We Explore How to Sell a House at Auction
Need to know how to sell a house at auction? What’s the main reason why people use property auctions? The speed of selling is usually near the top of any list. Review our beginner’s guide to Auctions, (if you haven’t already done so) before reading this article.
Choosing to sell your house at auction means you’re effectively starting a bidding war that will hopefully result in a premium paid for your property. However, before you get in touch with your nearest property auction house, there are a few things about the selling process you should know.
Selling a house at auction offers several benefits
Selling a house at a property auction gives you a clear idea of how long you will have to wait for a sale providing you with the peace of mind you’re looking for if a quick house sale is of paramount importance. If you choose the right auction house, you know you’ll sell to the audience. Also, there are often various protection mechanisms in place that protect your interests and stop potential time-wasters.
Buyers are usually required to pay a 10% deposit as soon as the hammer comes down. The final balance is due to be paid within 28 days, giving you a definite timeframe for receiving your funds. If the buyer can’t complete the purchase within the statutory 28 days, you keep the deposit to cover your costs.
The average property auction aims at sparking a bidding war between prospective buyers. The idea is that this competitive process drives up the sale price. However, there are times when homes sell for significantly less than their guide price — or even don’t sell at all because they don’t meet the reserve price. By advertising the auction and spreading the word, you can maximise your chances of receiving a premium for your property at auction.
Some people choose to sell a house at auction because they can’t find the buyers they’re looking for on the open market. Perhaps your property is in dire need of repair or refurbishment. Or maybe your home is considered as a niche; repurposed Churches, schools, lighthouses and commercial buildings often struggle to generate a lot of interest. If you’re struggling to find buyers the traditional way, selling a property at an auction may be the way to go.
Take your time in comparing various auction houses. While the fees charged should influence your decision, they shouldn’t be your only concern. It’s sometimes worth paying more for a good auction house that has experience in selling properties just like yours.
How much does selling houses at auction cost?
Although the rate of commission charged by property auction houses can vary, you should expect to pay around 2.5% of the final sale price your property achieves comparing favourably with what you might pay a traditional estate agent.
When you’re calculating your finances, it’s important not to forget the other charges and expenses you will incur. You may be expected to pay the auction house for the cost of advertising your property. You will also have to pay all the usual legal and professional fees involved in the home selling process.
I’ve been made an offer before the auction. What should I do?
Professional property developers and investors are always looking for ways to cut the cost of doing business. From time to time, they approach vendors just before an auction takes place to make a verbal offer. But ask yourself what the motivation in a situation like this is. Someone making such an offer must be keen to minimise the price they’re paying. If they’re genuinely interested in your property, they will bid for it just like everyone else.
If prospective buyers are willing to make an offer for your property without first seeing what other people are prepared to bid, there is a good chance that they know something you don’t. Only by allowing a bidding war at auction will you be able to ascertain the real value of your property.
How to set Auction reserve and guide prices
When you list your property at an auction, you will be asked to set the reserve price which is the least you are prepared to accept for your property. If the highest bid falls short of this amount, your property is taken off the market. But beware, as once the gavel falls down on a bid of at least the reserve price, you will be committed to selling.
You should take advice on the setting of your reserve price from the auctioneers and various property experts. However, the final decision rests with you. It’s always a good idea to do some house price research on sites such as Rightmove and Zoopla before you commit to a reserve price, and use online property valuation tools which will indicate what people might be prepared to pay for your house.
If the highest bid made on your property is less than the reserve price, you can relist it with a lower reserve price. Alternatively, you can speak with the auctioneer and formally accept the highest unsuccessful bid.
The guide price you set at a property auction is not in any way binding. It is merely a rough estimate of your property’s market value giving buyers an idea of what you’re expecting to receive, and it is often the basis for opening bids. The guide price is ultimately your decision, but you should be realistic about your expectations. Set a price that reflects what is going on in the local property market. Otherwise, you could price your home out of a successful sale from the beginning.
A few final tips for selling houses at auction
Most auction houses will have their marketing and advertising channels. However, it’s always a good idea to be proactive in spreading the word about your upcoming auction. Advertise your home across all of your social media accounts. Tell friends, family and work colleagues about it at every opportunity, and speak with your auctioneer about ways in which you can widen the potential audience for your property before the auction takes place.
During the days before the auction, potential bidders will probably want to take a look at your property. It is, therefore, critical to do everything you reasonably can to make the property look as presentable as possible. Just give it a few licks of paint, and some small repairs could be enough to squeeze a little extra cash from the process. Consider putting a date in the Auctioneers catalogue for open house viewings to give buyers a chance to view prior to the Auction.
A lot of people get caught out by the brevity of the property auction process. If you live in the property you are selling at auction, make sure you have plans for your next move in place well before the day of the auction. Once a successful bid has gone under the hammer, you have 28 days before completion.
You can speed up the house selling process significantly by listing your property for sale at auction. If you have researched the market, planned your approach and taken expert advice, your foray into the property auctions should be reasonably good.We hope you’ve enjoyed our ‘how to sell a house at Auction’ guide.