Why Do Properties Fail to Sell at Auction?

At every property auction, a number of lots will go unsold on the day. Here we will look at what can cause this to happen.

Auctions – the chances of selling…

The chances of a property being sold in an auction sale are generally pretty good. Analysis of circa 18 months of our own data suggests that success rates at individual sales vary between 50% and 90%, but hover around 70% as a market average.

For the 30% that, on average, do not sell what might the reasons be?

Issues surrounding the property market

Interest in buying at auction reflects the interest in buying in the wider property market to some extent. This can vary due to sentiment in the market, interest rates, in the wider economy, or even seasonally.

Issues surrounding the property itself

Auctions tend to offer a very diverse range of properties and buildings. In many cases, this includes problem properties that have, for example, structural or legal issues. It could just be that buyers at a particular sale did not have the appetite to tackle those issues.

The choice of auction sale

Not every auction sale is the same. To maximise chances of sale, a property ideally needs to be entered into an auction that has an established market for that type of property.

Sellers must also consider, for example, whether to enter a property into a London-based or regional/local auction. Or whether a traditional, online or modern method of auction is more appropriate.

Marketing issues

To attract multiple bidders an auction lot must be promoted extensively and for an adequate period of time. Potential buyers must also be provided with sufficient information (by way of the legal pack or viewing opportunities) to come to a decision about whether they wish to bid.

Pricing issues

As every auctioneer will tell you, an attractive guide price encourages competitive bidding. In the case of an unsold lot it could be that the guide price (and hence the reserve price) was ambitious –  or potential buyers considered it to be.

Buyer issues

When a lot fails to sell it could simply be that the right buyers did not turn up on the day – or perhaps bought something else instead.

Expert opinions on auction sales…

Now let us take in some views from experts as to reasons why auction properties sometimes go unsold: Jay Howard, Director at Hammered Auctions tells us: “There are several reasons why we see properties fail to sell at auction. The first point, which in our estimation is the biggest culprit for a property failing to sell at auction, is an incorrect pricing strategy. If the price is too high, it deters people from buying as the auction is designed to be a give-and-take environment. If you do not give a discount, no one will buy.

“Other reasons include incorrect, ambiguous or confusing marketing details. Or an incomplete, deterrent or even no legal pack. An incomplete pack gives buyers a lack of confidence to bid. A deterrent is normally excessive fees or unfair contract terms. And no legal pack means no sale – simple.

“A lack of internal viewings/floor plans/video walkthroughs can be to blame. People really do prefer to see what they are buying, even if they are seeing it remotely. If you have nothing to show someone of the inside of the property, they are unlikely to bid or it may sell, but for far less than it should have.

“Also, using the wrong method of sale, ie. conditional or unconditional auction. Using the wrong method depends on the property, the price and your ideal buyer demographic. Pick the wrong option, and you will be marketing to buyers that are unlikely or unable to buy your property.

“An auctioneer lacking specialism can be a consideration. Auctioneers are a jack of all trades when it comes to types of property. They can value most and with enough marketing can get a sale. However, there are some that specialise or have great results in a specific asset class, area or value add opportunity, then they are the natural option to sell with.

“Lastly, a vendor change of heart (and/or change of circumstances) can happen more than you might think. I used to see this a lot with receivership sales, mortgage repossession sales and the odd probate sale.”

He summarises: “There are other reasons which can impact the sale of a property at auction, but these are the ones we see the most and therefore are the most relevant to consider. Also, the reason why a property fails to sell can be a combination of any of the above!”

Andy Thompson, Auctions Director at SDL Property Auctions points out that SDL sell every type of property across the entire county, in varying levels of condition, for many different types of clients each with their own reasons for selling. He points out that the demographic of auction buyers is vast too. So, in theory, there is no reason why any property should go unsold. However, at the end of the day, there is one main reason why properties sometimes do.

He says: “So in a nutshell, if we sell every different type of property you can think of, to a whole host of various types of buyer – the only real reason that some properties don’t sell is ultimately the price. If the price is right, there is always someone who will take a chance on it.”

Thompson adds: “In this current market of 2023 which is less predictable compared to what we’ve seen in the previous few years, there is a clear pattern to our auctions. If the price is right, we are seeing high levels of demand, leading to strong competitive bidding and many sales far exceeding their reserve price.

“If however, the price isn’t right, bidders will simply sit on their hands and wait for more appealing options to come along. SDL had a record month in January with some incredible individual results and it is no coincidence that the best-performing properties were those that started with an appetising price.”