So you’ve decided to sell your house but think that the open market may not be for you? Selling your house at auction is a common way to achieve a quick sale of your property at close to market value.
18th February, 2022
So you’ve decided to sell your house but think that the open market may not be for you? Selling your house at auction is a common way to achieve a quick sale of your property at close to market value. If you’re thinking of selling at auction but aren’t sure how it works or how much it costs, don’t worry. In this guide we’ll walk you through the whole process. We’ll talk about why you might consider selling at auction along with the pros and cons. We’ll cover how much it usually costs to sell at auction, and outline how to actually sell your house at auction from appraisal to completion. Finally we’ll give you some of our top tips for selling at auction, and discuss other options to achieve a quick house sale.
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Traditional methods of selling a house aren’t always appropriate. But when is it a good idea to auction a property rather than use an estate agent or sell your house privately? There are three key reasons why you may want to opt to sell your house at auction instead of a more mainstream method of sale.
Vendors looking for a fast house sale may prefer to sell at auction. So how long does it take to sell a property at auction? Completion timelines tend to be much faster than with an estate agent. When selling via traditional auction, once bidding is completed and the hammer falls, the buyer pays a deposit (usually 10%) immediately.
The buyer then has 28 days to complete the sale under a legally binding contract. If the buyer chooses not to go ahead with the purchase they will lose their deposit and typically pay penalty fees on top. This vastly reduces the likelihood of the sale falling through. Critically though, a 28 day completion timeframe is far quicker than the amount of time it takes to sell a house via an estate agent in the UK. This makes it perfect for sellers who need cash for their property quickly.
Selling a house at auction is a good route for properties that are in a state of disrepair. These houses tend to do less well on the open market, but at auction they garner the interest of investors. Investors look for the potential to either renovate, extend, or otherwise modify the house. So you may end up achieving a higher price for a property that needs work without having to go through the stress of renovating it yourself.
Bespoke or quirky properties sometimes take a long time to sell on the open market. Typically they don’t get a lot of interest as they’re for a specific audience. Savvy auction investors may see the potential for redevelopment or extension of the property to make it cater to a wider range of buyers. So you might want to put your unusual property in auction to get a quicker sale.
Pros and Cons of selling your house at auction
Selling your house at auction can be a great route to sale, but doesn’t come without its pitfalls. We’ll cover 8 of the pros and cons of selling your property by auction.
Reach a bigger market for your property. If you market your property with a reputable auction house then they’ll typically have a large database of prospective buyers. This means that you have a pool of proceedable buyers, with no property chain, that are ready to buy your house.
Savvy investors can see potential. Auction buyers tend to be more savvy than through an estate agency. You’re less likely to face time-wasters or have to deal with endless viewings from low-intent buyers.
Hard-to-sell properties can be sold. Houses that may not sell quickly on the open market can be sold much more easily and quickly at auction. If your property is stagnating on the open market then an auction sale can be a good option. Properties that are difficult to sell because they have structural issues like subsidence or Japanese knotweed can also be sold through auction. You’ll likely sell below market value however.
Quick cash for your property. Sales through an auction complete more quickly than those on the open market. As you’re more likely to reach investors, you’re more likely to be dealing with cash buyers that are in a proceedable position and complete quickly on the purchase.
Security. Due to the deposit that buyers pay directly after their bid is successful there is far less chance of them suddenly dropping the price between exchange and completion. This practice is known as gazundering.
Sell tenanted property. Auction buyers are often buy-to-let investors who are landlords too. So buying tenanted property isn’t as much of an issue as it can be on the open market.
Auction fees. Auction fees can add up quite quickly. You’ll have to pay a solicitors fee and entry fee for the auction. This entry fee is usually due regardless of whether your house sells or not. Then you’ll have to pay the auctioneers fee as well, which typically ranges between 1.5-3% of the sale value. This can be quite a lot more than selling your house through an estate agent. So it’s important to be sure that an auction is the right route to sell your house.
There are no guarantees. Despite paying for the auction entry fee and marketing of your property, there’s still no guarantee that your property will sell. If you’re not careful about how you set your guide price and reserve price, or your property isn’t marketed well, or there aren’t enough interested buyers, then the property may not sell on the day. This could leave you out of pocket and back at square one.
You don’t control the sale price. Whilst you are able to set a reserve price, you can’t control the final amount that your property sells for on the day. This can go both ways. You may end up with much more than you hoped for, but equally you could receive less than anticipated for your house.
You’ll have to move quickly. This is both a pro and a con of selling your house at auction. Completion time frames are more rigid and quick than putting your house on the market. If your property sells at auction, be ready to move quickly once it’s sold!
