Selling property at auction has become increasingly popular in recent years.
It offers some distinct advantages and disadvantages to it.
Let’s examine what these are.
Auctions: An overview
Property auctions occur all across the UK. Most are held in person, but there are also online auctions.
Sellers contact an auction company to list their house with them. The company guides them on the start price, takes photos, and markets the property.
Open viewings are then organised before the auction is held. Viewers can arrange a survey, too.
On auction day, bidding will start at an opening price that sellers and the auctioneer agree upon.
If buyers at the auction are interested, they will make an offer. They then submit their deposit on the day and the rest of the money within one month.
Pros of selling property at auction
Quick sales
If successful, your house sale will be completed quickly when you use an auction company. This is much quicker than selling on the open market.
The auction day is often within a month or two of you first contacting the auction company.
Sell your house in any condition
You can sell your house in any condition via auction, including houses with problems. You’ll just need to compromise on price to reflect this.
For example, you may struggle to sell on the open market with a short lease or a house in disrepair.
Sitting tenants or squatters could also make this impossible. But when you sell via auction, you can complete it no matter what.
Save on renovation costs
There are money savings to be had when you use an auction company.
You don’t need to invest tens of thousands in home improvements. By contrast, you would when selling on the market.
Fixing holes in the roof or faulty doors and windows can cost thousands.
Plus, there’s the stress and time involved. Sidestepping this process may sound very appealing.
The sale is binding on auction day
Once an offer comes in on auction day, the buyer needs to honour it. They’ll lose their deposit if they don’t.
And you can sue them for further damages, too. You thus feel assured that everything will go ahead. This is a safety net you don’t get on the open market.
Marketing support from the auction company
You aren’t the only one trying to sell your house. The auction company will help you out, too!
Your property should be featured in their brochure and website. This gives maximum visibility. And they’ll host open days for potential buyers to look around.
You should still market it yourself. The combination of the two can be effective.
Cons of selling property at auction
You’re not guaranteed a sale
There’s no guarantee that you’ll complete a sale with an auction company.
If your opening price is too high, no offers could come in. According to recent data, around 1 in 5 homes at auction fail to sell.
You’ll still have invested time and money despite the failure to sell. And you may need to start the entire process again.
You can’t control the final price
You can control the starting price – but from there onwards, it’s out of your hands.
Unless the bidders agree, it doesn’t matter what you hoped to get. And this can make you feel powerless.
Ultimately, the final selling price can feel like a letdown. You’ll need to prepare for this, both emotionally and financially.
Auction fees
Auction companies don’t give you their support for free. You’ll need to pay a few expenses along the way. And they’ll take a percentage of the final sale price, too.
Make sure to look through all contracts carefully at the start. This should give you the exact percentages.
You can thus work out the costs. Keep an eye out for hidden fees, too. A solicitor could help you to look through the contract.
Limited buyer pool
There aren’t as many buyers attending auctions as regular buyers on the open market.
With a limited buyer pool comes the potential for less competition and, thus, lower offers. You also can’t guarantee a sale at all.
Likewise, you won’t get to choose who buys your house. This can be challenging if you’re sentimental about it.
Penalties for breach of contract
Lots of auction companies introduce penalties for breach of contract.
For example, once you agree to sell with them, you may be unable to pull out without a fine.
And there could be clauses about misrepresenting the property as well.
Sometimes, you’ll break these terms without meaning to. So, you should carefully comb through the contract at the start.
