Why Sell Your House at Auction?

Why Sell Your House at AuctionUsing an auction is an established way to secure a quicker sale relative to using an estate agent.

It can be a good option if your property needs a lot of repairs, it’s unusual or difficult to sell on the open market.

The good thing is that, once the traditional auction bidding is done and the hammer falls, buyers usually have to pay a deposit straight away.

The buyer must then complete the sale (usually after 28 days).  This is a legally binding contract.

If the buyer doesn’t proceed, he/she will lose the deposit and have to pay fees alongside other penalties.  The chances of a sale falling through are therefore very slim.

Auctioning a property can seem like a daunting prospect, especially if it’s your first time.

However, in an attempt to attract a broader range of home sellers, the sector has moved on from stuffy auction rooms and intimidating sales tactics.  As a result, the process has become more transparent and easier to navigate.

Furthermore, there’s also the modern method of auction option which we’ll discuss further below.  Growing in popularity over the last year or so, it can be broadly described as a cross between selling on the open market and using a traditional auction service.

How to Find an Auction House

Across the UK, you can find a number of reputable operators via a simple Google search (‘property auctions’ is a common term).

You’ll also see auction houses marketing properties on sites such as Rightmove, Zoopla, On the Market as well as the more ‘niche’ and property auction news sites.

The auctioneer’s contact details are usually on the listings.  You may come across estate agents with separate departments that deal exclusively with auction sales.

There is also a growing presence of online auctions and traditional agents selling properties via their own platforms (who often do not advertise on the portals).

Pros and Cons of a House Auction Sale

Pros and Cons of a House Auction Sale There are many misconceptions about auction sales, especially when it comes to the speed at which things are done.

Unlike a ‘We Buy Any House‘ service, it’s not as simple as calling an auction house and expecting everything to be sorted in a few weeks.

In terms of getting things prepared for auction day, the process is reasonably similar to selling through an estate agent.

However, once a buyer has won the auction, things tend to be plain sailing and considerably more secure compared to an open market sale.

It’s worth taking note of some of the pros and cons…

Pros of a Property Auction Sale

  • Buyers are generally more business-minded and serious.  Compared to estate agency sales, you’re less likely to find time-wasters and ‘window shoppers’ at auctions;
  • You’ll be selling to a buyer with no onward chain, often saving a great deal of hassle.
  • There is usually not as much ‘nit-picking’ compared to estate agency sales.  Auction buyers generally know what they want and go for it;
  • A reputable auction house usually has a database of serious buyers and property investors.  This means you have a ready-made pool of people actively looking to buy;
  • Auction buyers are usually less concerned about the property’s condition and as they’re used to buying properties with issues;
  • You’ll normally have no issues when selling a tenanted property say, for example, you’re portfolio is affected by the Section 24 legislation. Auction buyers are often landlords on the look out for new stock;
  • Inherited/probate and other types of problem / unmortgageable properties often get good results at auction. More landlords, for example, are likely to be selling properties that do not meet minimum EPC standards through auction (rather than do the work themselves);
  • Should you be at risk of repossession due to mortgage arrears, auctions are a great place to find a secure buyer
  • With highly capitalised investors out there ready and able to buy, auctions are a great way to sell a property portfolio;
  • Selling quickly through auction during or after a divorce/separation can be a good way to get things done and move on;
  • You should be able to sell – albeit at below market value – if there are major structural issues, subsidence or problems like Japanese Knotweed;
  • Due to strict legal obligations, buyers cannot suddenly drop the price between exchange and completion (known as ‘gazundering‘);
  • There’s no need to worry about the best time to sell your property as auction buyers are actively looking all the time;
  • You’re often dealing with cash buyers only who effectively bypass the drawn-out mortgage application process.  This makes the whole property sale process much smoother;
  • You’ll avoid the fall-through risks that often happen with estate agencies after properties are marked as Under Offer or Sold STC.

