Going going gone: Is selling a house at auction a good idea? Advice for UK home owners thinking of selling

House Buyer Bureau is a property buying company. They buy hundreds of properties every year, and sometimes use auctions as a way of selling the property that they buy. Chris Hodgkinson, MD, says; “Selling via auction can be a relatively quick process, but you have to do your homework and know what you’re doing. Otherwise, you risk getting far less for your property than you really want.”

If you do sell at auction, then it takes between four to eight weeks to complete the sale depending on the type of auction you used – compared with six months to sell via an estate agent.

Traditional auction

A traditional auction is like the one you see on Homes Under The Hammer and takes place on a specific day when buyers submit their bids (either in the room or remotely) and the highest bidder wins.

When your property is sold, the buyer has to pay a 10% deposit and contracts are exchanged immediately. Completion of the sale takes place 28 days later.

Chris says, “Due to the short timescales, you tend to only see experienced cash buyers at these auctions. There isn’t enough time to put a mortgage in place, so bidders have to go with funding already in place. These auctions tend to be better for selling ‘problem’ or unusual properties.”

Modern auction

A modern auction is more like an ‘ebay auction’ and takes place online and your property is advertised for up to four weeks prior to the auction. During this time bidders can arrange a viewing and survey of your property, and you must appoint a solicitor who provides a legal pack. Bids can be made at any time in the run up to the auction and on the day.

Chris said: “The key differences are that the highest bidder pays a 5% reservation fee, then has 28 days to exchange contracts and a further 28 days to complete the sale. This extra time makes it easier for the buyer to put a mortgage or other finance in place, so this type of auction often appeals to a broader range of potential buyers.”

Do properties always sell at auction?

The answer is no. According to EIG (who are considered the ‘go to’ source of auction data) three out of four properties will sell once they go into the auction room.

Chris adds “What their data doesn’t tell you is that many properties are withdrawn from the auction before it takes place – usually due to a lack of bidders. We’ve seen a lot of volatility recently in the auction market with lots of properties failing to make it into the room.”

How much is my house going to sell for?

The answer is no-one knows until the day of the auction!

According to Home Selling Expert, properties that do sell at auction sell for as low as 70% of their value all the way up to 10% more – and the average is about 85%-90%.

So, an auction sale could be an appealing option if you don’t want to wait to sell via an estate agent – but you need to balance this with the risk you might end up with less money, or worse still, your house could fail to sell.

Chris added: “There are two main consequences if your house fails to sell at auction. Firstly, there will be some costs that you can’t get back. But the bigger issue is that it will make your house harder to sell in future and is likely to reduce its value.

Any future buyers who do their research will see that it failed at auction and are likely to think “what’s wrong with it?” or “if no-one bought it at this price, it must be worth a lot less”.”

You can improve your chances of selling at auction by doing the following:

- Pick the right auction house

Do you go for a big national brand, or a local auction house? Is your house better suited to a traditional or modern auction? These are important questions that you need to research. Home selling expert has a useful tool to help you compare auction houses and decide which route might be right for you.

- Get auction appraisals

Ask a number of auction houses to value your house. An auction valuation differs from an estate agent’s valuation in one important way – an auctioneer will be realistic about what your house will sell for at auction as they are judged on how many properties successfully sell. An estate agent will always give you a sales pitch and an optimistic valuation as they want you to choose them.If the auctioneer’s valuation is less than you can accept, then auction is probably not the right route for you.

- Decide the minimum price you need to achieve

You have to set a ‘reserve price’ which is kept private and is the minimum that you will accept for your house. Your auctioneer will then advertise a ‘guide price’ which will be up to 10% lower than your reserve.The idea is that by advertising the lowest price, you will attract lots of bidders making the auction competitive, getting you a higher sale price. The risk is that if you don’t get much interest you might end up only getting your reserve price – so be realistic.

- Be prepared to invest lots of time

Appointing the auction house is just the start. You’ll need to appoint solicitors (don’t just jump to using the ones the auction house recommends!), you’ll have lots of documentation to complete, searches to pay for, a listing to create (which the auction house should help with), and viewings to manage.

- Be vocal with your auctioneer

In the run up to the auction you need to know that the auction house is doing their job and attracting interest and bidders. If you’re not getting much interest, you need to be proactive and get the auctioneer’s feedback. It’s no good waiting till auction day, otherwise you’ll be left with a tough decision whether to take a chance or withdraw altogether.

Selling at auction is an option if you don’t want to sell on the open market, but it comes with risks. You need to do your research and hold your nerve on the day of the auction. And don’t be scared of withdrawing your property if it isn’t getting enough interest. You don’t want to end up with a property that fails to sell and is then reduced in value.

If you want a quick, guaranteed sale then the simplest and better option might be to sell directly to a property buying company. Genuine companies will buy your house for cash in as little as 7 days. You’ll get less money, but you’ll have it in your account months sooner than you would selling via an estate agent.

For your FREE cash offer, visit housebuyerbureau.co.uk/sell or call free 0800 880 3232