Yes, you can sell a house at auction even if it still has a mortgage on it. However, there are some important considerations and potential challenges to be aware of when auctioning a mortgaged property.
When selling a house with an outstanding mortgage at auction, the primary concern is ensuring that the sale price will cover the remaining mortgage balance. This is crucial because the mortgage must be paid off in full at the time of completion. If the auction sale doesn’t generate enough funds to clear the mortgage, you’ll be responsible for making up the shortfall.
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Challenges of Auctioning a Mortgaged Property
Uncertainty of final sale price: One of the main issues with selling at auction is the unpredictability of the final sale price. While auctions can sometimes drive up prices through competitive bidding, there’s also a risk that your property might sell for less than expected. This uncertainty can be particularly stressful when there’s a mortgage to pay off.
Time pressure: Auctions typically require a quick turnaround. Once the hammer falls, contracts are exchanged immediately, and completion usually occurs within 28 days. This tight timeline can be challenging when dealing with mortgage lenders, who may require additional time to process the necessary paperwork.
Potential for a failed sale: If your reserve price isn’t met or if there’s insufficient interest, your property might not sell at all. This can leave you back at square one, potentially having incurred auction fees with no result.
Upfront costs: I should have emphasized that there are significant upfront costs when selling at auction. These typically include:
- Entry fee: Usually around £300 + VAT, payable before the auction.
- Legal pack preparation: Costs can range from £200 to £500 or more, depending on the property’s complexity.
- Marketing fees: Some auctioneers charge additional fees for enhanced marketing.
These costs are often non-refundable, even if your property doesn’t sell.
Exclusivity contracts: Many auction houses require sellers to sign exclusivity agreements. These contracts typically:
- Bind you to that specific auction house for a set period (often 6-8 weeks).
- Prevent you from marketing your property through other channels during this time.
- This may include penalties for withdrawing your property from the auction.
Forced entry into subsequent auctions: If your property doesn’t sell at the initial auction, some auction houses may:
- Automatically enter your property into their next auction.
- Charge additional fees for re-listing.
- Require you to lower your reserve price for the next auction.
This can lead to a cycle of auctions and mounting costs if your property doesn’t sell quickly.
An Alternative: Selling to Property Saviour
If you’re looking for a quicker, more certain sale process without the risks associated with auctions, consider selling to a company like Property Saviour. We offer several advantages:
- Guaranteed sale: We provide a firm offer and stick to it, eliminating the uncertainty of auction outcomes.
- Quick completion: We can complete the purchase within 10 days or at a timescale that suits you.
- No fees: Unlike auctions, we don’t charge any fees, and we even contribute £1,500 towards your legal costs.
- Any condition: We buy properties in any condition, so there’s no need for costly pre-sale repairs or renovations.
- No viewings or surveys: We don’t require multiple viewings or surveys, making the process smoother and less intrusive.
By choosing Property Saviour, you can avoid the uncertainties and potential pitfalls of selling a mortgaged property at auction while still achieving a quick and hassle-free sale.
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