Cons of a Property Auction Sale

  • The time to actually sell a property at a traditional auction takes longer than people think.  From start to finish, it can sometimes stretch out to 3 or 4 months.  That’s why more sellers are moving towards online auction sales (as the listing process is significantly faster);
  • Before the auction day or bidding period, there will be viewings, open days and surveys/valuations. This can be a time-consuming and inconvenient process which may not suit your particular circumstances;
  • Depending on the auction house you use, the costs of selling your property can be higher than using an estate agent.  Make sure that the auctioneer operates on a ‘no sale, no fee’ basis;
  • There are often hidden fees that are only mentioned in the small print (see below);
  • There is a fine line in terms of what the ‘reserve’ price should be.  For example, if it’s set too high, then people may not end up bidding at all;
  • Like many estate agents, auction houses have been known to overestimate the value of properties to win business.  This places a risk on sellers if auction bidders don’t ‘bite’;
  • When properties do not sell at the reserve price, there is a loss of time and money (unless a buyer emerges post-auction with an acceptable offer);
  • If you have immediate debts to clear or need to stop repossession, the time it takes for an auction sale to complete may not be enough.

Sell Your House at Auction – The Process

Sell Your House at Auction – The ProcessIn this chapter, we’ll outline some of the essentials to bear in mind when putting your house up for auction.

The Auction Seller

A lot of properties you’ll see at auction need a considerable amount of work.  Sellers of these homes (perhaps like yourself) do not have the time, budget or inclination to deal with the issues themselves.

You’ll often also see inherited, buy-to-let, commercial, mixed-use properties and land sold at auction.

However, auction houses are trying to remove themselves from the reputation as being a place where the only problem and investment properties get sold.  These days, you’ll find people selling homes of all shapes, sizes, and states (especially at modern method auctions).

Some sellers, for example, simply do not wish to deal with estate agencies and the risk that the buyer could pull out after the sale has been agreed upon.

With at least 1 in 3 sales currently falling through these days, such an approach makes a lot of sense.

The Auction Buyer

The majority of buyers at auctions are either professional investors, small builders and people looking for ‘fixer-uppers’ (i.e. properties in need of extensive refurbishment works).  But, these days, you’ll also find buyers that want to buy a home to live in themselves.

Auction buyers need to have their finances in place in order to exchange contracts at the moment the hammer (or gavel) falls.  They usually need to pay 10% of the value of the property on the day.  The buyer then has 28 days to complete and to pay the remainder of the purchase price.

Note that some auction houses have a longer period between exchange and completion – especially those that sell commercial property, land and development sites (with or without planning).

Initial Stages with the Auction House

The process will usually begin by contacting a local auction house who will need to understand your current situation.

If you have a unique, commercial, mixed-use or development site, it’s sometimes worth looking out for a specialist auctioneer.  Good ones will have the knowledge of how to find buyers that are more interested in these types of properties.

Be Prepared…

Some of the questions may include:

  • Whether the property is already on the market.  Note that the auction house will usually want exclusivity to market your property (to avoid any conflicts of interest);
  • The current level of mortgage and other secured debts against the property;
  • Ownership status (i.e. if you own the property with other people, if the property is held under trust etc.);
  • The condition of the house (including the age of the gas central heating system and electrics);
  • If there are any legal complications you’re aware of;
  • Approximate value and any surveys you may have undertaken in recent months/years;
  • How urgently you need to sell.

The auction house will then download some paperwork from HM Land Registry and undertake some Anti-Money Laundering (AML) checks.

Then you’ll usually be given a rough (‘desktop’) estimate of the achievable value.  This is based on the auctioneer’s experience and professional opinion on current market conditions.  Note that you should take this valuation with a pinch of salt.

Beware - Auctioneers Overvaluing Your Property Some auctioneers will overvalue your property to win your business, especially if they are aware that you’re exploring different options.

A valuer will then visit your property to see its overall condition and confirm other details.

Note that this is not always necessary and, provided you’re happy, it’s entirely possible to get your property listed without an auctioneer’s visit.

However, if your property has unusual characteristics or some commercial elements, a formal valuation may be necessary.

