Explaining all things selling a house at auction, including the process, the fees and whether or not it's a good idea...
Selling a house on the open market can be stressful, leading you to look to other options, with auction being one that will pop up. But is selling a house at auction a good idea? Is it going to be the right option for you?
In this article, we talk you through why houses end up going to auction, what the process and fees are, and we also help you decide whether or not it’s the right option for you:
- Why do houses go to auction UK?
- Selling a house at auction – the process
- Selling a house at auction – the fees
- What are the pros and cons of selling a house by auction?
- Is selling your house at auction a good idea?
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There are a few different reasons why a house may go to auction. Primarily, it may just be because the property owner wants a faster sale, compared to the open market, without having to go through a load of viewings and they’re not worried about getting lower than the market value.
Someone may also decide to sell their property at auction for other more personal reasons. Selling your house at auction can be a good option if you’re in one of the following situations:
- Going through a divorce
- Relocating, whether it’s moving to a new city or country
- Someone has passed and you have inherited a property
- Facing debt or financial difficulty that may result in repossession
- An investment property
In each of these situations, time is of the essence making an avenue that can provide you with a fast sale more appealing. Auction allows you to get a quicker sale compared to the open market, but it’s not necessarily the quickest sale method – more on this in our last section…
Other reasons why someone may go about selling a house at auction is because of issues with their property, with auctions being renowned for being a method of selling a ‘problem property’.
A ‘problem property’ can mean a range of different things, from having a short lease to being damaged by fire. The following types of problem property are suitable for sale at auction:
- Nightmare tenants
- Short lease
- Subsidence or other structural issues
- Japanese Knotweed
- Built with non-standard construction
- Flood damage
- Fire damage
- Legal complications
- Derelict properties, or those needing serious renovation
- Roofing issues
This is not an extensive list, so don’t worry if you don’t see your ‘problem property’ on that list – chances are an auction house will take it on, but of course, there are no guarantees it will sell.
Some people may look to sell through the modern method of auction, which has grown in popularity over the last year or so. This method of auction allows mortgage buyers to get involved, compared to a typical method of auction where only cash buyers are able to buy.
Even with the modern method of auction, though, there are still no guarantees your house will sell using this method.
If you want a guaranteed sale on your property, we will buy it! We buy any property in any location and condition for cash, and with over 50 years of combined experience, there’s no property type we haven’t dealt with.
If selling a house at auction is completely alien to you and you want to know the process before deciding if it’s the right method for you, then you’ve come to the right place! We’re going to talk you through step-by-step how to go about selling your house at auction…
How does selling a property at auction work?
Step 1 – Auction appraisal
The first step of selling a house at auction is to choose the auction house you want to sell through. If you have a particular problem with your property, you will want to do your research and ensure you choose an auction house which specialises in selling problem properties.
Once you’ve selected the auction house you wish to sell with, they will have your property appraised. An appraisal is where an approved auction valuer will assess your property, outlining to you the benefits of selling your house at auction, how much to expect it to sell for and also give you some advice on your reserve price.
At this stage, you’re able to ask the value any questions that you have and there’s no obligation for you to go through with the process, so make sure you’re fully happy at this stage before agreeing to go ahead.
Step 2 – Instruction
Providing you’re happy at the appraisal stage, you can go ahead with selling your house at auction. During the next stage, you will need to sign the terms and conditions of the auction and also provide any documents and certificates required to sell your property.
The auction house will also draft up a description for your property, which will be sent to you for approval.
Step 3 – Involve your solicitor
The next step in selling a house at auction is to get your solicitor involved. You will need your solicitor to draw up the legal pack, which will include the title deeds, property searches, conditions of the sale and any other important guidelines or documents that will allow you to quickly transfer ownership rights for your property to the highest bidder on the day of auction.
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Step 4 – Generating interest
When you’ve got all the legal details in place, it’s time for the auction house to market your property to prospective buyers in order to drum up some interest before the auction day. Auction companies should use multiple different marketing channels, such as property websites, social media, and newspaper ads.
You will also need to host a few open days before the main auction day for potential buyers to have a look at the property to see whether or not it’s something they will want to bid on when the auction day comes around.
You may find in some cases that you have a buyer try offer on your property before the auction day to see if you will accept their offer and stop it from going to auction. Of course, it’s up to you whether or not you choose to accept this offer, but by this point, you will have committed to paying the auction fees, so it would seem a shame not to go through with the auction.
