Can You Auction Property In Monopoly?
Selling a home in the UK can be a lengthy and uncertain process if going through traditional estate agent routes. Vendors can wait many months for a sale to complete, with the risk of deals falling through if buyers cannot finalise mortgages or sell their properties first. For those seeking a quicker, more assured way to offload a property, more are turning to the auction room.
What Does It Mean to Auction Property?
Property auctions provide an alternative route for transacting residential and commercial property compared to private sales. Auction houses market listings to attract interest from potential buyers in the weeks leading up to scheduled public sales events. Buyers then bid against each other in live auctions to secure the highest price possible. Legal contracts get exchanged on the fall of the gavel for successful bids over the reserve.
For sellers, opting to auction property brings some major plus points compared to more traditional disposal channels…
Speed and Efficiency
One of the standout advantages is the speed and efficiency of sales that becomes possible. The actual auction date will usually come around just weeks after the decision to sell has been made. Marketing by the auctioneer generates interest ahead of time among registered house hunters looking for renovation projects, buy-to-let investments or own homes.
When auction day arrives, competitive bidding then accelerates the sale itself. The public environment sees purchasers spurred on by the desire to not miss out, with adrenaline and auction fever often taking over!
If the hammer price meets or exceeds the vendor’s preset reserve level, the winning bidder exchanges legally binding contracts there and then. Completion dates also get agreed upon within as little as 28 days in most cases. Such a pace of sale is virtually unheard of selling through estate agents or privately.
Certainty of Sale
Opting to auction also brings far greater confidence for sellers around deals completing. Whereas approx. 1 in 3 private sales collapse due to mortgage, survey or legal obstacles, auction conditions enforce buyer commitment. Winning bidders exchange binding contracts immediately after sale agreements get struck, backing this with hefty upfront deposits. Buyers must then complete purchases by the early dates defined in sales contracts – or face forfeiting deposits if they withdraw later. By effectively eliminating risks of gazumping and down valuations, auctioning property removes huge uncertainty headaches for stressed vendors.
Potential to Exceed Expectations
Another possible benefit to sellers is enhanced sales prices above initial expectations. While achieving the reserve remains the priority, nothing guarantees higher ultimate sales values like open transparent bidding between competing purchasers. Auction fever even occasionally results in homes selling for over-list prices amid spirited bidding wars. For forced sellers requiring quick high certainty disposal, the heightened atmosphere and urgency of the auction room unlocks maximum value.
Wider Market Exposure
Auction houses also access much wider potential buyer markets than traditional channels. The online global promotion sees listings go out to investor mailing lists and portal feeds internationally – reaching far more house hunters than typical estate agent email shots. Come auction day itself, packed function room attendance then allows bids to be taken from the widest possible pool of interested parties. Whether aiming to offload quickly or secure the highest prices, casting the net as wide as possible is key.
Are There Any Downsides?
Potential drawbacks also merit consideration before committing to an auction.
May Not Hit Reserve
First and foremost, there is the risk of failing to attract bids hitting the guide price and reserve level. Auction houses will market listings widely and likely generate good initial interest. However, if too few parties register to bid or get put off on the day itself, unsold lots can occur. This may require a rethink of pricing and relisting at a later auction. It can dent vendors’ confidence slightly even if reserving the right not to sell.
Less Influence Over Buyers
Unlike private sales where estate agents often update vendors on buyer backgrounds, auction sales see limited insight into who may end up purchasing the property. Bidders often remain fairly anonymous. While funds and the ability to complete sales get vetted ahead of auctions, the lower level of individual influence will not suit all sellers.
Costs Either Way
Vendors face auction costs whether their lot sells successfully or not. Booking out spaces in auction catalogues and conducting viewings still incur fees regardless of the outcome. Sellers may also face charges if sales collapse post-auction due to non-committed buyers. Factoring these risks into budget forecasts is advisable before proceeding. That said, successful sales continue generating positive net returns in most situations.
Weighing everything up, for the majority of property vendors the many benefits of auctioning a property greatly outweigh the potential limitations…
Who Buys at Property Auctions?
Given the advantages to those selling homes via auction, it is little wonder more vendors are opting for the gavel route year after year. Yet auctions can only function effectively if buyer demand exists too. So where does that demand come from? Broadly three main purchaser profiles bid for properties at auction.
