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Why Do Houses Go to Auction? 

Property Saviour » Modern Method of Auction » Why Do Houses Go to Auction? 

Ever wondered why houses go to auction? Why do certain properties end up in auctions?

This is because these properties must be sold.  Banks, councils and bankruptcy receivers sell through auctions because these properties must be disposed of to raise funds.

It is a popular belief that auction properties are problematic properties; either they are in poor condition or have legal issues with the title or boundary disputes.

But why do some sellers opt for this method? In this article, we will go through the reasons why people put their properties up for auction, as well as alternative ways to sell.

Table of Contents

Why do People Auction Properties?

Sellers often choose auctions to ensure their property is sold with minimal disruption. This process can be completed within as little as 56 working days.

Auctions allow sellers to avoid long chains and buyers backing out at the last moment.

Other motivations for auctioning can include the potential for a higher sale price, avoiding the need for survey, and the potential for a quick exchange.

Buyers may benefit from auctions too. They can gain access to properties which may not otherwise be available, and auctions provide a transparent and simple transaction with a set completion date.

Auctions are becoming increasingly popular, yet the process can still be daunting for those unfamiliar with it.  However, they are not fast as the wait can be frustrating.

Difficult to Mortgage

Estate agents often have difficulty selling properties that are hard to mortgage. To increase a vendor’s chances of a successful sale, these properties are typically referred to auction houses like ours. Here are some of the reasons why they can be difficult to mortgage:

  • The structure may be unique or unusual; the property may be uninhabitable (i.e., there is no functional kitchen or bathroom);
  • It could have multiple uses (such as a living/work arrangement);
  • It could be an asset that depreciates;
  • The construction may be non-standard (for example, Airey houses built in the 1940s or flats with cladding);
  • It may have serious damp or Japanese Knotweed;
  • There could be a risk of flooding;
  • The price guide may be too low to finance (usually between £40,000 and £50,000);
  • It may have a short lease (usually under 80 years);
  • There may be planning issues or other potential blights;
  • The property may be in a high-rise building or an area mainly made up of council houses;
  • There may be no formal registration of the property at HM Land Registry;
  • There could be high service and/or ground rent charges;
  • Legal checks could have flagged up issues such as undisputed restrictive covenants/negative easements, flying/virtual freeholds, etc.

Buyers should be aware of these (and other) potential problems before bidding at a property auction. However, it is also important to remember that many of the opportunities at auction lie within these properties.

Tenanted Properties

It is very common to encounter tenanted properties at auction. This is largely due to the fact that these properties are not as attractive to buyers on the open market as they usually prefer vacant properties.

At auctions, you may find Houses of Multiple Occupation, studio apartments and other housing created specifically for renting.

Even if the landlord can sell the property as a vacant one, its condition is usually not ideal.

Therefore, it may be more beneficial to opt for a quick sale to buyers with an appetite for such properties and take advantage of the fast-tracked process. In fact, many of these buyers would have bought the property at auction in the first place.

Landlords who are looking to get rid of their rental properties in either large or small batches also come to auctions.

With all the punitive tax, regulatory and legislative changes, which are creating an unfavourable environment for small landlords, the number of tenanted properties available at auctions is likely to increase.

Why do Properties Go to Auction
Buyers should be aware of these (and other) potential problems before bidding at a property auction.

Inherited Properties

Inherited and post-probate properties often go up for sale at auction. This is usually because the beneficiary or beneficiaries don’t want to go through the trouble of using an estate agent.

We often get contacted by people who have inherited a property in another part of the country that has fallen into disrepair. They don’t have the time, money, or desire to bring the property back to a habitable state.

We can purchase your property, regardless of its condition, anywhere in England or Wales.  You will avoid auction fees, delays and upfront fees.

Sell with certainty & speed

A Death Intestate

If the owner of a property has died without having created a will, the property can be sold at auction.

When the deceased did not designate an heir to their property, their family may opt to sell any real estate and use the funds from the sale to divide among the beneficiaries of the estate.

You’d have to allow a month of marketing before the auction.  This is to generate interest and it will take another 28 days if a property is sold.

With a Modern Method of Auction, it can take up to 56 days to complete after the auction, provided that the buyer doesn’t pull out of the proposed purchase.

Commercial / Mixed Use Properties and Land

Commercial property and land buyers often turn to auctions to purchase new stock, making it a popular place to buy.

Estate agencies and brokerages may also offer these services, but auctions guarantee a secure sale with deadlines that buyers must meet.