Check the Auction House MarketingCheck the auction houses marketing material for other properties. Are you impressed with the way they promote other homes going up for auction?

The auction house should then give you some time to think.  They will either call or arrange a meeting to confirm whether you would like to move forward or not.

Going Ahead with the Auction Sale

If you decide to proceed, you’ll need to sign a binding contract and agree to the terms of sale.  This will include the auction date, fee structure (see below), marketing plan, conditions amongst other specifics.

Before signing, you may want to speak to the auctioneer directly about how he/she will conduct the auction bidding process.  Here, there’s a fine line between getting the outcome you want from the sale and allowing the auctioneer to do his/her job.

You’ll also need to decide what the guide and reserve prices will be.  To clarify the difference:

Guide Price

This is the price that the auctioneer will advertise the property for in the marketing material.

Depending on the timing of the market, this may be lower than the expected selling price.  This is a common tactic auction companies use to generate interest.

There’s a fine balance between getting you a fair price but also ensuring that people will attend the auction and bid.

Reserve Price

This is the minimum price that you’ll agree to sell the property for.  It will be kept between you and the auction house.

We would recommend being realistic about how you price your property, especially if there’s work to be done.  Here at Property Solvers Auctions, for example, we use RICS Red Book standards as the assessments are kept completely impartial.  Also, check out our post on how to value your house where you check much of the data (for free) yourself.

Depending on market conditions, buyers will usually be competing amongst themselves in the auction room or via the online platform.  They will factor in their own costs and risks and, in most cases, look for a discount on the open market value before placing a bid.

If the reserve price is not reached during bidding, then potential buyers can make a post-auction bid (on the day).  If you’re not happy with any offers you receive, the property can then be relisted at the next auction for a fee or you can withdraw it completely.

Note that the reserve and guide prices can be the same, but much will depend on buyer appetite for a property like yours.

Property Auction Contract Remember to read through the auction contract carefully. Seek independent legal advice if any of the terms are unclear.

Legal Considerations at Auction

You’ll need to instruct your solicitors to start the searches and draw up the relevant paperwork – often known as the ‘legal pack‘.  This will be uploaded on to the auctioneer’s website for buyers to view.

The auction legal pack will have the Title Register and Plan from the Land Registry, information on any leases and range other relevant details.

Most auction houses will also require the solicitor to be at hand to handle enquiries from prospective buyers.  This means that the solicitor may charge you a higher rate.

Marketing, Open Days and Appointments

A good auction house will have solid online and offline marketing processes in place.

This usually means your property appears on the main portals like Rightmove, Zoopla, and Prime Location.  The auction house should also have its own website and database of investors for further exposure.

The property should also appear in a professional catalogue/brochure that will be made available online and posted out to prospective buyers upon request.

On this note, double-check the general standard of photography, floorplan, and particulars when looking through existing properties up for auction.

The auction house will handle all the inquiries and liaise with you to organise viewing appointments.  Remember to present your property in the best way to appeal to a wider range of buyers.

Fast House Sale - 101 TipsBased on our 20+ years’ industry experience, our 101 sell house fast tips will help you present the property in the best way and achieve a great price.

In many cases, they’ll also suggest ‘open days’ – where a number of prospective buyers will look at the house at the same time.  These usually happen 1 to 3 weeks before the auction.

Note also that some buyers may request a survey or condition report (at their own expense).  Of course, you can refuse for this to happen – but remember it may ring alarm bells amongst prospective buyers.

Pre-Auction Offers

You may find that some buyers may get in touch with the auction offices to make an offer before the day.

This can sometimes make sense, especially if you need to get rid quickly and the buyer is legitimate.  If the market is slow, you may also want to consider moving forward.

However, we would generally recommend letting buyers ‘battle it out’ at auction.  Yes, there’s a risk that it might not sell – but at least you’ll be able to know there’s some demand.

A good auctioneer will help you price the property correctly to make sure it sells (and avoid any risks).

