Selling a House at Auction UK
Are you auctioning your property?
Are you prepared to put in a low guide price, wait two months, and pay upfront fees with no guarantee of a sale?
How about if you can sell your property as it is anywhere in England or Wales with a guaranteed cash offer?
On paper, selling your house at auction may seem like a good idea, particularly if you own a problematic problem with subsidence, dry rot, fire damage or flooding. However, for inexperienced sellers, it can be a stressful process with an uncertain outcome.
If you have seen BBC’s Home Under The Hammer TV program, you will be familiar with the process for auctions. You may not be aware that to get potential buyers excited, the property needs to have a really low guide price.
We’ll cover whether auctioning a house is a good idea, recent auction results, insider secrets, risks, common auction phrases, auction fees, and an alternative way to sell.
So is auctioning a house a good idea? You can watch this video or read the rest of this article:
Table of Contents
Why would you sell a house at auction?
Most properties that come into auction are corporate sales such as repossessed properties, surplus properties being sold by councils, housing associations, banks or administrators – and occasionally private sellers.
Sellers have a variety of reasons for considering auctions as a way to sell their property. For instance, a property has to be sold because a landlord is retiring, or the seller must sell within a fixed timeframe. Auctions do not guarantee a sale.
So why do houses go to auction?
Auctioning your house isn't for everyone
Property auctions come with a degree of uncertainty. This is why auctioning a house isn’t for the faint-hearted.
In order to have a successful outcome, you need to do the following:
- Check if your property is suitable for auction;
- Put in a low guide price to get buyers excited;
- Pay for an auction legal pack, searches and auction entry fees well in advance of the auction;
- Ensure that you select the right property auctioneer;
- Ensure that the auctioneer uploads the legal pack a month before the auction;
- Hope that the property sells and you receive the balance of funds in 28 or 56 days.
How does auction property work?
At online or in-person house auctions, buyers who have registered to bid will place their highest bids, and the highest bidder wins.
The winning buyer will have to pay a deposit or a reservation fee and the completion date is set for 28 days or 56 days later.
How much is the property auction fee?
Property auctioneers can charge up to 2.5% of the final sale price plus VAT.
On top of that, you may have to pay an entry fee of around £500, which is non-refundable. You will have legal pack costs for preparing a contract of sale & ordering local authority searches.
How do I choose an auction house?
There’s not a single ‘best’ property auction house as they all specialise in different types of properties and different price brackets; some are regional and others are national.
Look at their auction performance data, as many auctioneers tend to display sold figures to make it look better, whereas the reality is different.
Do properties always sell at auction?
There is no guarantee that your property will sell at auction, even with an enticing low guide price.
As you can see from the above figures, in the current auction market, there’s a 30% to 55% chance of your property not selling! That’s a huge risk to take with all the delays associated with auctions.
Unsold properties in auctions can be very difficult to sell due to stigma.
What is a guide price in an auction?
A guide price is indicative of the property’s value determined by the auctioneer. Bidding starts at a guide price. Auctioneers set low guide prices to attract buyers.
Do properties sell for guide price at auction?
It depends on the auction house and the seller’s minimum expectations. Depending on the number of registered bidders, suitable properties with low guide prices tend to do very well.
What is a reserve price in an auction?
A reserve price is the minimum price that is agreed between the seller and auctioneer, that bidding has to reach before a property can be sold at auction.
The reserve price is the price at which you will be legally obliged to sell. Following a ruling by the Advertising Standards Agency, the reserve price can’t be more than 10% of the guide price.
Bidders are not made aware of this reserve price because it is confidential between the seller and auctioneer. The seller is not allowed to increase the reserve price once it has been set. However, they can lower it.
How do you determine reserve price at auction?
A property auctioneer will advise you to put in a low reserve price because a lower reserve price increases the chances of selling a house. But is it worth giving it away?
Can the reserve price be higher than the guide price?
The reserve price can be up to 10% higher than the guide price if a single figure is stated. For example, a house with £80,000 guide price will have a reserve of £88,000 or below.
How long does it take to sell a property through auction?
Selling a property at auction takes between 2-3 months to complete. This is because you have to wait for the next auction and then allow for 4 weeks of marketing period. But what if you need to sell now?
