Selling a property at auction could help you shift your home quickly, but that doesn’t mean it’s right for everybody.
Should you sell your property at auction, and if you do, will you make more profit than going a more traditional route?
These are key questions, but before you consider an auction as an option it’s vital to understand the consequences - once the hammer falls, you can’t change your mind, and the sale is binding.
Here’s what you need to know, and how to go about it.
Why sell at auction?
An auction sale may appeal if you’ve got to make a quick move, for example, you need the cash urgently to pay off other debts.
Properties for sale at auction will be there for a number of reasons, such as bankruptcy, or repossession.
Alternatively, they may have particular issues that could prove problematic for mainstream buyers, such as a short lease.
If you have a property with such an issue that you’re finding hard to shift, selling at auction may offer a solution.
What types of property sell at auction?
All types of property are up for sale at auction.
However, this way of selling often attracts more unusual properties. Auction houses are known for attracting buyers looking for a property project, or a property that may not typically be on the market.
You’ll pay around 2.5% of the price you finally receive for your property to the auction house, although it depends on which one you use. You may also pay for advertising costs, if required, even if the property isn’t sold.
The costs of selling at auction may be higher than using an estate agent, so do your sums before signing up your property.
Once a sale is agreed, you’ll also need to fork out for a solicitor, as you would with a standard sale.
Finding an auction house
Essential Information Group (EIG) at www.eigpropertyauctions.co.uk offers a useful database, which is a good starting point.
You can also find the best auctioneers in your local area with Zoopla's AgentFinder tool.
Contact those auction houses you may be interested in, and ask to receive details of properties for sale, to get an idea of how your property will be marketed.
Ask any questions you might have, and it’s also worth visiting some auctions, which are free to attend, to see how the sale process works.
How your property is valued
Your property will feature a guide price and a reserve price, which are not the same.
The guide price will typically be less than the property actually sells for. It’s the price that potential buyers will see, giving an idea of what the property is worth.
The reserve price is set by the seller, and it’s the lowest price they are willing to accept. This may be kept secret, between you and the auctioneer.
The reserve is not usually set too high, but if your property is expected to appeal to bidders, it could receive a high reserve price.
If offers are lower than the reserve price the auctioneer will withdraw the property from sale.
It’s important to think carefully about the price you’re comfortable with, as once a sale is made, you cannot change your mind.
How your property is marketed
The auction house will market your property in the weeks leading up to the auction, and it’s up to you to ensure it’s looking its best to attract potential buyers.
You can choose to publicise your property yourself if you wish, perhaps through social media, and by spreading the word that it’s for sale to family and friends.
The sale process
The bid with the highest offer that’s accepted is your buyer – and you are legally committed to selling the property to them.
Once the hammer falls, you will receive 10% of the cost of the property before the buyer leaves the auction, with the balance to be paid in full within 28 days. So it’s a speedy process, and you need to be prepared to move quickly.
A buyer in need of a mortgage should have this in place if they are seriously bidding on your property, with the lender able to complete their application within three weeks of the sale.