You’ll probably find that the pre-auction bidder will be in attendance on the day.

The Day of the Auction

The auctioneer will attempt to drive the price towards the agreed reserve (sometimes more). However, much will depend on the level of interest for properties like yours and where the market stands.

Most buyers will be present, although a number will use telephone, proxy and online bidding services offered by auction houses.  There are also a number of emerging online auction sales where registered buyers bid on properties (usually over a longer timeframe).

Ideally, you want a situation where buyers competitively bid for your property – pushing the value over its reserve.  This will depend on the desirability of your property, local/national market conditions, financially viable opportunities to extend, convert or improve amongst many other factors.

Once the bidding is over and the hammer (or gavel) falls, contracts are exchanged and the buyer must pay the deposit straight away – usually 10% of the purchase price.  Online auctions may allow buyers to have a longer time to pay (typically 24 hours).

The buyer then has a legal obligation to complete on the sale (usually within 28 days).  If not, then he/she could lose the deposit plus incur fees and withdrawal penalties.

Post Auction Offers

This situation arises if the property has not sold.

The auctioneer will be able to advise you how close to the reserve price the bidding has reached.  In these circumstances, it’s sometimes worth seeing if you can negotiate with the last bidder.

However, even if there are no bids at all, the auctioneer will still open up the property for offers if the hammer hasn’t fallen.  They should also make sure your property remains on the website and property portals as ‘unsold’.

Failing that, you should be able to relist the property at the next auction.  Note that extra fees may apply here (check the contract).

Modern Method of Auction

In its simplest form, Modern Method of Auction is a cross between an auction and open market sale.  Some agents refer to it as a ‘conditional’, ‘hybrid’ or ‘combi’ auction.

Usually offered by estate agents as an ‘add-on’ service, interested buyers usually have between 14 and 30 days to make their bids online.

Unlike normal auctions, exchange of contracts does not happen instantly when the bid is won.  However, the buyer must pay a non-refundable deposit to show that he/she is committed to the sale.   This also means that the property is no longer marketed to other buyers.

The exchange and completion time is then stretched over a longer period (usually 28 days for exchange and another 28 days for completion).  This means that the buyers have more time to get their finances in place.

Using a modern method auction (as opposed to the traditional way of doing things), opens up your property to a wider pool of buyers.

Modern Method of Auction Fees Fees for the Modern Method of Auction vary between 2 and 5% of the purchase price. The buyer will still have to pay the 10% deposit at the exchange of contracts (but this process will be delayed).

Is the Modern Method of Auction Worthwhile?

The biggest benefit for you, the seller, is that your fee is effectively shifted over to the buyer.

However, this often means that buyers steer clear of these types of transactions.  Those that do decide to bid will take into account the reservation fee and seek a lower price.

Of course, much will depend on how ‘in demand’ your property is and, as with standard auctions, you can fix your reserve price.  But remember that most buyers these days are savvy enough to know what houses are really worth.

Others accuse this sales route as just a way for estate agents to earn a higher fee.  Some will cheekily insist that you pay a fee (so they get two commissions!).

Although it is arguably more secure than an estate agency sale, the smaller deposit requirement means that the risk of the sale falling through is also higher compared to a traditional auction.

On the Property Solvers auction platform, we split the fee between the buyer and the seller to create more of an even playing field.

How Much Does it Cost to Sell A House at Auction?

Selling House Auction FeesAlthough every auction firm works differently, it’s important to understand the fees before going ahead.

Note that some of the costs below apply to traditional auction house models and may be combined as one.  Also, remember to take account of the extra VAT.

Auction Fee (1.5 to 3% of the value of your property)

As with estate agencies, you will normally be charged a percentage of the sold price upon completion.  However, some auction houses will insist you pay a separate fee up-front.

You may be able to request for the buyer to cover your legal expenses (mentioned in the Special Conditions).  However, this will probably end up being factored into the agreed guide price.

Marketing Fee (0 to 1.5% of the value of your property)

This is the cost of placing your property on the main portals (like Rightmove and Zoopla).