Risks of Selling at auction
Auctions are complex and, because of several factors, by definition, risky for the sellers and the buyers. These are some of the common risks:
Property placement in auction catalogue
A property auctioneer will ‘lot up’ his properties into a catalogue; the first ten lots are usually very popular. They will place ‘lemons’ (these properties that might not sell) next to ‘star lots’ so that bidders who miss out on their preferred property could bid on a ‘lemon’.
Once an auction catalogue is published, it is too late to change the order of auction lots.
Earlier property lots carry a lot of energy. The auctioneer is fresh, enthusiastic and ready to sell. Imagine being lot 190 out of 200 lots when the auctioneer is tired and can’t pay too much attention to incoming bids.
Property placed with unsuitable auctioneer
If your property is in Yorkshire and is placed with a London auctioneer, it is doubtful that a potential bidder will pay £200 for a return train ticket to view a property they might not be able to buy.
Repeat customers get priority treatment
Property auctioneers like to deal with repeat customers. Banks, administrators, property traders and councils who dispose of properties in auctions regularly. Therefore, they influence where their properties are placed in an auction catalogue of 200 lots.
Your property will be one of these 200 lots, and your custom to auctioneer is a one-off transaction. The result achieved will be more luck than chance. Do you think they will have time or inclination to give your property the best chance when the odds are against you?
Unless you know exactly what you are doing, you could take a huge risk with an auction sale. Auctioning a house may not be a good idea after all.
How much less do houses sell for at auction?
Property auctions attract investors because they can buy cheap property at 30% or less than its market value. If there’s a strong bidding war, a property could sell for more than its market value, and that’s the risk.
Can a buyer pull out after auction?
A buyer can pull out of the auction; he/she will lose their deposit or reservation fee. He/she will be in breach of contract, and as a seller, you can sue them, but litigation is very expensive.
Can seller pull out of auction sale?
Yes, most property auctioneers have 7 or 14-day cooling-off period to change your mind. If you decide that the property auction isn’t for you, you can give them a written notice to withdraw.
Do you lose money selling a house at auction?
Yes, it is possible to lose money when selling via property auctions. This is because auctions are painful for the seller and equally painful for the buyer.
With the recent rise of the ‘Modern Method of Auctions’, buyers are expected to pay a ‘buyer’s premium’ as written in the legal packs.
When the buyer is paying the auctioneer’s commission as sellers are told, ‘it is free to sell,’ there’s a possibility of conflict of interest.
You will lose out as the buyer will bid less for your property or could pull out of the sale. This leaves the estate agent and auctioneer to split the fee between them. But that’s not the worst part. If the property is unsold, it is automatically entered into their next auction.
What if you need to sell now and want to avoid the pain and uncertainty?
Sell with certainty & speed
Would you be happier with a guaranteed cash sale instead?
Navigating the complexity of the auction process and fee structure and trying to get a fair price for your property might feel like a few hurdles too many.
Suppose you’ve inherited a dilapidated house or don’t have time or inclination to learn the ropes of the auction house. In that case, you may find it less stressful to sell to a professional cash buyer like Property Saviour instead.
A guaranteed discreet sale gives you peace of mind and puts you firmly in control of the situation.
Is selling a house by auction a good idea?
Auctions can be an excellent idea if you are looking for a quick sale. This is because the process is far less drawn out when using an estate agent.
As the seller, you have the certainty that once the hammer goes down, in theory, the highest bidder cannot back out of a sale. However, a sale is still not guaranteed just because you intend to sell via auction.
If you have a suitable property and provided that you are well aware of the risks, it can be a good idea to sell your property in an auction.
Auction properties appeal to property developers due to a short completion date. The contract of sale can state a specific date for completion, and that’s why mortgage lenders can’t lend funds for auction purchases.
Some people are natural-born adrenaline junkies. If you enjoy the excitement and the fear of uncertainty or the challenge of doing it on your own, this may be your route. The typical advantages of house auctions are:
- Fast completion (usually within 28 days)
- Chain-free sale unconditional sale
- Multiple bidders can push the price higher
- Properties in poor condition are acceptable unlike selling via estate agents
Would it be more comfortable to get a guaranteed price for your property rather than putting it through an auction?
As cash buyers, our offer means that a sale can be completed within 2 weeks, and we pay your legal fees. Why not get in touch with us to see how we can help?
What type of property is suitable for auction?
Not all types of properties are suitable for auction.
Properties in need of refurbishment or a rented property can potentially appeal to property investors IF you can create a very competitive bidding war that can allow for a great chance of the property selling for a higher price.