Cost to sell your house at auction
If you think that selling your property at auction might be the right route to sell your property, your next question is likely: how much will it cost me? There are typically three components to the cost of selling your house at auction.
Commission. This varies by auction house but will typically range between 1.5 – 3% of the property value.
Marketing. You can think of this as an ‘entry fee’ to the auction. This is the cost of placing your property on the popular property portals such as Rightmove and Zoopla. It also covers the cost of creating the listing in the auctioneer’s catalogue, and other marketing that they do to generate interest from prospective buyers. It’s also possible that the auction house will conduct viewings or open days on the property for interested parties. This fee goes towards that. Marketing fees for selling your house at auction range from 0 – 1.5% of the property value.
Legal Pack. Think of these as the conveyancing or legal fees that would normally be part and parcel of selling your house with an estate agent. You will need to cover the costs of producing the documents that potential buyers will want to review to buy your property. This includes things like a title register and plan, property searches, any special conditions of sale, and various property information forms. The legal pack is typically a fixed fee that costs between £500 and £1,000.
The costs of selling your house at auction add up. There are a couple of ways you can try to offset or reduce the cost of selling at auction though.
Pass the auction sale cost to the buyer. Selling at auction means that the seller has control of the sale contract and the terms contained within. These terms include things like the date of completion, buyer responsibilities, but critically any extra costs that are to be covered by the buyer. This means that you can add simple clauses into the contract that mean the buyer covers your auction costs and legal fees and make them payable on completion. This can be included as a buyer’s premium. It may deter some buyers from proceeding, or reduce their bids, but others may overlook it.
Negotiate commission with the auctioneer. For higher value properties, or properties that are very likely to do well, auction houses may be willing to negotiate their fee. It’s worth asking the question to see if you’re able to negotiate the commission at all. It could end up paying off!
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There are 7 steps to selling your house at auction. We’ll walk you through each of them now from the initial appraisal right through to completion.
Auction Appraisal. After you’ve made the decision to sell your house at auction you need to choose an auction house. The auction house you choose will do an auction appraisal on your house. They will outline the auction process for you and let you know how much you can expect to sell the property for. They’ll also be able to give you a steer on where you should set the guide price. It’s a good idea to corroborate this by getting a free online house valuation.
Instruction. If you decide to proceed with your chosen auction house you’ll need to give them instruction to sell your house. You’ll need to provide the necessary documentation and certification to sell your house. The auctioneer will then draft up a description of your property for you to approve to sell at auction.
Getting a Legal Pack. Once you’ve instructed the auction house, you’ll need to get the legal pack together. Your solicitor will do this on your behalf. The legal pack will include details such as the title deeds, searches, and so on.
Marketing the property. After instructing the auction house and getting your solicitor to assemble your legal pack, it’s time to start marketing the property. The auction house will take care of this. They’ll put together a listing on their site and market your property on major property portals. They may also use social media and publications to advertise your house. This doesn’t mean that you shouldn’t market your property yourself though, but we’ll cover that a little later on.
Setting a reserve price and guide price. You will agree a guide price and a reserve price with the auction house. The guide price at auction is the price that the public is shown and is usually the starting bid. It can be a good idea to pitch this low to generate buyer demand and create a bidding war. The reserve price is confidential between you and the auction house. It is the lowest price you’re prepared to accept for your property. If all of the bids received at auction are below the reserve price your house will be withdrawn from the auction.
Bidding. As auction day draws closer, prospective bidders will register for the auction so that they can bid on the property. The auction house you choose will conduct checks on these bidders for anti money laundering purposes. Registered bidders will then bid on your property. Usually this bidding starts at the guide price, and the auctioneer will make sure that everyone gets their fair chance to bid. As a seller, auction day can be very nerve wracking. You aren’t under any obligation to attend so if the nerves get too much then don’t worry! You can always check in afterwards to find out how it went.
Completion. Exchange of contracts typically happens immediately after the bid is won. At this point the buyer pays a deposit of 10% of the sale price of the property. They are then given around 28 days to finalise the sale after exchange. The auction house will coordinate completion with you and your solicitor and manage things like handing over keys etc.
Tips for selling at auction
Selling at auction is exciting. It’s easy to get caught up in the whirlwind of bidding and forget to do the basic things that will make your auction sale a success. We’ve given you our ten top tips to having a successful auction sale.
Choose your auctioneer carefully. There are many different auctioneers and auction houses in the UK. Some of which are purely auction houses, and some are add on services that are offered by traditional estate agents. Spend time up front to research what properties they’ve sold and what price they’ve managed to achieve for them. Some auction houses will specialise in selling a certain type of house. Such as properties in a state of disrepair, or buy to let houses. Choosing the auction house that is best suited to your property maximises your chances of reaching the best pool of prospective buyers.
