Written by Sarah Bromley
Sarah Bromley
Edited by Ruban Selvanayagam
Ruban Selvanayagam
Ruban Selvanayagam is a professional cash homebuyer, private rented sector landlord, auction specialist, blogger and media commentator.
The first question you’ll probably want answered is whether going down this route is better than selling through an estate agent.
Below, we’ve listed the pros and cons of selling a house at auction.
One of the main reasons people choose auctions is to secure a quicker sale.
Indeed, selling a property through an auction can take as little as 20 business days – whereas it can take up to 25 weeks to sell through the open market.
Check our Property Solvers free tool which shows how quickly properties sell anywhere across the UK (updated monthly) to see how it compares.
Plus, auction participants are generally cash buyers who aren’t involved in a chain, so sellers often benefit from avoiding all the hassles that come with mortgage financing.
When you sell your house through the open market, potential buyers can pull out of the sale at any point up to the exchange of contracts, so you won’t get true peace of mind until the sale completes. It is indeed estimated that at least 1 in 3 open market sales collapse.
Through an auction, bar exceptional circumstances, there will be a guaranteed sale provided that the property reaches its reserve price.
This speed and peace of mind are particularly valuable for sellers with more difficult or unusual properties – such as those in need of renovation, those that have been tenanted, have other legal complications or tax issues (such as those resulting from Section 24). Due to these risk factors, these types of properties often see open market purchasers drop out at the last minute.
In contrast, property auctions eliminate the chance of a buyer pulling out. Once the auction is over, the winning buyer has an obligation to put down a deposit immediately (and pay associated fees).
If you get lucky and there are multiple interested buyers, you could also end up with a higher purchase price than expected due to the competitive bidding process that both traditional and online auctions offer. This is particularly true in a “hot” market where there are more buyers than sellers.
One of the main drawbacks to auctions is the uncertainty of the outcome and the risk that no bids occur at all.
The starting and actual bids may not reflect what you believe your property’s true value is. Furthermore, there’s no way of knowing for sure how far the bids will reach at auction.
Although a reserve price offers some extra security, you may still end up disappointed if you thought your house would reach a higher price.
In fact, there’s no guarantee that your house will sell at all.
Although getting a good sales price is possible, many auction buyers are motivated by the opportunity to get a bargain. This means that, unless you get lucky with a prospective buyer looking for a particular property that your house perfectly matches, you should be willing to accept a lower price.
Property auctions also force you to move quickly. While a quicker sale is an advantage for many, it won’t give you get your house ready.
Now you have an idea of whether an auction is right for you, you can start to understand how the auction sales process works from start to finish.
Note that the following runs through the broad steps behind a traditional (unconditional) property auction…
Once you find an auction house, you’ll give them the property details and receive an appraisal.
The auctioneer will walk you through the process with them, waiting times, how they will market your property amongst other factors aimed at getting you on board.
The auctioneer should offer an evidence-backed property valuation. Some of the leading firms have in-house RICS surveyors and valuers. Property Solvers Auctions also offer free auction valuation reports for active sellers.
You will need to agree on a reserve price – i.e. the minimum price you’d be willing to sell the property for. This number is only known by you and the auctioneer. But if nobody bids at or above it on the day of the auction, the sale won’t go through.
The auctioneer will also confirm the guide price. This is essentially an indicator of what the auction house thinks the property is worth.
Then, you’ll agree on an auction date, time and location for a slot in the upcoming auction. This will usually be in 1 to 3 months, but this can vary between auction houses. Note that most online auctioneers can often list properties within a week.
Just because you’re selling through an auction, it doesn’t mean that you avoid the need for solicitors. A conveyancer must prepare the necessary legal documents.
They will also guide you through your own responsibilities (such as arranging an EPC) and sort out any legal issues related to your property that could cause issues with sellers.
Often, buyers will request an auction legal pack to inform them about all the relevant information. Although it’s not compulsory, we would always recommend having one in place to maximise your chances of success.
Ahead of the auction, the auctioneer will need to market the property – principally via Rightmove, Zoopla and On the Market alongside other leading property portals.
Most auction houses have a pool of buyers (and perhaps an investor database) they can contact. It’s a given that your listing should be added to their website to maximise reach – or even gain media coverage.
You can also do some marketing yourself using social media or word of mouth to generate further interest.
The auctioneer will then deal with enquiries and organise visits that most prospective buyers wish to do before bidding.
You can either provide the keys or discuss how you can be present and/or organise access for viewings.
Property Solvers Auctions recommends holding open days and inviting interested parties together. According to James Durr (auctioneer and professional cash homebuyer), “this creates a ‘fear of missing out’ or effect and helps create more of a competitive environment in the build-up to the auction.”
Prospective auction buyers must also register before being allowed to bid on a property.
The auctioneer will therefore request identification and personal details such as proof of photographic identification and address / contact information. There will also be Anti Money Laundering (AML), Politically Exposed Persons (PEPs) and sanctions checks.
Then, the property auction day or “timeframe” will come around.