Part of this fee also goes towards producing the listing in the auctioneer’s catalog and other marketing material used to generate buyer interest.

You’ll also be paying for the auction house to organise viewings and conduct open days at your property.

Room Hire Fee (0-1.5% of the value of your property)

Auctioneers will need a space large enough to conduct the bidding process.

The bigger and more reputable firms hold their auctions in central locations with good parking and accessibility.

Whilst the costs may be incorporated into the overall fee, they can be quite steep.  But the more people that are in the room, the better your chances of getting a good price.

Online Sales Fees (0%)

Online sales occur on digital platforms whereby buyers bid on properties in an ‘eBay’ style process.  This auction process can run for days to ensure maximum exposure.

Note that it’s rare for an auction house to run an online and offline auction simultaneously.  Many are, however, offering ‘hybrid’ options (when the auctioneer invites bids on lots live on camera).

Conveyancing Legal Fees (set fee ranging from £500 to £1,500 depending on the solicitor’s location)

These may differ according to the size of the property, its tenure and whether there are other complications involved.

We’ve outlined some of the essential elements of the auction legal pack in our post on modern method of auctions.  Note that the requirements are usually the same regardless of the type of auction.

Relative to standard conveyancing fees, most solicitors will also want to charge more for dealing with inquiries prior to the auction.  There may also be immediate issues to deal with on the day (which will come at a cost).

Some auction houses may suggest that the buyer covers the auction fees which, again, will usually be factored into the purchase price.

Sell Your House at Auction – 10 Tips

Sell Your House at Auction – 10 TipsIt is also worth taking on board the following considerations before moving forward:

1. Watch Out For Hidden Fees

The auctioneer has a legal obligation to clearly explain all the associated costs of sale to you at the start.  Beware of sliding scale or other hidden fees in the contract.  For this reason, make sure you read through any agreement carefully.

2. Are the Fees Unusually Low?

Be cautious of low auction fees which often means that the advertising plan for your property will be poor. When in doubt, ask for evidence of previous sales in your local area and references from other sellers.  Also, check out online reviews.  A good auction house will have nothing to hide and send you with all the information you need.

3. Is there Any Up-Front (Non-Refundable) Costs?

If you’re asked to pay an up-front fee, make sure that the charges once the sale is complete are comparatively low.

4. Potential Damage During Pre-Auction Viewings

Check that your insurance policy covers you for any damage when prospective buyers view your property.  Although it’s fairly rare, there has been evidence of damage appearing after people look around.  This is especially true after open days are held.

5. The Auctioneer’s House Selling Experience

Check the expertise and qualifications of the auctioneer.  The description should usually be on the ‘About Us’ page and you can also Google search the name or look it up on LinkedIn.

6. Don’t Price Too Aggressively

You’ll obviously want the price driven up as much as possible on auction day.  But remember that auctioneers need to attract cash-ready buyers.  Pushing things too much may lead to people being put off.  If no one bids, in most cases, you’ll still have to pay the auction fees.

Try to look for the balance between realism and getting a fair price.  Remember, with a little help from the auctioneer, it will be the buyers that will raise the property’s value up – not you.

7. Confirm Your Position in the Auction

Remember to check your property’s lot number on the day.  Some auctions will have hundreds of properties going up with yours.  You ideally want your house to appear at the peak time of the auction.  This is normally in the first half of the session (preferably near the start).

If you’re using an online property auction, this won’t usually be a concern.

8. Check Your Competition

Ask the auctioneer about other properties that may be going into the auction at the same time as yours.  If any are similar and/or close to yours, make sure that your reserve price is competitive.

Again, when using an online auction, you normally won’t have to worry about this.

9. Go Through the Online Auction Terms

Online auction business models may work differently and you should ensure that you read any contract carefully. For example, some may charge buyers an extra fee upon exchange.  Others may work in partnership with a local estate agent, in which case a different fee structure applies.