  • Office and mixed-use buildings, serviced offices, shops, and retail stores;
  • Public houses, hotels, B&Bs, restaurants, takeaways, cafes, halls, and former churches and places of worship;
  • Redundant nursing and care homes, healthcare facilities; industrial, light-industrial, and agricultural buildings, office- warehouses, garages, storage, data, and distribution centres;
  • Dilapidated and empty shelled buildings such as barns; land and development sites with and without planning consent;
  • Houses of multiple occupations (HMOs), single and multi-lets, multi-unit freehold blocks, studio apartments, landlord portfolios, and listed buildings can all be found at auctions.

Due to the nuances of commercial property and land sales, most auction houses provide longer periods between exchange and completion, typically 6 weeks as opposed to 4 weeks for residential sales.

At Property Saviour, we can purchase any freehold residential property within 10 working days and any commercial property, including land, within 10 working days.

What are repossessed Properties
Banks must get the highest price possible from competitive bidding, so they usually reject pre-auction offers.

Repossessed Properties

Some properties are up for auction due to repossession. This occurs when a mortgage borrower has failed to make their payments, and the lender has taken back the property.

The lender or receiver typically does not have the time or resources to renovate the property or hire an estate agent, so they are sold via auction in the condition the previous owner left them.

Banks must get the highest price possible from competitive bidding, so they usually reject pre-auction offers.

Quicker Sale (Compared to Using an Estate Agent)

It is common for properties to be sold at auction when their owners need to relocate quickly due to career moves, family matters, or other time-sensitive matters.

Even after paying upfront entry fees and paying a solicitor to prepare a legal pack with searches, there’s no guarantee that your property will sell.  If the auctioneer gives you the wrong advice and the property has a very low guide price, you could end up giving away the property.

If a property does not sell at auction, you will receive very low offers.

In this case, the buyer will approach the auctioneer and make an offer. It is important to note that guide and reserve prices still apply, and the seller may accept a price lower than the reserve or choose to re-auction the property.

Why not sell it for cash instead to us?  

Guaranteed Minimum Price

At a UK property auction, the seller sets a reserve price, which can’t be bid below. The marketing material also displays a guide price, giving buyers an idea of what the property should sell for. It’s not uncommon for the final bid to be much higher than the guide price.

This is appealing to sellers as they are guaranteed to get a certain amount of money for their property. However, it’s essential for them to set a sensible and informed guide price, or else the property may not be sold.

Can you buy a house before it goes to auction UK
Even in a traditional auction, if the buyer backs out, they will lose their deposit. 

Security of Sale: The Buyer Can’t Pull Out Or Can They?

When purchasing a property at auction, bidders should remember that their final bid is legally binding. When the gavel falls, the buyer is obligated to the purchase, and any refusal has severe financial repercussions.

However, with a Modern Method of Auction, the buyer doesn’t exchange contracts and can walk away.  

Even in a traditional auction, if the buyer backs out, they will lose their deposit.  Your only option will be to sue your buyer using £300/hour litigation solicitor – and this brings additional anxiety and uncertainty.

Sell with certainty & speed

Maintenance Issues or Structural Problems

Property auctions are often a fast and straightforward way for a seller to get a quick sale. They can also ensure they get a minimum price or dispose of a problem property. The risks are usually higher for the buyer than the seller, as there may be mortgage or structural issues to take into account.

The main disadvantage for the seller is that the property may not sell, or that they may receive less than the guide price.

To find auction properties in the UK, simply go online. There are many websites that advertise both online and in-person auctions.

Auction details are also available on popular portals such as Rightmove and Zoopla. Here, the auctioneer will provide information about the terms and direct you to their own page for further details.

Average Property Auction Sale Prices

In many cases, properties ideal for an auction sale tend to achieve a better price than they would through a private treaty sale.

This is mainly because the audience is more engaged and comprises several pre-registered bidders actively searching for properties in the area.

If bidding is competitive, it results in a higher price. All buyers have access to the guide price before the auction and can make informed decisions about whether they would like to bid and their maximum offer.

Properties sold via private treaty can remain on the market for a long time or have more than one sale fall through, which can discourage other buyers because of potential problems. This stagnation can be regardless of the condition of the structure.

Why are properties auctioned UK
We provide a free cash offer, and as cash buyers we will complete the sale within 10 days, with no estate agency or legal fees.

Contact Property Saviour

Property Saviour provides a great solution for those looking to sell their home quickly. We provide a free cash offer, and as cash buyers we will complete the sale within 10 days, with no estate agency or legal fees.

auction hammer

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.

Sell with certainty & speed

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