One in three estate agency sales falls through in the modern property selling market. With auctions, there is a minimised risk of this happening as once the bidding is complete and the gravel falls; the auction buyer must exchange contracts straight away and pay a non-refundable reservation fee. This ensures that the auction buyer is serious about your property, as if they do pull out, they will face penalties – costing them money.
Auctioning can seem daunting, but it doesn’t have to be! Please use our menu below to find a section you want:
- Why Sell Your House At Auction?
- Pros and Cons Of House Auction Sales
- How To Sell A House At Auction
- 9 Tips To Selling Your House At Auction
- Frequently Asked Questions
Subscribe To Our Newsletter
Why Sell Your House At Auction?
Selling a house at auction was one of the only ways to sell your home, other than using an estate agent. But with the rise of the internet and quick cash buying companies, they have seen a slight decline in use. Typically, auction houses are used for properties that have been on the market for a while but aren’t getting an offer, the home is undergoing renovations, or the house is part of a probate/inheritance.
Decluttering Your Home
An auction house is a secure and faster way to sell your property than a standard estate agent. They are often seen as a good route if your property needs tender loving care, is unique or is not selling on the open market.
Usually, when the gravel falls in a traditional house bidding, the buyer must pay a deposit and complete it within 28 days. The exchange of contracts happens on the day of auction which then acts as a legally binding contract. If the buyer pulls out, they will need to pay penalties for losing their deposit. This ensures that the sales process is secure and that the chances of a sale falling through are minimised.
Auction houses are no longer set in dingy, dark auction rooms; instead, they aim to be more transparent and honest about the sales process. This transparency movement has also led to the rise of online auctions – which have become a significant route to selling a house in the UK.
How Do I Find An Auction House?
It is pretty easy to find an auction house; however, the route will depend on the type of auction house you are looking for. As a rule of thumb, for all auction houses, you should check that they are members of either the National Association of Property Buyers or The Property Ombudsman. This will ensure that you are treated fairly. Otherwise, their membership will be revoked:
- Traditional Auction Houses – Type into Google or Bing ‘Property Auctions’, and you can find a reputable auction house. If you are unsure about the company, you should check their Google or TrustPilot reviews.
- Estate Agent Auctions – Some estate agents will have their departments which focus on selling houses via auctions. This can be a good route if you don’t mind investing the time to wait for an estate agent to sell your property, as they may be able to squeeze slightly more money from the buyer.
- Online Auctions – ‘Online auctions’ can be found by entering the term into Google or Bing. They may have their own platform or app, which is an optional download. Online auctions are great options if you want to sell fast and effectively.
Pros And Cons Of House Auction Sales
Selling your house at auction has its benefits and disadvantages; use this thorough explanation to see if it’s the correct route for you to follow.
Pros of Selling Your House At Auction
- Unlike your bog-standard estate agents, property buyers are often more business-minded and know what they are looking for. Auction houses have vast databases of highly capitalised property investors, landlords, and serious buyers eagerly waiting for property & they don’t tend to mind the condition of a property as they are used to properties with issues.
- Buyers are always looking for new properties, so the usual Spring & Summer buying/selling peaks do not apply to auctions – you can sell a house at auction all year round.
- Because many buyers are landlords, there are usually no problems if you want to sell a tenanted property.
- Probate/Inherited properties, unmortgageable properties or problematic houses often get reasonable rates at auction. It can be an excellent route for people going through a divorce or separation as they can move on quicker.
- A property with dampness, major structural issues, subsidence, or pests will sell, albeit below market value (BMV).
- Buyers are legally not allowed to drop the offered price between the exchange of contracts and completion, which ensures the security of your sale.
- Due to most buyers being cash-only-buyers, they tend to bypass the mortgage application, which minimises the risk of bumps in the road.
Cons of Selling Your House At Auction
- Selling your house at auction may take slightly longer than you perceived. It will usually take 3-4 months – but online auctions are significantly faster. Auctions take so long because, before the bidding process, viewings, open days and surveys/valuations have to be introduced. This is quite a demanding and time-consuming process.
- Depending on the auction type and the actual auction house you choose, the cost of selling your house at auction may be higher than that of an estate agent. There are also hidden fees generally associated with auction houses, so you must read the fine print when you sell a house at auction.
- Some auction houses may overestimate the value of your property to win your business, which is risky because some buyers will be experienced and know the actual value of your property & won’t bite. Also, if the reserve price is too high, some houses will not sell at all at auction.
- If your property does not sell at the reserve price, you and the auction house will lose valuable time and money. If there are any looming debts or you need to prevent repossession – the time it takes for an auction sale to complete may not be quick enough. In which case, you should probably go for a quick-buying-cash company.
How To Sell A House At Auction
In this section, we will discuss the difference between an auction buyer and a seller, the basics you need to know about selling at an auction, the different types of auctions and how much it will cost you and the potential buyer.