The bidding process will vary according to whether the auction is “in the room” (live) or online.
At live auctions, potential buyers receive a bidding number to identify them. They will bid against each other until one person is willing to pay more than anyone else. Once the hammer falls, there’s a legally binding contract between the buyer and seller to proceed with the sale.
Online auctions work in a similar way – however, auctions effectively click a “bid” button on the respective lot. It’s also possible to “proxy” bid whereby buyers can set their maximum price and the auction software will raise the increments on their behalf (similar to how eBay works).
Note that more auctioneers are offering live-streamed auctions. These can be broadly described as a combination of online and offline auctions (where an auctioneer is filmed and prospective buyers bid online).
The buyer must pay a reservation fee. They then usually have to pay a 10% deposit immediately and the rest (i.e. 90% of the sale price) within 28 days. Note that modern method auctions operate under different timeframes.
Some potential buyers may try to make an offer ahead of the auction.
But while these pre-auction offers might sound tempting, you often have little to gain from accepting. There’s a good chance these extra-keen buyers will also participate in the auction, meaning you could benefit from competitive bidding. Plus, you will have to pay the auction house either way.
However, if the prospective buyers have made a particularly attractive offer, you may want to consider accepting – particularly as the sale can complete quicker. In this case, the property won’t make it to the auction room, and you will proceed to exchange contracts with the successful buyer instead.
Your auctioneer may also book viewings before the property auction for prospective bidders, so you have the responsibility of making your house look as attractive as possible to lure buyers.
Much here will depend on how “in demand” the property is.
Active actions can get intense and the auctioneer’s job is to drive the price as high as possible by effectively pitting buyers against each other.
The winning buyer will ultimately be decided when the final bidder does not want to raise any further (and the minimum reserve price has been achieved).
The auction buyer and seller exchange contracts as soon as the final bid is accepted.
At this juncture, the auctioneers will organise the memorandum of sale, reservation agreement and the payment of 10% (unless otherwise stated).
One of the main advantages of selling at auction is that much of the legal (conveyancing) work is usually undertaken by the solicitor before the bidding begins.
Sales usually take around 28 days to complete for traditional auctions. It’s worth noting that most terms + conditions will impose penalties if the buyer delays the sale by even a day.
Much of whether your auction will be successful comes down to the auction house you work with.
A few factors to take into account include:
Buyers are no longer restricted to heading to their local auction house to sell a house through auction. Online property auctions are now becoming more popular. As the name suggests, the entire auction process is conducted virtually.
Selling a property online allows you to reach a larger pool of potential buyers. They may be held on a specific day, like a traditional auction, or on a rolling basis (meaning people can place bids over a longer period).
In some cases, an estate agent may even encourage sellers to opt to work with an online property auction partner – particularly if the property is struggling to sell on the open market.
Online auctions also take a form known as the modern method of auction.
Unlike a traditional auction, modern method auctions are “conditional”. Here, the buyer has a longer timeframe (typically an extra 28 days) to exchange contracts on the property. As with traditional auctions, the terms and conditions then provide a further 28 days to complete.
This gives them the chance to obtain a mortgage or bridging financing, which is more challenging through classic auctions.
Buyers must still pay a reservation fee at the fall of the hammer, providing further security for sellers. This also lowers the chances of them pulling out.
Deciding on a reserve price is one of the most difficult parts of selling a property at auction. As soon as the buyer bids at the reserve price or above, he/she will be committed to the auction sale (and ultimately exchange contracts).
Choose too low, and you could regret it.
On the other hand, a higher price might get no bids at all. However, you will still have the chance to negotiate with a buyer if you set it too high.
There’s less resting on the guide price since it’s only there to give buyers an idea of the property’s value. However, it’s an important part of marketing – a ridiculously high guide price could put prospective buyers off, while asking for too little could make them suspicious.
It’s possible to choose a guide price below the reserve price, and you won’t be under any obligation to accept bids at this price.
When selling your house at auction, you will incur fees. Some of which we have touched on already.
These are the three main categories:
In essence, the auctioneer fees replace the estate agent charges when selling your house to open market buyers.
These costs can vary depending on your location, the type of property you’re selling, and the pricing structure of the auction house you choose.
You can sell any property at auction. It’s become an increasingly popular for all types of owners, particularly those looking for a faster sale.
Typically, you’re likely to come across the following…
Selling a house at auction is a fantastic way to get a quicker sale, and the auctioneer will replace the role of an estate agent by handling a lot of the administrative side.
However, you’ll need to consider your reserve and guide price carefully and be prepared for an outcome that you weren’t expecting.
To keep up with the latest market news and opportunities in the world of property auctions, check out our articles on Property News. You can also download our auction valuation report for extra guidance on the house sales process through auctions.
Note that if you’re looking for an even faster sale (and are willing to accept discounts in the region of 20-25%), there are a number of We Buy Any House companies that can complete in as little as 7 days. As it’s a private (one-to-one) sale, there are usually no estate agency fees and they should also cover any conveyancing fees.
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