10. Remember the Penalties for ‘Pulling Out’

Make sure you are 100% sure about going ahead.  If you pull out, the auctioneer may charge you a withdrawal penalty (sometimes known as an abortive fee). This levy will cover the costs of listing your property, inspections, advertising, legal documents and handling of pre-auction inquiries.

Property Solvers Quick Sale / Auction Options

Property Solvers Quick Sale Options If you’re in search of a more efficient way to sell, we’d be happy to have a chat about both our cash home buying and online property auction services.

Regardless of which option you may choose, you can be sure to receive a reputable and full-regulated service from experienced industry professionals.

Quick Cash House Sale

With our sell house fast service, you directly with us (no middlemen) and we can get things completed in as little as 7 days.

There are also no legal or estate agency fees/commissions and we can offer zero-interest cash advances whilst the sale progresses.

We take on properties in any condition and can help in a range of different sales situations.  Please click on the box below to find out more about some of the different properties we buy.

Why Use Us For a Private Home Sale?

In addition to avoiding all of the various auction fees, below are some of the reasons why you may want to consider a private sale with Property Solvers:

  • We follow The Property Ombudsman (TPOS), National Association of Property Buyers (NAPB), Anti-Money Laundering (AML) regulations amongst others;
  • We guarantee to move through the sales process much quicker than any auction house in the country;
  • Our experienced solicitors can exchange contracts within as little as 24 hours from the moment you get in touch;
  • We can fully complete the entire transaction within 5 to 7 days after the exchange date;
  • Property Solvers Area Managers are legitimate buyers that can show proof of funds for the cash purchase (through bank statements or a letter from our solicitors);
  • We do not use mortgage financing, so are not held accountable by the bank;
  • We make ourselves readily available in the most demanding of circumstances;
  • There’s a guaranteed sale at the agreed price, with no risk of us ‘pulling out’ at the last minute;
  • Our Area Managers are active, cash-ready buyers and there will be no chain;
  • We’re a lot more efficient than any part-exchange house scheme (and often more competitive);
  • We can meet or sometimes exceed the reserve price offered by the auctioneer (see below);
  • We take out the necessary insurance policies to cover ourselves in the event of problems with the searches and other contractual issues – meaning that the sale will happen regardless of the circumstances;
  • There are no issues with purchasing problem properties.  We’ll buy homes with physical/structural issues (including subsidence, serious damp, flooding history, Japanese Knotweed) and/or legal complications (restrictive covenants, negative easements, third-party consents such as unmet overage clauses, ransom strips);
  • We can offer a cash advance required (for moving costs, rental deposits or other expenses/debts you may have to deal with).

How we Compare to Auction Houses

This service suits home sellers looking to avoid the hassles, delays, and costs of auctioning. Some of the key differences are outlined below:

Auction vs. Quick Cash House SaleAuction vs. Quick Cash House Sale

Property Solvers Online Auctions

We launched our property auction service on the back of many clients wanting to achieve a quick sale, but without compromising on price.

Property Solvers now offers 28-day and 56-day sale auctions.

Our video explains a little more…

As well as Rightmove, Zoopla and Prime Location, we’ll also market your property on more niche property portals.  Examples of which include, Mouse Price, Net House Price, the House Shop – all of which investors and private buyers frequently visit.

We can market investment properties through Renovate Me, One and Only, Sourced and our own sister investors property portal PS Investor Services (The Property Investor’s Estate Agency).

In short, we’ll get the property in front of the right eyes and follow many of the same sales processes of an auction house, at a fraction of the cost.

Our service also includes accompanied viewings and we can organize open days to fast-track the process.  We also have a 24/7 inquiry line and chat service.  And will send you weekly sales reports from Rightmove and Zoopla (most estate agents and auction houses rarely give these out to homeowners).

To discuss any aspects about the sale of your home, through auction or otherwise, please contact Property Solvers on 0800 044 3733 (freephone). Our lines are open 24 Hours, 7 days a week. Alternatively, fill your details in the contact box below or e-mail us at info@propertysolvers.co.uk.  We look forward to helping…