Who is the auction buyer and seller?
The auction seller is the person who is selling the property. Some auction houses need much work, and the seller may not have the time, budget or expertise to renovate the property.
Other auction sellers may offer inherited, commercial, mixed-use properties, land, and buy-to-let housing to be sold at auction, as well as people just looking to sell houses of all sizes, conditions and shapes. Most auction sellers choose to use auctions because they do not wish to use estate agencies as they don’t want to risk the buyer pulling out.
An auction buyer is any party looking to buy property at an auction. Auction buyers tend to be professional investors, fixer-uppers, landlords or developers, and just your standard Joe looking to buy a house for themselves.
The Basics To Sell At Auction
To start the process, you will need to contact a local auction house via telephone or their sign-up process on their website. You will need to give them a breakdown of your situation. It would help if you looked for a specialist auctioneer to sell a commercial, mixed-use, or development site.
All auction houses will ask you similar questions to understand the actual value of your property; a few examples of this would be:
- Is your property already on the market?
- What is your current level of debt against the property or mortgages?
- Do you own the property with others, or is the property held under trust?
- What is the condition of the house? Do you have an EIC?
- Are there any legal complications that you are aware of surrounding your property?
- Are there any previous house valuations or surveys that have been taken?
- What is your urgency to sell the property?
House Valuations
Before you receive your property estimate, the auction house will do some background checks on your property. This includes checking it on property portals, HM Land Registry, and against the Anti-Money Laundering check.
When you receive your property estimate, this combines the auction houses’ experience and current market trends. This valuation shouldn’t be a definitive figure for a property sale because some auctioneers will overvalue your property to get your business.
Someone from the auction house will conduct a home viewing to determine if the house valuation is accurate. Most potential houses sold via an auction will have quirks or unique characteristics that an in-person house valuation may create a more precise figure.
Sometimes this check is unnecessary, and as long as both parties (the auction house and yourself) are happy, the property will be listed at the price valuation.
The Legal Pack
Unless your auction house offers their solicitors or covers their fees, you will need to hire external solicitors to search and draw up the relevant documents (known as the legal pack). The pack will be listed alongside your property on the auctioneer’s website for buyers to browse through.
Your solicitor will also be needed to handle any registered interest from prospective buyers. The auction legal pack will need to contain the following documents:
- The Title Register from HM Land Registry.
- Conveyancing Searches.
- Special Conditions of Sale.
- Property Information Form (TA6).
- Fixture & Contents Form (TA10).
- Leasehold Information (TA7) and Property Enquiries (LPE1) Forms.
- Tenancy Agreements and Proof of Rental Receivables (for tenanted properties).
- Commercial Property Leases.
- Planning and Building Regulation Documentation.
Property Listing
Before proceeding to the property listing process, the auction house will ask you to sign a legally binding contract and agree to the terms of the sale. This includes the auction date, fee structure, conditions and marketing strategy. This is an excellent time to ask the auction house how the process will work with that firm.
At this stage, you and the auction house should also agree on what the guide and reserve prices should be:
- Guide prices – Used as a selling tactic to generate interest in a property, this price is used on any marketing materials to advertise your property. This price may be less than the expected selling price.
- Reserve prices – This is the lowest price you want the property to sell for (this is kept confidential between you and the auction house). The reserve price will depend on the current market conditions and the buyers involved in the sale. Any auction buyers can make a post-auction bid if the reserve price is not met during the sale. If the offers don’t meet your expectations, then the property will be relisted on the next auction (for a fee), or you could choose to withdraw it from the auction.
Property Marketing
Most reputable auction houses can sell your property offline and online through property portals like Rightmove and Zoopla, their databases of investors and any in-person connections they have. This could involve an auction catalogue that could be emailed or posted to potential investors.
They should also have professional photography, floor plan and property listing services to help sell your property. The auction house should also handle any incoming viewing appointments and enquiries, but they may ask you to carry this out depending on their services. It’s best if you read their fine print.
A widespread tactic for auction houses is to have open days, where multiple auction buyers will attend the house simultaneously. These usually occur in the final weeks leading up to the auction to build excitement. However, if your property is not presented attractively, even with problems, it may put some potential buyers off.
Before Auction Offers
Before the auction takes place, some auction buyers will get in touch with you to make offers before the big day. If the buyer is legitimately interested, this can be a great way to offload the property quickly, especially if the market is moving slowly.
However, allowing the property to get to auction is recommended as you may receive a much higher price than the initial auction buyer. The initial buyer will probably be at the auction anyway, and if the demand is still there, they may offer you a higher bid too.
The Big-Bid-Day
During the auction, the auctioneer will try to steer the bids close to the agreed reserve price, depending on the demand. Some buyers will be at the auction in person, whereas others will be on the phone or any online bidding service.
