A Brief Overview of Property Auctions
Property Auctions are an excellent way to sell if you ever need a quick sale of your house, or if your priority is to minimise the cost of selling your home.
Selling or buying at a property auction opens up several different possibilities that aren’t available when selling the traditional way. Whether these sales are online or in traditional auction houses, they deal with a very broad range of property types. Don’t be surprised to find old Churches, lighthouses and school buildings for sale!
It doesn’t matter if you are buying or selling a property, you need to know exactly how UK property auctions work or you could find yourself in lots of trouble when the auctioneer finally brings down his gavel.
Before you take the plunge in an auction, it’s important that you do your homework.
Why do people use property auctions?
There is a common misconception that investors’ looking for something to develop and sell on for a huge profit fill property auctions. While investors do scour auctions for deals, people who are looking for a home at a bargain price also find them very useful.
If you’ve tried searching for a home in your local area, the chances are you used estate agents. Often, Agents price the houses they sell for negotiation and wiggle room, which can waste time and create inflated sale prices. At an auction, however, houses are priced to sell. From the seller’s point of view, the process gives a minimum sale price, and there is always the chance of a bidding war driving the price well beyond the reserve.
Despite the recent economic woes in Britain — which started during the 2008 banking crisis — the property auction market has performed relatively well illustrating a process that people trust at a time when there is great mistrust in the UK’s financial mechanisms.
What types of property do auctions sell?
Most homes are listed for sale at auction because the owner needs a quick sale. Typically, these homes are vacant or have sitting tenants. However, private residential homeowners do go down the auction route from time to time too.
Many sellers are landlords or investors who want to cash in on their assets with the minimum of fuss and expense. Other vendors include banks, building societies and creditors who require a quick sale to discharge a debt.
It’s useful to note that property isn’t necessarily cheaper when bought at auction. In fact, the opposite is often true, thanks to the competitive bidding process.
Guide and reserve prices
Every property put in an auction has a guide price and usually reserve price. The guide price is exactly that — a rough estimation of the property’s market value. The reserve price is the minimum price the vendor will accept. If the property doesn’t reach its reserve, it will not sell.
Selling a house at auction
If your decision is to sell your house at auction, you should expect to pay the auctioneer around 2.5% of the price your property achieves. There may also be advertising costs you need to cover.
There are hundreds of UK property auctions every week, so you’ll never be short of choice. Before committing to the process just be aware of other possibilities.
For instance, there is a good chance that someone will approach you before the auction starts to make an offer for your home. People only do this if they believe they can keep the price down through bypassing the auction process, so proceed with caution if this happens to you. If they want your home that badly, they’ll be prepared to fight it out with other interested parties.
Set a sensible guide and reserve price when selling your home at auction. Also, make sure your house is presentable and in a state of good repair for viewings during the weeks before the event. And don’t let the auction house do all of the marketing for you. Share your home sale on social media, tell your friends and do everything you can to get people interested.
Buying a house at auction
Go into a property auction as a buyer with your eyes wide open. If you become embroiled in a bidding war, you may end up paying too much. Don’t let your emotions control your decisions. Set a maximum price you’re willing to go to, and don’t exceed it.
If you’re successful in buying a property at auction, you will need to pay an administration fee, which can be anything between £100 to £300. You will need to pay legal costs in the normal way, as well as any stamp duty.
Before you attend the auction, study the catalogue of featured properties carefully. If you’re buying as an investment, keep an open mind about which properties you’re going to target — as you might get a bargain from out of the blue.
Before bidding, find out everything about the properties under the hammer. Make sure you inspect each property thoroughly — preferably with a builder or architect. You will need to factor in repair and renovation costs when you decide how much you’re willing to pay. Commissioning a survey to protect yourself and carefully scrutinising the legal pack (details the legal process of buying and selling a house at Auction), are also good ideas.
If you have finalised all the necessary checks and arranged your finances in advance, you’ll be in a strong position when the bidding starts. However, don’t be ruled by the guide price, as this is only ever an estimate.
If your winning bid is less than the reserve price, don’t give up hope. The vendor has the option of accepting the highest bid once the process has finished.
There are advantages for selling at a property auction, but these are equally matched by disadvantages too. However, if you want to buy or sell a property quickly and without too much fuss, this is a good way of going about it. Read more here.