Selling Your House At Auction
Selling your house at auction is becoming more popular with those who wish to achieve a quick house sale.
We have collated all the information that you need to be aware of when considering selling your property at auction. The process of selling at auction isn’t for the faint hearted, so it’s important that you have all the facts upfront to manage your sale successfully.
In this guide
- What is an auction?
- How does a property auction work?
- How long does it take to sell a house at auction?
- The auction process – step by step
- The auction day
- How much does it cost to sell at auction?
- Is my house suitable for auction?
- Which auction house should I use to sell my property?
- Pre-auction offers – what to do!
- Setting a reserve and guide price at auction
- What else should I consider prior to the auction?
What is an auction?
Auctioning is the process of buying and selling goods, or services, by offering them for bidding. Bids are taken, and the items are sold to the whoever bids the highest amount.
Auctions are commonly opened with an ascending price, and bidders bid openly against one another, with each subsequent bid required to be higher than the previous. Auctions are common for the quick sale of a wide range of goods, including cars, antiques, livestock and property.
How does a property auction work?
To purchase the property the bidder has to put a 10% deposit down to secure the sale. The sale will then be completed within a month, when the remaining 90% of the funds are transferred.
At an auction, interested buyers will bid for your property and the highest bid wins the auction. The is deemed under offer when the hammer strikes, and the winning bidder is obligated to purchase the property by putting a 10% deposit down to secure the sale. The sale will then be completed within a month, when the remaining 90% of the funds are transferred.
Selling property at auction can create a lot of interest from potential buyers which can soon drive up the price, especially when the auction room is full of property buyers who don’t want to miss out on an opportunity to buy property quickly, and below market value.
Auction selling often requires a particular type of property. If you have an unusual or dilapidated property, you may find it difficult to advertise to traditional house buyers. Auctions do however attract a different variety of property buyers, such as developers and experienced landlords with different needs and requirements, who aren’t put off with problematic properties.
How long does it take to sell a house at auction?
Selling a property at auction can be a quick process and you could sell your property within two months. Typically, it takes anywhere from 6 to 10 weeks.
If you’re looking to sell your house fast, auctions are an ideal option. Providing there is enough interest in the auction rooms, and you set a realistic reserve on your property (generally 75-80% of the market value), your property will sell quickly at an auction.
The auction process – step by step
The auction process as a whole involves seven main steps, beginning with an auction appraisal right down to completion of the sale.
If you’re considering selling your home at an auction, it’s important to consider all of the steps and be as informed as possible, ensuring the sale goes smoothly.
- Auction appraisal
Once you’ve decided to sell your home via auction, you should decide which auction you’ll choose to sell your home at. It’s a good idea to research auctions that specifically specialise in your kind of property, or sell them regularly – this way, you’ll know your property will be seen by the correct kind of buyers.
Then, you’ll need to have it appraised. Appraisals are usually completed by the auction you’ve chosen, and it involves an approved auction valuer assessing your property. They’ll outline the benefits of selling your particular house at auction, how much you can expect it to sell for, and advise on your reserve price.
At this point, there should be no obligation to go through with the auction, so it’s best to use this opportunity to gain any advice and ask questions around the process.
If you decide to go ahead, you would then sign terms and conditions ahead of the auction. You’ll then be asked for all the documentation and certification required to sell, and a draft description of your home will be created by the auction and sent to you for approval.
- Legal pack
At this point, you should appoint a solicitor to draw up a legal pack which will include title deeps, applicable searches, conditions of sale and other important documents and guidelines that will allow you to officially and successfully hand over your rights to the property to the highest bidder.
Once your instructions and legal pack are all signed and completed, the auction will then start marketing your house to generate some interest and encourage buyers to come along and bid.
Most auctions will use social media, auction boards, publications and websites to market your property, but the auction should keep you informed along the way.
- Reserve price
The auction appraisal and results of the marketing will allow you and the auction to form an idea about the reserve price. You should consider the appraisal advice, along with the interest generated from the marketing, before setting a reasonable fixed reserve price – which is essentially the price of the starting bid.