The best outcome of an auction is if multiple bidders are competitively bidding for your property, which will push the value over its reserve (like you see in the movies). Again, this will depend on the market demand and the property’s desirability for auction.
Once the gravel falls, the buyer and seller must ensure they have their finances sorted before exchanging contracts. This is especially important for the auction buyer because they will need to pay 10% of the property value as a deposit as soon as the exchange of contracts happens.
Then, the property buyer will have 28 days or longer, depending on the auction house and if the seller is offering commercial property, to pay the remainder of the purchase price. If the buyer pulls out or tries to amend the contract with a lower purchase price, they will face losing their deposit & additional penalties.
After Auction Offers
If your property does not sell at auction, the auction house will disclose how close you came to the reserve price. This may allow you to negotiate with potential buyers who placed bids to make a new offer you deem acceptable.
If your property received no offers, it could be put up on the website for all to view or relist onto the next auction.
Subscribe To Our Newsletter
The Modern Method Of Auction
The modern auction method combines an auction and the open market sale, also known as a conditional or hybrid auction. It can be offered as part of an estate agent’s service as an additional add-on. Usually, interested buyers will have between fourteen and thirty days to make their bids via an online auction.
Differences Between Traditional And Modern Auction House
With traditional auctions, the exchange of contracts typically happens when the auction bidder has won the bid. On the day of auction win during a current house auction, the buyer must pay a non-refundable deposit to show their commitment — the property is also removed from the market.
Traditionally, the time from exchange and completion is 28 days; however, with a modern auction, it will take at least 56 days. The extended period will allow the buyer more time to finalise their finances, making the modern auction system much more attractive to a broader pool of potential buyers than the traditional system.
The completion time for traditional auctions is often too fast for most non-cash-buyers, which narrows the potential pool of buyers which means that the non-cash-buyers could lower the sale price to typically twenty percent below market value.
Before you get your property in a traditional auction, you may wait for one to two months before your house is listed. On an online auction, they tend to pump out auctions much more often, and your property will be put onto the auction listing faster.
What traditional and modern auction systems have in common is that they both depend on the market’s demand. If your property is in high demand, you will receive more and higher bids, but if it is a unique property with low demand, the offers can waver. Most buyers at auctions are experienced property investors and will know your actual market value.
If your property is in demand, but there are a lot of similar properties, your house may become buried within the traditional auction houses catalogue — meaning you won’t get the exposure you are after. If you are online, you may be able to negotiate which types of properties are alongside your lots in the auction.
Online modern auction systems get much more exposure than traditional ones because buyers can access the auction from abroad or across the country; it also means that people can use many devices to access your property instead of visiting in person.
If you decide to use the modern auction system, the buyer will need to pay between two and five percent of the purchase price on top of paying the ten percent deposit at the exchange of contracts, but the process will be staggered. This means that the fee is given over to the buyer – which can act as a deterrent for the buyer, or if they do bid, they may try lowballing you.
What makes the modern auction system a slightly controversial way to sell a property is that some people accuse the system as another route for estate agents to earn a higher fee — based on some estate agents insisting that you pay a fee, making them two commissions. However, the modern auction system is much more secure than using your bog standard estate agents as the minor deposit requirement minimises the risk of a buyer pulling out compared to the traditional auction system.
Conditional/Unconditional Auctions
Property online auctions can be split into two different types of auctions. The conditional method is where it takes place over 56 days, and the unconditional which ties closely to traditional auction methods, takes 28 days.
| Conditional/Modern Method – 56 Days | Unconditional/Traditional – 28 Days |
| The completion or settlement date is stretched out. This means the auction house can attract more buyers willing to pay prices closer to and above your reserve price. | The exchange to completion time is 28 days which means it’s a much quicker sale and will attract a more professional clientele. It works exceptionally well if you have tenants or the property needs work. |
| The entire process is done online, and buyers can bid from anywhere, at any time. | There is a high chance that the buyers attending the auction are local, so that they will know the area of your property. |
The winning buyer will win a 28-day exclusivity period & a non- refundable deposit is instantly required — securing the deal. There is then a further 28-day period to complete. | The winning buyer will immediately need to exchange contracts and pay a deposit of 10% of the house value. They will then have 28 days to complete. |
| By allowing extra time for the buyer, you are increasing the possibility of reaching 90-100+% of your reserve price. | If the winning buyer does not complete the process, they will lose the deposit and face penalties. |
The Cost Of Selling Your House At Auction
Every auction house will offer varying levels of fees and costs; the following is based on the average prices of traditional auction systems:
- Auction Fee – 1.5% to 3% of the property value: Some auction houses will ask you to pay a separate fee up-front instead of charging you a percentage of the sold price upon completion. You could ask the buyer to cover this cost for you, but they will consider this when offering you an agreed price.