Professional Investors & Developers
The first major category is professional property purchasers. These include landlords and rental investors on the hunt for new tenanted additions at discounted prices compared to the open sales market. Renovation builders also regularly attend auctions seeking run-down properties with “improvement potential”. By refurbishing dated houses, they can then sell these privately at sizable profits. Their expertise allows them to accurately cost upgrade works to calculate viable bids. Auction houses welcome traders who repeatedly transact for a living – they are committed buyers unlikely to pull out down the line.
First Time Buyers
Increasingly younger first-time buyers visit auction halls too. Growing difficulties securing affordable housing through traditional channels see more youthful house hunters turn to auctions to get on the ladder. Viewing auction lots allows them to assess if cheaper entry prices exist on certain properties compared to expensive estate agent listings. Where first-timers have done their homework and set realistic ceiling bids based on required renovation budgets, they can come away with genuine bargains. Their enthusiastically competitive bidding also helps drive prices up for sellers.
Downsizers & Lifestyle Buyers
Empty nesters at later life stages form another key segment attending property auctions today. Equity-rich but cash-poor “last-time buyers” may sell large family homes to downsize into lower-cost auction lots. The quick and assured auction method suits their time imperative if winding down careers or planning retirement relocations abroad. There are also those seeking auction homes in scenic locations as relaxed lifestyle investments. Professional middle-aged couples in this bracket will often compete strongly to secure character cottages or rural retreats not available on the open market.
Auction rooms brim with eager prospective buyers from across the private, trade and lifestyle segments – all ultimately enhancing sales prospects for vendors listing properties.
How Does the Bidding Process Work?
For those unfamiliar with auction procedures, what exactly happens once the hammer comes down? How do bids get placed and exchanged?
Before entering bidding, prospective buyers must register their details with the auctioneer and make payment of a refundable bidding deposit. This shows commitment and ability to honour offers made during frantic salesroom activity. Officials carefully note identities and paddle numbers assigned to registered bidders.
The auctioneer declares guide prices ahead of bidding but reserve levels stay confidential between the auctioneer and seller. These represent the minimum acceptable sale prices vendors will accept. Escalating bids must reach or exceed the reserve before gavels fall to conclude sales. Where bidding stalls below vendor reserves, properties get withdrawn unsold.
With the auctioneer describing property features, initial bids get typed into computer screens before rooms and online platforms. Registered attendees bid against each other by raising numbered paddles after each increased price was announced. Auctioneers look out for signals and call out paddle ID numbers after each bid. Assistants help spot raised hands.
The Race to the Top
As bidding accelerates between committed buyers, auctioneers rapidly call successive bids until eventually, the hammer falls with a bang. Gavel falls confirm the final highest amount – sales then get agreed if this hits or clears previously set property reserves. The vendor’s sale price gets established and the winning bidder is noted.
With the property now “under the hammer”, the winning bidder heads to a desk to immediately sign contracts and hand over a 10% deposit cheque. Details also get agreed upon for completion dates occurring within tight time frames at this point. Legal commitments get secured “on the fall of the gavel”. If bidders later withdrew for whatever reason, they sacrificed 10% deposits paid.
While necessarily condensed here, the fast-paced sequence generates an adrenaline rush for participants. Skilled auctioneers build suspense and atmosphere before driving bidding upwards through tried and tested sales patterns. For vendors who can stomach a public sale spectacle playing out, the competitive momentum invariably assists final results – both in terms of sales completion as well as optimal end prices being achieved.
In the frenetic world of UK property auctions, only one certainty exists around eventual sale values. Residential properties reasonably aligned to market rates by expert local professionals should exchange contracts achieving realistic pricing levels. While higher final bids deliver profitable outcomes for satisfied vendors, even sales at reserve still complete deals rapidly. For lawyers managing distressed clients requiring urgent sales like bereaved estates or divorce splits, this assurance offers comfort alone. Auctions ultimately expedite property disposals at market rates quickly for those seeking certainty most. Where pricing aligns with local buyer demand, fair, fast home sales represent a given.
Ball, Michael (2022) How to Buy Your First Home at Auction (And Not Get Your Fingers Burnt). propertyinvesting.net. https://propertyinvesting.net/value-property/buy-first-home-auction/