Auction Advantages: Exploring The Winning Strategies In The UK Property Market
The UK property market has seen enormous growth and changes over the past few decades. One area that has steadily gained popularity is the use of property auctions to buy and sell houses. Auctions offer distinct advantages for both buyers and sellers in today’s fast-paced housing market.
This article will explore the key benefits of UK house auctions and provide tips on how to develop effective auction strategies that lead to successful outcomes.
Understanding UK Property Auctions
A property auction is a method of sale where prospective buyers place competitive bids on a home during a live event. The highest bidder wins the right to purchase the property at the end of the auction. Auctions are facilitated by licenced auctioneers and governed by strict rules and procedures.
There are two main types of property auctions in the UK:
- Traditional Auctions – The most common type, these are live in-room events where bidding takes place in person. Once the hammer falls, the exchange of contracts and deposit payment usually occurs immediately.
- Online Auctions – A more modern approach, these allow buyers to place bids remotely via the internet. Registration and participation occur through the auctioneer’s website.
Auctions have long been popular for distressed properties such as repossessions and probate sales. However, today they are utilised across the housing market for all types of residential and commercial properties. On average, over 100,000 properties sell at auction in the UK every year.
Key Benefits for Buyers
For buyers, auctions offer several advantages that can facilitate purchasing a home:
- Faster Purchase – Unlike traditional house buying which can take months, auctions accelerate the process. Most auctions complete sales within 28 days from the fall of the hammer. This enables buyers to secure a property quickly.
- Reduced Competition – Many serious buyers are put off by the auction process. This leaves less competition compared to the open market. Serious bidders have a greater chance of success.
- Motivated Sellers – Homeowners use auctions because they need to sell fast. This creates an opportunity for bargain hunters hoping to get a discounted price.
- Fixed Timescale – Auctions have defined start and end times for bidding. This pressures buyers to have everything ready beforehand (e.g. viewings, surveys, mortgages, funds). A deadline focuses the mind.
- Ability to Set Maximum Bid – Buyers can establish their highest price limit and stick to it during the heat of the moment. This financial control removes the risk of overpaying.
- Reduced Risk of Gazumping – As the sale is legally binding post-auction, the risk of gazumping is largely removed. Buyers gain certainty that the property is theirs.
Maximising Success as a Buyer
For best results as a buyer at auction, the following tips are recommended:
- Do Thorough Research – Check sales prices for comparable area properties. Visit the property and inspect it fully before auction day. Identify any work needed and associated costs.
- Arrange Finances – Speak to a mortgage broker and have the needed deposit funds ready. If buying at auction without a mortgage, have the full purchase price available.
- Read All Legal Packs – Review the property information pack carefully. Ensure you are comfortable with the contents before bidding.
- Set a Maximum Price – Based on your research, establish the maximum you are willing to pay and do not get tempted beyond this price in the heat of the moment. Stick to your limit.
- Attend in Person – Review the lot yourself on the day and register and bid in person if possible. This gives you direct control.
- Do Not Get Emotionally Attached – Approach the auction rationally. Do not get caught up in bidding wars and pay over the odds. Be ready to walk away.
- Consider Potential After-Sale Costs – Factor in costs for repairs, renovations, or upgrades after purchase. Leave room in your maximum bid to cover these.
- Have Contingency Plans Ready – In case you are unable to secure the property, be ready to immediately move on to the next buying opportunity. Do not dwell on a failed auction bid for too long.
Benefits for Sellers
For those looking to sell property, auctions also offer numerous advantages:
- Speed of Sale – Property can go from listing to sold in as little as 6-8 weeks rather than waiting months for a buyer. This ability to liquidate assets quickly is advantageous.
- No Lengthy Sale Chains – Unlike private sales, the auction process is not dependent on existing chains of buyers and sellers. This removes delays and collapses timescales.
- Cash Buyers – Auctions attract serious investors and landlords with cash ready to buy. This minimises the risks associated with dependent mortgage sales.
- Transparent Pricing – Competitive open bidding ensures the property sells closest to its real market value on the day. Sellers get true price discovery.
- Contract Binding – The instant legally binding exchange of contracts gives sellers certainty that the sale is secured. The risk of gazumping is removed.
- Motivated Buyers – Auction buyers must have finance arranged, conveyancer instructed etc. This results in committed buyers who will complete deals smoothly.
- Lower Fees – Auctioneer commissions and legal fees are often cheaper than private sale costs such as high street agent fees. Overall lower selling costs.
Utilising Auctions Effectively as a Seller
When selling at auction, the following tips can help maximise results:
- Set a Realistic Reserve Price – This is the minimum amount you are willing to accept. Get advice from professionals to establish a competitive and enticing reserve price.
- Prepare Legal Paperwork – Ensure all property ownership documentation is ready. Gather any surveys, warranties, leases etc. Buyers want full information.
- Invest in Marketing – Pay for quality online and print marketing via the auctioneer to attract maximum buyer interest and bidding. Market nationally.
- Declutter and Clean – Present the property in its best light to buyers. A cluttered or dirty home puts bidders off.
- Consider Pre-Auction Offers – Be open to considering pre-auction offers over the reserve price. This removes the gamble of waiting until auction day.
- Attend the Auction – If possible, attend in person. You can speak to interested parties first-hand and have direct influence over the bidding.
- Be Prepared to Negotiate – After the auction, be open to negotiating with the highest bidder if the reserve is not met. Maximise your chances of still agreeing to a sale.
- Have Contingency Plans – Should the property fail to sell, have a backup plan in place. For example, consider listing it with an estate agent or trying another auction date.
In summary, auctions offer significant advantages to both purchasers and vendors in the UK property market. Buyers can often secure properties faster, with less competition, and with more price certainty. Sellers benefit from expedited sales, motivated buyers, and auction fees that are lower than traditional estate agent commissions. However, thorough preparation is required by both parties beforehand to enhance success. When executed strategically, the auction process can enable transactions that benefit all participants.