Although most residential property is sold through estate agents, it has become more common in recent years for people to sell their home at auction. There can be many advantages in doing this, including the possibility of a quicker sale, the ability to set a minimum selling price and finding an appropriate buyer for an unusual or dilapidated property.
A Quick Sale
Selling your home at auction can be a great way to move quickly. While it can be difficult to predict when your home might sell through an Estate Agent, putting your home up for auction means that there is a fixed auction date, between one and two months after your home is listed in the auctioneer’s catalogue. Once your home has sale must be completed within 28 days, so you will be able to move out in about three months.
A Minimum Sale Price
Putting your home up for auction means that you have control of the minimum sale price. Before the auction you and the auctioneer, who acts as your agent during the sale, agree a ‘reserve price’ for your property. This means you have a financial safety net and if the bids at auction do not reach this reserve, your home will not be sold. A good auctioneer will ensure that the ‘guide price’ attracts as many interested parties as possible to bid for your home. It is possible that if there is a lot of interest the selling price will be higher than the ‘guide price.’
Even if your property does not make the reserve at auction, it is possible that an interested buyer will want to negotiate a deal with you afterwards. Any deal agreed would work in the same way as if the bid had been accepted during the auction. Whatever happens, you are in control of the sale and can decide to sell or to look for a better offer elsewhere.
Finding the Right Buyer for Your Property
If you own an unconventional property that an Estate Agent finds difficult to value, or your property needs extensive renovation, you might have a better chance of selling it at auction. Many buyers looking for these kinds of properties will search for them at auction rather than through Estate Agents. In addition, if your property has proven difficult to sell, perhaps because of legal complications, an auction offers the chance of a definite sale with no chance of it falling through.
Preparing to Sell Your Property at Auction
There are a few things that you will need to do to prepare your property for sale at auction. First of all you will need to decide on an auctioneer. The auctioneer you choose might depend on the type of property you are hoping to sell, but you should certainly shop around to find the company or individual you feel comfortable with. While costs are likely to vary a little, you should budget to pay the costs of advertising your property in brochures and catalogues plus about 2.5% of your property’s price in auctioneer’s fees when it is sold.
It is a good idea to choose an auctioneer that sells properties that are similar to yours and in a similar price bracket. Consider that a specialist auctioneer may be ideal if you have an unusual property with a niche market, or that an established national organisation may help you to find the widest possible range of buyers. Take a look at a few of the auctioneer’s previous catalogues, to just make sure that the standard of their publications matches your expectations.
Next you will have to instruct your solicitor to prepare the contract and the legal pack for the sale, setting out any special conditions. This will be included in the auction catalogue. You will also need to organise a Home Information Pack (HIP) for buyers and make sure that the property has an energy efficiency certificate.
Before deciding on the price of your property you should obtain an independent property valuation. The ‘reserve price’ of the property should be based on the valuation, but will be agreed in consultation with the auctioneer.
The auctioneer will then decide the ‘guide price’ of the property, which will be calculated to attract the maximum number of buyers. The idea is to keep it low enough to entice buyers to attend the auction with the intention of bidding for the property, but for it not to be unrealistically low so that bidders are put off if the price is driven up much higher during bidding.
Once the catalogue has been produced and the property’s particulars are available, you will have to make your property available for viewings by potential buyers. You can agree set viewing times with the auctioneer or allow viewing by appointment. This can mean quite a bit of disruption if you still live in your home, but viewings are important to attract bidders to the auction. You should aim to make your property look as good as possible during this time, by keeping the décor as neutral and attractive as possible, removing excess clutter (including some furniture if necessary) and making sure spaces are clean and tidy.
Receiving Offers Before the Auction
It is possible that you may receive an offer for your property before the date of the auction. This is perfectly legal, and it is up to you to consider whether you think you are likely to get a better price on the day of the sale. It is worth bearing in mind that anyone interested enough to put in an offer beforehand is likely to attend the auction and bid for it, meaning that you could receive a higher price if you wait. But this could also be risky, as bidding could also stop before the offer price is reached.
The decision you reach depends on your personal circumstances, but if you think there is enough interest in your property it may well be worth your while holding out until the auction. If you do decide to accept the offer you are not obliged to withdraw your property from the auction until the completion of the sale.
The auction is likely to take place at a large function room or hall and you are under no obligation to attend, though it might be helpful to do so. You will need to ask your solicitor to attend in order to deal with last-minute questions and any possible irregularities. If your property does not meet its reserve during the bidding, a buyer could make you a lower offer after the auction. If the offer is suitable, the sale can go through in the same way as it would have done if it had the property been sold at auction.
If your property sells on the day of the auction, you will exchange contracts and receive a 10% deposit of the price immediately. The buyer is legally bound to complete the sale within 28 days, and if they fail to complete in this time you can keep the deposit. All being well, you will need to vacate your property before the end of the month.
Disadvantages of Selling at Auction
Although there can be many advantages of selling at auction, there can also be drawbacks. Selling at auction means that you will have to pay the auctioneer’s advertising fees, valuation fees and solicitor’s fees whether or not your property sells. You will also have to pay your solicitor to attend the auction. These fees could be higher than those charged by an Estate Agent, so it is worth doing your homework beforehand.
Another consideration is that if your property fails to attract interest you may end up selling it below market value on the day. In addition, you might not be in a position to move home quickly, or to make your home available for frequent viewings, as is necessary when selling at auction.