- Marketing Fee – 0% to 1.5% of the property value: This is pretty universal across all auction systems; it’s the cost of placing your home on property portals like Rightmove or Zoopla. The marketing fee will also factor into the property listing in the auction houses catalogue and any other marketing platform or viewing/open day organisation.
- Room Hire Fee – 0% to 1.5% of the property value: Reputable auction houses may have their rooms for no fee. However, some may ask you to cover the room hire to provide their auction of your property.
- Conveyancer/Solicitor Fees – £500 to £1,500: Cost may vary depending on the size of your property, its tenure and whether or not it is a problem property. Most solicitors will want you to pay a service fee if they are required to deal with any incoming inquiries.
9 Tips To Selling Your House At Auction
There is a lot of information in this article for you to take in, so here are our 9 top tips to sell a house at auction:
One # Beware of Hidden Fees
Your auction house is legally obliged to divulge all costs associated with selling your property. But, you should read the fine print or other hidden fees in your contract as there may be sliding fees. You must also ensure that any charges once the sale is complete are low if you pay an upfront fee.
Two # Low Fees?
If you are considering an auction house and they have low auction fees, it may suggest that their services may be poor. This is especially true for photography and marketing your property which the auction house may not even cover. If you are having doubts about the auction house, then you should be upfront with them and ask to see previous case studies or examples in your local area — a reputable auction house will be able to show you all past auction sales and the marketing they used.
Three # Manage Damage
During organised pre-auction viewings, potential buyers may cause damage to your home via increased footfall. You should check your insurance policy covers when prospective buyers visit your property. This is a pretty rare occurrence, but you don’t want to be caught out.
Four # Experience Over Prices
You should research the auction house before you decide to use their services. This could include looking at their Google or TrustPilot reviews, asking previous customers about their experience or checking whether they are members of the National Association of Property Buyers and The Property Ombudsman — this ensures that they must treat you fairly while dealing with you.
Five # Aggressive Pricing Could Lead To Your House Value Slicing
During the auction, the best scenario would be to drive the price up as much as possible; however, the auction house will need to attract the right cash-ready buyers. If the auction house pushes the pricing too much, it may put off any potential buyers — if no one places a bid on your property, you will still need to pay the auction fees.
Six # Positions…Everybody!
To get the most optimised slot within your auction, you should aim to be at the peak time of the auction — ensure you check your property’s lot number on the day. Auctions can range dramatically from a couple of houses to a couple of hundred properties, so your property lot must be in the first half of the session. This doesn’t apply if you are part of an online auction.
Seven # Competitive Competition
During the auction process, there may be similar properties to yours – so it may be wise to check your competition that is being sold simultaneously. This will allow you to ensure that your property’s reserve price is competitive and not far-fetched.
Eight # Read Terms and Conditions
You should make sure that you read through the online auction terms and conditions, as they can differ significantly from traditional auctions. An excellent example of this would be that some online auctions may charge the buyers an extra fee upon exchange of contracts which may deter potential buyers or make them lowball your reserve price.
Nine # Avoid the Red Cards!
Like football, you may be penalised if you pull out prematurely. You need to ensure that you are ready to go forward with the sale, as if you pull out, the auction house may charge your withdrawal — this is known as an abortive fee. The abortive price will include the cost of living, your living property, inspections, advertising, legal documentation, and pre-auction viewings
Frequently Asked Questions: Sell At Auction
What do I do if my house doesn’t sell at auction?
Depending on your contract with the auction house; if your home doesn’t sell at the auction, you may have the choice to either accept a post-auction offer/negotiate with any bidders, relist the property at the next auction (you will probably be fee’d for this) or take it off the market and try your luck elsewhere.
What to do if my property doesn’t sell through an estate agent?
If your property is not selling through an estate agent, an online auction can be a great way to get large amounts of exposure and sell your property efficiently and effectively. You can choose 28 or 56 days, whichever period works best for you.
Is selling your house at auction a good idea?
If your house is unique, has its quirks, is a mix-use property, a commercial property, has tenants, is a problem property, or just isn’t selling on the open market — a house auction can be a great way to sell your property. Auction houses attract genuinely interested investors, landlords and flippers who have extensive experience in the property market and will be eager to grab your property.
Do houses sell well at auction?
No matter their size, condition, age or style, houses sell well at auction. If a traditional auction house doesn’t manage to sell your property, we suggest trying an online auction, as you will be exposed to a wider net of potential buyers who may be into your properties niche.
If you have any more questions, feel free to contact us, we will be happy to help.
Subscribe To Our Newsletter
Tom is a Digital Content Writer passionate about sustainable property & property trends. Regardless of the subject, he will always write blogs of the best calibre. Read more about Tom here.
Be the first to comment