions can be a good option.
The beauty of property auctions is that they extend the circle of potential purchasers and are attended by expert buyers, investors, builders and developers. These property auction veterans are savvy enough to see the potential of your property, particularly if it can be redeveloped or extended, or there’s space for another home to be built.
Of course, many properties offered at auction are mortgageable and ready to move into. So, whatever state of repair or disrepair your property is in, auctions are worth considering, particularly if you want to speed up the process of moving home as you’re relocating, or want a quick sale because you need the cash urgently.
How does the auction process work?
Understanding the auction process means you can give your property the best chance of selling for the right price:
- Choose an auction house
Selling via an established auction house may cost more than a less well-known company, but the auction team will likely know how best to market your property to the maximum number of potential buyers. Do some research and weigh up the options before you make your choice.
- Check out what fees you need to pay
There’s usually an entry fee, which can range from a few hundred to a few thousand pounds, to cover costs such as listing your property in the auction catalogue and advertising. There’ll also be commission to pay if your property is sold, which you’ll have to factor in along with all the other associated costs of moving home.
- Register your property
Do this at least six weeks before the day of the auction to ensure that it’s included in the catalogue and the auctioneer can market it effectively.
- Make sure the catalogue listing is correct
Check all the details before it goes to print.
- Appoint a solicitor
They'll prepare the contract of sale and legal pack. Solicitors fees and legal fees vary so shop around.
- Set a valuation reserve price
This is the lowest minimum price you’ll accept and is kept confidential between you and the auctioneer. If all the offers are lower than the reserve, the property will be withdrawn from the auction.
- Set a guide price
Your auctioneer will help with this – it’s the price that the public is allowed to know and is often pitched on the low side to lure buyers in.
- Prepare your home for sale
Make sure the property is looking its best and is open for viewings for interested buyers and parties to see before the auction date.
- Do your own publicity
You can also market the property yourself by publicising it to your friends and family on social media. Facebook and LinkedIn can be great options.
- Go to the auction or wait for a call
If you're not attending in person, the auction house will phone and tell you the outcome.
- Collect payment
Completion usually takes place a set number of days after the auction, so you'll be able to get your money, minus fees, shortly after the sale.
What are the two property auction methods in the UK?
There are two ways that exchange and completion can take place at a property auction – the ‘traditional method’ and the ‘modern method’.
- If a buyer successfully bids for your property at an auction that uses the traditional method, they’ll exchange contracts and pay a 10% deposit immediately after the auction finishes. They’ll then have 28 days to complete.
- With the modern method of auction, contracts don’t have to be exchanged straightaway. Instead, the buyer pays a fee to reserve the property, which is non-refundable if they pull out. The buyer then has 56 days to exchange contracts and complete the purchase. This method is used for online property auctions (see below).
Are some property auctions held online?
Online-only residential auctions are just starting to take off in the UK and are sometimes referred to as modern method or conditional auctions. They offer greater flexibility for sellers as it’s easy to reduce the property’s price and enter it into another auction if it fails to sell first time round.
The process of setting a reserve and guide price is the same as with a traditional property auction, but with the online version, properties are displayed with an auction ‘timer’, usually set for 30 days.
The bidding process happens online, 24 hours a day, seven days a week. The only prices anyone else sees are the starting and actual bids. At the end of the auction period, the highest bid wins. In an online-only auction, a late bid can result in the clock being extended by a minute, and a sale is only complete after 60 seconds of silence.
Sellers benefit from online auctions because the costs are borne by the buyer. To secure the property, the purchaser must pay a substantial reservation fee upfront, so there’s far less chance of them pulling out. However, there’s a longer completion timescale of 56 days– unlike a traditional auction where contracts are exchanged on the day – to give the buyer time to sort mortgage finance.
How much does it cost to sell a house at auction?
Auctioning a property will almost always cost less than selling a property through a high-street estate agent.
There are three main costs to consider when auctioning your house.
First, auctioneers will usually charge around £300 + VAT to get a property listed. Then, once a final sale price has been agreed, you will likely need to pay around 2% + VAT to the auctioneer. Finally, you should also bear in mind any solicitor fees. This can often be an additional £200.
What happens if a house doesn’t sell at auction?
While the overwhelming majority of properties brought to auction sell, sometimes houses fail to reach the bids necessary to complete a sale.
In the event that you can’t sell your property, it will be marked as ‘unsold’ and the auctioneer will continue to advertise the property online for a set period of time.
What are the advantages of selling a house at a property auction?
- You’ll reach a bigger market
Auctions are attended by a wide range of people and interested parties, including investors, developers and property dealers.
- Buyers are often on the look-out for renovation projects
If you've got a property in need of significant repair, auctions are the place that people go to find them.
- If you have a type of property that’s tough to sell
Unusual homes or those with legal complications are standard fare at auctions.
- You'll get your cash quickly – Once contracts are exchanged and the conveyancing is complete, the buyer has to pay a 10% deposit on the day and the remaining amount within 28 days.
What are the disadvantages of selling a house at auction?
- You'll need to be ready to move
If you're living in the property, you'll need to up sticks quickly once it’s sold.
- The auction fees can add up
Along with the solicitor’s fees and auction entry fee, which you pay even if the property doesn’t sell, if the sale is successful, you’ll have to pay the auction house around 2.5% plus VAT in commission, which is considerably more than the average estate agent fee of 1.42%.
- The sale isn’t guaranteed
Although you’ve stumped up for various costs and have a fixed date for when your property will be ‘sold’, there are no guarantees. If the auction house hasn’t marketed it well, or your reserve price is too high, your property may not sell, even if there are interested bidders on the day.
- The final sale price is out of your hands
While the reserve price will protect you from selling below the minimum amount that you’ll accept, you have no control over what happens on auction day. While the property may go for more than you anticipated, it’s just as likely to sell for less than you hoped.
Are there other alternative ways to sell my house?
In addition to traditional or online auctions, other ways to sell a property include:
- Sealed bids
This is a type of auction that’s used if there’s lots of interest from competing buyers. The seller receives an undisclosed offer from each prospective buyer before choosing the winning bid.
- Cash buyer
This is someone who can buy a property outright, without a mortgage or loan. A cash sale releases funds to the seller very quickly, but, because of this, cash buyers may only be willing to pay below the asking price.
- Part exchange
A part exchange homes scheme is where your current home serves as part payment towards a new build property, and the sale is guaranteed.
Property raffles are rare in the UK. Essentially, people buy a raffle ticket to win a property and, if their ticket is picked, the house is theirs. Raffling your home is perfectly legal, but you’d need to hire a solicitor to ensure everything is above board. Bear in mind too that if your home is valued at £300,000, then to raise that amount you’d have to sell 60,000 £5 raffle tickets, which is no mean feat.