The benefits of selling a house at auction:
• If you are in a rush to sell your house, an auction might be the way to go. Properties that sell will be closed much quicker than a standard sale and the buyer is legally obliged to pay the entire sum within 28 days.
• Because the buyer must pay within 28 days or face a fine, auctions can provide more security for your sale. As the deposit is paid and Exchange of Contracts is done on the day of auction, the sale is legally binding from the get go and you have less risk of someone pulling out of the purchase.
• If you have an unusual or desirable property, you could end up with two or more buyers entering a ‘bidding war’ and driving the price of your property up. It’s best to choose an auction house that is experienced in selling your type of property to ensure you get a relevant audience for it and increase the chance of a bidding war.
The disadvantages of selling a house at auction:
• If your house doesn’t attract a buyer you will still have to pay auction fees of around 2% - 2.5% +VAT of the property value. So if your house is valued at £200,000 and it doesn’t sell at auction, you’ll still have to pay your auction house £4,000 - £5,000, plus any costs to your solicitor, surveyor and other legal expenses.
• Standard homes tend not to sell well at auction and even if they do sell, they tend to go for much less than their value. The kinds of homes that sell well at auction are rare or unusual properties, ‘bargain’ houses which need a lot of work doing, or homes which people are desperate to sell quickly and don’t mind taking less for it.
So how do you sell a house at auction?
1. Agree a reserve price with your auctioneer. This should be the lowest amount you are willing to accept for the property. Be aware that once the hammer comes down at auction there’s no going back, so make sure to set a reserve price that you’re truly happy with. You will also agree a ‘guide price’ with the auctioneer, which is the estimated value the property will go for.
2. Prepare the property for auction. You’ll need your solicitor to create the catalogue and you’ll want to get the house looking its best ready for pre-auction viewings.
3. Sometimes someone might offer to buy your property before it goes to auction, this can be exciting, but since you’ve already agreed to pay the auction house a fee, you should probably put it to auction anyway. There’s also the chance that the buyer knows it will sell well and is trying to avoid a bidding war, but a bidding war is what will get you a good price, so stick with it.
4. Auction time! If the house sells – good for you – you’ll get a 10% deposit from the buyer on the day and the remaining 90% in 28 days. If the house doesn’t sell, you’ll still have to pay the fees unfortunately, but if you’ve had interest from buyers you can always make an offer to them at a slightly lower price to avoid paying to auction it again.
And that’s all there is to it! While selling a property at auction can be daunting, it’s really not that hard once you know what you’re doing – and that’s where we come in!
Fridaysmove we can help with buying or selling at auction. We have a great deal of experience in creating catalogues for sellers or performing speedy conveyancing searches for buyers, so if you’d like to discuss auctions further, give us a call on 0800 038 6446.