It’s so important to gain a good idea of where you should set this price, as you’ll still be charged auction fees, even if no one bids on your home. Bidders may be put off by a high reserve price, whereas they may fight with other bidders and drive up the sale if the price starts somewhere reasonable – but not below its worth.
- Auction day
When the day comes, potential bidders will register for the auction, and most auctions will take copies of identification and carry out legal processes which prevent fraud and money laundering.
Bidders will then bid on your property – starting at the reservation price. Once someone wins, contracts are usually exchanged immediately. They’ll have to pay a deposit, which is usually around 10% of the selling price, and will usually be given a month to pay the rest.
Auction day can be nerve wracking – so it’s important to remember you don’t even have to attend as the seller.
It usually takes around a month for the sale to be finalised after the exchange of contracts. The auction will usually liaise with yourself and your solicitor to confirm dates of completion and other processes, such as the handing over of the keys, or access for the buyer.
The auction day
When the auction day finally arrives, there is no obligation for you to attend as the homeowner. Sometimes it can be nerve wracking and sellers don’t like to attend because of this. It can often be the case that sellers can’t attend the auction due to work or personal commitments, but with the wonders of technology, homeowners can now log into any auction remotely through their computer or smartphone to watch the auction live.
This also applies to property buyers, as buyers can also now log into the auction room and make proxy bids. This means that bids don’t just come from the auction room itself, but also from telephones and computers.
Hopefully your property will sell fast at auction, however if it doesn’t sell on the day, there is still the option of trying to sell after the auction, if you are prepared to sell at less than your reserve price.
How much does it cost to sell at auction?
Selling a house at auction can cost up to £1200 plus VAT for a solicitor, with 2.5% of the house value on top of that for the auctioneer fee.
Selling property at auction is not a cheap process and is considered one of the most expensive routes when you need to achieve a fast house sale. The cost can be as high as £1200 plus VAT for a solicitor and 2.5% of the house value on top of that for the auctioneer fee.
Generally, there are no hidden costs, however homeowners should expect to pay the auctioneer in the region of 2.5% of the sale price. One factor to consider is that even if your property doesn’t sell, you are still liable to pay the auctioneer fees. It is also advisable to check with the auction house if there are advertising costs when selling, as this may be an additional cost to consider.
Another cost to think about is solicitor fees. Solicitors commonly need to prepare a legal pack, which potential buyers will review prior to making an offer. The fees for legal packs can differ depending on the solicitor, but they generally cost around £350-£500 to produce. The pack will include things such as the title plan, lease information (if required) and any other valuable information which is required to formulate an offer on a property.
On the day of the auction, once the auctioneers hammer is hit and an offer is accepted, this is now legally binding. You will then be required to pay an additional fee to your solicitor for the conveyancing to get the property sale completed with the buyer. Conveyancing fees differ throughout the country, but usually range between £450-£750 plus VAT, depending on the sale price of the property.
So, to summarise, selling a house at auction can cost up to £1200 plus VAT for a solicitor, with 2.5% of the house value on top of that for the auctioneer fee.
Is my house suitable for auction?
Most homes are able to be sold at auction – but certain types of properties are more suited, such as niche, dilapidated, high demand and properties with tenants.
As aforementioned, sellers usually turn to auctions when aspects of their property make it difficult to sell to traditional buyers, and auction bidders are often looking to buy these kinds of properties for a great price.
While you can sell most properties through auction, your house is more suited to this form of selling if it is dilapidated, niche, in high commercial demand, has tenants – or has anything which may make it difficult or complex for your average buyer. These properties often do well at auction, as buyers aren’t usually looking for something to live in – they’re usually looking for projects to renovate or improve, before selling again for a profit.
If your property has any unattractive or complex qualities, property specialists at an auction will usually pay more for it than what it would sell for through traditional methods, as they are more understanding of its potential.
Which auction house should I use to sell my property?
We recommend that you go with one of the larger and more established auction houses, as the generally have the largest databases of property buyers.