Set a realistic guide price. Set the guide price at a level that will stimulate demand. If you set your guide price too high then you risk putting some prospective buyers off. Setting the price low, attracting a large pool of bidders, and then letting them bid the price up between themselves is a great way to achieve a better price for your property.
Be wary of hidden fees. There is a legal obligation on the auctioneer to explain all of the associated costs and fees at the start of your sale. Look out for any hidden fees in the contract or sliding scale fees that could become expensive. It’s a good idea to read the agreement carefully before instructing any auction house.
Check out the competition. Once you’ve had your property marketed and listed in the auction catalogue it’s a good idea to look at similar houses that will go in the same auction. Make sure that you set your guide and reserve price competitively. This isn’t something that you’d have to worry about in an online or ‘modern’ auction, but is a consideration when selling your house in a traditional auction.
Make sure you know the terms inside out. All auction houses operate slightly differently. It’s important that you read the terms and conditions carefully before proceeding to instruct an auction house. This is so that you know the fee structure and how much you can expect to pay, as well as understanding how the auction process will work.
Are the fees too good to be true? You’ll notice that some auction houses have much lower fees than others. If the fees seem ridiculously low, there’s probably a reason why. Make sure you check the auction house’s history and track record. Some smaller auction houses with a much smaller pool of bidders offer lower fees to try and attract vendors. You might be shooting yourself in the foot if you opt to go for an auction house with very low fees, because you’ll limit the potential demand for your property.
Check your lot number. Some auction houses run hundreds of lots on auction day. Your lot should appear at peak time, and not too late in the day once most of the bidding is done. The ideal time is during the first half of the session and closer to the start. However this isn’t an issue if you’re using an online auction to sell your house.
Do your own publicity. Your auctioneer will develop a marketing pack for your property and should list the property on major portals. However, there’s nothing stopping you from sharing the listing on social media and other websites to generate as much demand as possible. Every extra bidder helps!
Keep in mind the fees for pulling out. If you pull out before the auction, some auction houses will charge penalty fees. This will cover the cost of listing your property and handling pre-auction enquiries. Keep this in mind and make sure that you’re absolutely positive you want to go ahead before you opt to sell your house at auction.
Get insurance. Get property insurance prior to the auction if you don’t already have it. There have been cases where damage has been caused to properties on auction house open days. Make sure your policy covers you against this.
Modern method of auction
The ‘modern method of auction’ is best described as a hybrid between a traditional property auction and an open market sale. Many agents offer this service as an addition to their core business of selling properties on the market.
The key difference between a traditional auction and a modern method of auction is twofold. First, unlike traditional auctions, the exchange of contract does not take place immediately once the bid is won. The buyer does however pay a deposit (which is not refundable) which commits them to the sale. It also prevents the vendor from marketing the property to other potential buyers.
The second difference is that the timelines are longer. There is usually a period from winning the bid until exchange, and then another period from exchange to completion (typically 28 days between each). This allows buyers more time to arrange finances before completing the sale. Because of this, using a modern method of auction widens the audience of prospective buyers.
Other quick house sale options
People often choose to sell their homes at auction because it’s a method of selling their house quickly to a proceedable buyer. If you’re looking for a quick house sale but aren’t sure if an auction sale is for you then consider a cash house buyer like SmoothSale. We buy any house in any condition, and we buy properties across the UK day in, day out.
We can buy your house for cash in as little as seven days, and our service is completely fee free. We’ll even provide you with a solicitor and cover your legal fees. Get in touch on 0800 368 8952 or get a cash offer today!
FAQs About Selling Your House at Auction
Q: Can I set a confidential minimum price? A: Yes, the reserve price allows you to set a confidential minimum price. If bidding doesn’t reach this price, the property may not sell.
Q: Do I have to accept the highest bid? A: No, if the highest bid doesn’t meet your reserve price, you have the option to negotiate with the highest bidder or relist the property.
Q: What if the bidding exceeds my reserve price? A: Congratulations! If the bidding surpasses your reserve price, the highest bidder is legally obligated to purchase the property.
Q: Are there any upfront costs for selling at auction? A: Yes, there are costs associated with auctioning, including marketing expenses and auctioneer fees. These are usually paid upfront or deducted from the sale proceeds.
Q: How long does the auction process take? A: The auction process can take several weeks, from the initial marketing phase to the closing of the deal.
Q: Can I change my reserve price after the auction starts? A: No, once the auction starts, you can’t change the reserve price. It’s essential to set a realistic reserve price from the beginning.