Why do people sell their homes at auction? There are several reasons, but the most common relate to the speed of the process.
If you choose the right auction house and take an active role in marketing your home, you can create a bidding war that could drive the value of your home to levels you never thought imaginable.
But before you make your first move, you need to know how to sell a house at auction (for buying at auction, see our blog here).
Why is selling a house at auction right for you?
If your circumstances make a speedy, hassle-free house sale imperative, then selling a house by auction could be the right way to go. Selling the traditional way doesn’t usually involve a specific timeframe, and it often involves buyers pulling out at the last minute. However, auctions offer in-built protections and a finite timeline, which is very attractive to homeowners who need to sell in a hurry.
In most auctions, the buyer must pay a 10% deposit as soon as the hammer falls, with the balance transferred within 30 days, or the deposit is lost.
A property auction pits several buyers against one another. If you have adhered to an effective marketing strategy and have been realistic with your guide and reserve prices, you can expect a bidding war — driving the final sale price way beyond what you might expect on the open market.
Another common reason for selling a house at auction relates to the condition or type of property. For instance, you might struggle to attract interest from buyers on the open market if your property needs extensive repairs and renovation. Similarly, unusual property types will often work to generate interest via traditional marketing channels. But buyers often approach property auctions with an open mind.
What is the cost of selling houses at auction?
The standard rate of commission payable to an auctioneer currently stands at around 2.5% of the final sale price. However, you will probably need to cover the cost of advertising and marketing too.
You should also factor in the cost of conveyancing and legal work — both before and after the auction itself. And to protect your investment, it’s also a good idea to have trained professionals carry out the necessary checks and surveys.
What is the best auction house for my property?
There are hundreds of property auction houses up and down the country. To ascertain which is the best for your property, you should take a close look at each auction house’s promotional material. For example, does the service specialise in properties like yours? Does the service have any testimonials from previous customers?
While the fee charged for selling your house at auction is something you should consider when choosing the ideal auction house, it shouldn’t be your only concern. It might be worth paying a little extra to a company with a proven track record of maximising sale prices for homes like yours.
Take your time shopping around and using the Internet to search for genuine customer reviews and experiences that might help you decide.
What happens if I receive an offer before the auction starts?
By the time the auction day arrives, you will have paid your fees and advertising costs. It is, therefore, not a good idea to accept a speculative offer before the bidding starts.
If a buyer is trying to persuade you to sell before the auction, that person must be very interested in your property. If they’re serious, they’ll fight it out with other buyers once the bidding starts. And let’s face it, a buyer would only try this tactic if they believed it was the best way of keeping the price down.
A buyer who displays the audacity required to attempt to circumvent the auction process may have the information you don’t have. Indeed, if this is the case, it’s better to let bidders fight it out with their highest offers?
From the moment the hammer falls, the sale of your property is binding
Setting the reserve and guide prices
The reserve price is the lowest price you will accept for your property. If the highest bid doesn’t match or exceed the reserve, the property is withdrawn from sale. However, if the reserve price is met, you are committed to purchasing at the fall of the gavel.
When setting your reserve price, it is essential to be realistic. Research sold house prices in your area on sites such as Zoopla and Rightmove. This will give you a rough idea of what your home can achieve during the bidding process.
If your house doesn’t meet the reserve price, you still have options. First, you can relist it for sale with a slightly lower reserve price — but this will result in a delay you might need to avoid. Alternatively, you can speak to the auctioneer and accept the highest unsuccessful offer after the hammer comes down.
Setting the guide price.
The guide price is the equivalent of the asking price in the traditional property market, not legally binding. It is set to generate interest and price expectations with the auctioneer’s help. Also, do some research into recent house sales in your area.
Other issues to consider before a property auction
Before selling your house at auction, it’s a good idea to be proactive in searching for potential buyers. The easiest thing you can do is make your property as presentable as possible. However, this doesn’t necessarily mean investing in major renovations; it might simply involve some cleaning and the odd lick of paint here and there.
It’s also essential that you take a proactive role in marketing your property by sharing details across all your social media channels. However, marketing can be as simple as spreading the word amongst friends, relatives and work colleagues.
If you sell your house at auction, you should expect completion within 28 days, not a lot of time to get organised, so it’s usually a good idea to prepare for a relatively quick move.
Selling houses at auction is a great way to raise the money you need for your next move in a hurry. As long as you are organised and prepared for what lies ahead, the process should be smooth and relatively problem-free.