Selling at auction can be tricky as there are so many auctioneers in the UK. If you need to sell your house quickly at auction, it’s a good idea to choose an auctioneer that specialises in what you’re selling. Some estate agents have specialist auction divisions, and it is these types of auctioneers who will have a greater understanding of the market, and a better chance of achieving a higher price for your property.
Some of the larger and better auctioneer houses in the UK have been featured in this article from The Telegraph, which gives a comprehensive breakdown of the top 20 auction houses in the UK. The costs, reputations and procedures for most auction houses differ in their own ways. It is worth doing some research if you’re considering selling your home through an auction house and review some auction house catalogues to check the standards and presentation of available properties.
Selling your house at auction is never guaranteed, and even if the property doesn’t sell, you will still need to pay the professional fees. To give yourself the best chance at selling your property at auction, Good Move recommend that you go with one of the larger and more established auction houses, as the generally have the largest databases of property buyers.
Pre-auction offers – what to do!
We suggest letting interested parties fight it out on the day with other buyers.
Before going under the hammer, your property will be marketed to many buyers via the auction catalogue and a number of viewing days will be arranged before the auction date. It is perfectly normal for homeowners to receive offers on their property prior to the auction date. It is the homeowner’s decision as to whether they will take the offer or risk going to auction, with the uncertainty that the property may not sell.
Depending on individual circumstances, you may need the money quickly and maybe you can afford to wait for the auction date. Here at Good Move, our surveyors always recommend that if you have already gone to the expense of paying auction and solicitor fees, you may as well wait for the auction instead of accepting an offer pre-auction (if you can afford to).
The thought process behind this, is that if there is a strong interest for your property prior to the auction, then this interest usually will stay until the day of the auction. Therefore, we suggest letting interested parties fight it out on the day with other buyers. This will usually help you achieve the best price by creating competition.
Setting a reserve and guide price at auction
Set a reserve price to stimulate interest in the auction room. Let the auctioneer set the guide price.
Prior to the auction day, you and the auctioneer will need to decide on the reserve and guide price.
What is a reserve price?
The reserve price is the minimum price which you as the seller will accept as the winning bid on your property. The price remains confidential between you and the auctioneer and once bidding reaches or exceeds the reserve price, you are legally bound to sell.
It is important to have a reserve price, but it’s imperative that you set this at a realistic level because even if your property doesn’t sell, you will still be liable to pay the auction and solicitor fees.
Setting a reserve price
Every auctioneer is different but, in most cases, you can set a reserve price of up to 10% of the guide price. You can also increase or decrease your reserve price before and during the auction.
What is a guide price?
A guide price is estimated worth or market value of the property. It is set by the auctioneer to get the bidding process started. The auctioneer will use his/her skills to position the guide price just right, so that it entices property buyers to start bidding.
What else should I consider prior to the auction?
We recommend that you put some time into presenting your property in the best possible light for the open days, prior to the auction.
Homeowners often ask us if there is anything that they can do to help make a sale at auction. On most occasions, if you instruct a good auction house, things should go well, but it’s just as important that you take matters into your own hands.
Unless the right kind of buyers are in the auction room on the day, your property might not sell. We recommend that you put some time into presenting your property in the best possible light for the open days, prior to the auction. This could be done by giving your property a deep clean, buying fresh flowers, or giving your property some great kerb appeal with the likes of hanging baskets and landscaped/manicured gardens.
In addition to making your property shine, the way we market our properties is changing at an alarming rate. Social media has a big impact on how we go about our everyday life, and now people keep up-to-date with news and information through Facebook, Twitter, LinkedIn and so on. If you are selling your house at auction, make sure that you share your property advert in the auction catalogue, through your social media channels. This can help generate more interest around your property.
One of the new approaches to get a guaranteed sale is through property buying companies such as Good Move. We are a surveying firm, which operates in the Quick House Sale Industry, and are regulated by the RICS (Royal Institution of Chartered Surveyors) and the NAPD (National Association of Property Buyers). We purchase properties anywhere in England and Wales, regardless of its condition. We can buy your property within two weeks, and we will generally pay between 80-85% of the market value. You won’t have to worry about legal fees, as these are paid by us, and you also have no estate agency fees to pay either.