How much does it cost to sell your property at auction?
Property auctions can be expensive, so it’s worth weighing up the options to get the best deal. So, how much does it cost to have an auction? Many auctioneers are shy of telling you this upfront, so why are auction fees so high?
There are certainly costs for the seller in selling a house at auction. These include entry fees, commissions, and legal expenses.
- Typical auction entry fee range from £500 to £1,000. These are payable upfront and non-refundable.
- Auction house commission rate can be up to 2.5% of the sale price, plus VAT.
- Preparing a legal pack, an auction contract and searches could cost between £1,500- £2,000. These are upfront cost and non-refundable.
- There is normally an administration fee of £750 to £1,500 payable by the winning buyer. Serious buyers often despise paying these fees. This means that only the most astute seasonal auction buyers would bid thus property has limited appeal.
How quickly can my property be sold at auction?
Not very quickly, as auctions allow up to 28 days of marketing prior to the auction and a further 28 days for completion if it is a traditional exchange. In a Modern Method of Auction, allow a further 56 days to complete post-auction.
One particular thing to consider is to enter the property for auction with a reasonable amount of time for the property to be sufficiently promoted to maximise the chance of a successful sale. Enter the property at least 4 weeks before the auction date is recommended.
If you are looking for a quick sale of your property without the hassle of going to auction, why not ask us to see how we can help you?
What happens if a property doesn’t sell at auction?
If a property does not sell at an auction, the seller can still re-enter the property for future auctions. However, they would still be required to pay entry fees for all auctions they enter, whether the property sells or not. This is where gazundering occurs, and you could end up with silly offers post-auction.
Property Saviour does guarantee to buy your property or rental portfolio from you.
What are disadvantages of selling by auction?
Many of our clients found us by searching for “how to sell a house at auction” but after careful consideration, they felt it would be too intense and stressful for them at this juncture. There are several disadvantages related to auctions, as mentioned earlier.
Auctions can mean a long wait
Auctions are not necessarily a quick way to get rid of your property. The process can drag on for months, with two or three months between auctions.
Once you sell your property via auction, you will only get 10% of the sale price as a first payment minus the auctioneer’s commission.
You will usually have to wait a month for the rest of the funds. If a 28-day wait for your money seems long, why not sell your house fast for cash?
With a discreet sale to Property Saviour, the cash will be in your account in under a fortnight. Which would you prefer – 14 or 28 days?
You'll need to move out quickly
As auctions have a strict timescale for the completion and handover of the property, you may be forced to move out before you’re ready.
You’ll need to consider your job requirements, children’s schooling, arranging transportation, removals and utilities.
If you sell to Property Saviour, we’re more realistic. We’ll get your sale dealt with quickly and your money in the bank – but you won’t be kicked out before you’re ready. We’ll give you a rent-free period to allow you time to plan your move.
What's Modern Method of Auction?
With the modern method of auction, the successful bidder must put down a non-refundable reservation fee.
This is not a deposit.
It can be as much as £9,600 inclusive of VAT.
In “Modern Method of Auction“, sellers are told there are no auction fees when they are charging the buyer a premium.
The auctioneer and referring estate agent split this fee between them.
Naturally, any sensible buyer will pay £9,600 less to you as they consider their maximum bid price.
Again, if the buyer can’t complete, the auctioneer gets paid, not you. The £9,600 fee is theirs to keep no matter what happens.
Here, we discuss the pros and cons of selling a property at modern method of auction and our insider tips.
Property Saviour will buy your property when you don’t feel you have the time, patience or knowledge to sell your home at auction.
Whatever condition your property is in – structurally unsound, completely trashed or just needing updating everything. Our team of experts will be able to make you a cash offer today.
Here’s why sellers like you trust us:
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.
Why risk it at auction when you can sell now for cash?
Only Property Saviour can guarantee to buy your home, complete the sale within a couple of weeks, and pay the legal fees.
There is no need to have sleepless nights over the uncertainty of auctions.
The main reason sellers opt for selling a house at auction vs a discreet private sale is that they think selling a property at auction will give them a better price. But this is not always the case.
Some properties may not be right for an auction – whereas Property Saviour will buy your house whatever the circumstances.
Forget lengthy forms, upfront fees and the risk of property not selling under the gravel. We will also buy commercial property too!
Why not simply request a call back for a chat about your current situation? It won’t cost anything and is a great opportunity to find out where you stand!
