Home owners may want to sell their property at auction for various reasons. Many hope for a bidding war to help boost the value of their house, others are just looking for a quick sale. Either way, it is likely that you are unfamiliar with the house auction process, and so before committing to selling a property at auction you may want to read this property guide which should help you understand more about what to expect before your home goes under the hammer.
How to auction your house – the process
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There are about six steps to auctioning your home:
Consultation: The first step to selling a house at auction is an appraisal. Your auction house will tell you whether your property is suitable to sell at auction, and how much it is worth. It is good to have an idea about the value of your home beforehand so you know what to set your reserve price at.
Entry fee and commission discussion: After your auction appraisal, you will find out the auctioneer fees and commission. Remember, even if your property does not sell at auction, you may still be expected to pay these.
Property inspection: Surveyors will be sent to examine your home. Photos and measurements will be taken.
Promotion: The aforementioned photos and measurements may well be used to market your property. Auctioneers should promote your property through the press, online and of course their auction catalogues. Auctioneers will report the interest in your home back to you.
Auction: hopefully good marketing of your home should help create a lively property auction, bids can come in person, online or even via telephone.
Sale completion: after the hammer falls, the buyer must pay a 10% deposit and there is a legal obligation to complete purchase.
In general, the length of time it takes to sell a house at auction can vary, but it may be as quick as 2 months. You must put your property up for auction at least 6 weeks in advance, and once the hammer falls sale completion should take 28 days. This is because someone buying a house by auction must commit to paying a 10% deposit upfront, with just one month to pay the remaining amount.
Can I sell my property by auction?
Generally speaking, most properties that are suitable for auction are usually in need of a little TLC. If your house is in a bad condition then you can consider auction as a route to market. Auction bidders do not shy away from redevelopments or fixer-uppers. Also if you house is considered conventionally “unsellable” i.e. it has a short lease or is unmortgageable, then it may be suitable for auction.
If your property still has tenants, fear not, this could actually be attractive to investors and may drive the final price up.
You can auction both residential and commercial properties, mixed-use is also possible.
How much does it cost to sell a house at auction?
Before you decide to auction your house, you may want to consider the cost of doing so. Auction fees may vary, and you will need to pay both an entry fee, and a commission. Entry fees depend on the auction house, and commision fees are a percentage of your sale price (typically 2.5%) But these are not the only auction fees you need to pay. Other costs include legal fees as you will need a solicitor to go over the legal pack, again this cost can vary wildly and may be anything up to £500. In addition to this you will need to pay for conveyancing (the legal process of transferring a property from one owner to another.) This fee will need to be paid to your solicitor and could be up to £750, excluding VAT. Add to this the fact that your solicitor must attend the property auction with you, and you must pay for this time, and you can see how to costs can escalate quite quickly.
The pros and cons of auctioning your property
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Despite the cost of auctioning a house, many homeowners are tempted by the speed and certainty of a sale. Although there are benefits of selling a house by auction, you should also be aware of the disadvantages. Some of these include:
The cost of selling at auction may actually exceed estate agent fees
You may not reach your reserve price, and must still pay for the auction expenses. Or you may only just reach this reserve price and leave the auction disappointed.
The sale price will not match the true value of your property on open market. After all, bidders attend auctions for a bargain.
The sale is not always that fast. Indeed, it can take up to 3 months (whereas we will buy any home in as little as 7 days!)
If you want to sell your house fast for a good price, auctioning it is probably not the best solution due to the hidden costs and the fact that it still may take months before the sale is complete.
However some of the advantages of auctioning a property include:
A chain-free sale
You can put multiple properties into an auction at the same time
Bidders may feel competitive and over-pay for your property.
Let us know in the comments your experience with auctioning a house, or if indeed you would ever consider doing so. For other options on how to sell your house quickly, just get in touch!
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