Also, if this buyer is offering before the auction, they’re clearly keen to buy your property. This means they will still be keen to buy the property when it’s at the auction and chances are, if they’re keen, there will be other keen buyers too, leading to the potential for a bidding war.
You could also use this bid to help you set your reserve price, which brings us onto the next step of selling a house at auction…
Step 5 – Setting the reserve price
Once your property has been marketed to potential buyers and you’ve hosted some open days, it’s time to set the reserve price. A reserve price is the price that must be met by bidders in order for your property to sell – essentially, it’s the lowest price you would be happy to sell your property at.
It’s key to set your reserve price somewhere reasonable, as buyers will be put off by a price that’s too high, but it’s important for you as the seller to not set it below what your property is worth.
You will also have a guide price set for your property, which is used to guide potential buyers as to how much your property could be worth. It’s important to note this has no say or bearing on how much your property will sell for, explaining why it’s simply a guide.
Step 6 – Day of auction
Now your reserve price is set, it’s time to wait for the auction day to arrive. On the day of the auction, bidders will bid on your property and a deal will be struck with the highest bidder, providing the reserve price has been met.
Once the deal is struck and the hammer comes down, contracts are exchanged immediately and the buyer must pay a deposit, normally 10% of the sale price. They will then have a set amount of time that they must complete in – this is normally 20 to 28 days.
One thing to note as a seller is if you’re feeling quite nervous about selling your house at auction, you don’t have to attend the auction day if you don’t want to – the choice is completely yours.
Step 7 – Completion day
After the day of the auction, the buyer normally has 20 to 28 days to complete the sale. During this time, the auction house will have communicated with you how completion day will unfold, including when and where you will be expected to hand over the keys.
If a buyer doesn’t complete in the agreed timescales, they will forfeit their deposit and you will be able to look to sell your house again.
Whilst selling a house at auction is designed to be faster than the open market, it’s still not going to be the fastest method of sale. You may have to wait several months for an auction to come up and even then, your property may not sell.
If your property doesn’t sell at auction, you have the option to try to sell it after the auction has ended, but only if you’re willing to accept less than the reserve price. If not, you will have to look to sell your house through another method in the hope you may get close to what you’re wanting.
With selling a house at auction being faster than selling on the open market, some may also expect it to be cheaper. Unfortunately, this is more often not the case, with auctions having the potential to be quite pricey. We break down the costs below:
The auctioneer will take 1.5 to 3% of the value of your property upon completion. This is similar to the percentage you can expect estate agents to take as part of their estate agency fees.
Some auction houses will ask for the auctioneer’s fee upfront, which will mean even if your property doesn’t sell, you will still have to pay this fee.
Room hire fee
You will also need to pay a fee towards the hire for the room where the auction takes place. You will have to pay up to 1.5% of the value of your property. You will have to pay more if you go for a bigger auction house, as they will use a room that’s in a central location, with good parking and easy accessibility.
It’s important to remember you will still have to pay this if your property doesn’t sell, as the auction will still have gone ahead.
You will need to contribute to the marketing costs of your property as the auction house will advertise it on social media, property portals, in the newspapers, organising and conducting the open days for your property.
You will need to pay up to 1.5% of the value of your property.
You will need to pay the legal fees of your chosen solicitor which will depend completely on the solicitor firm you have chosen. Solicitor’s fees can range anywhere from £525 to £1,500, depending on your property’s location, size and sale price.
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Just like anything, selling a house at auction comes with its own share of pros and cons. It’s important you make sure you do your research into these before you go ahead in making your decision.
Pros of selling property at auction
- Faster than selling through the open market
- More likely to get a sale for ‘problem properties’
- Able to become chain free, making you more appealing when you go to buy a property
Cons of selling property at auction
- There are no guarantees of a sale
- Fees for auction are high, which can lead to it being pricier than the open market
- Properties tend to go for significantly below the market value
- You won’t have any real say in the completion timescales so you will likely have to move out before you want
- Whilst auction is meant to be a fast method of sale, it might end up dragging on longer than you expect. You will have to wait for your property to be approved and then you will have to wait until an auction comes up, which can be a few months away
- Auction houses can overvalue your property, just like estate agents do, to try to win your business. This can lead to your property being unappealing and therefore not selling at auction
- Auction is appropriate for all properties and the auction house you want to go with may not approve your property to sell
- You will have to host multiple open days, which isn’t ideal for those who want a sale with minimal fuss
Whether selling a house at auction is a good idea for you will depend on why you’re selling. If you’re selling simply because you don’t want the hassle of the open market, or you’d like to sell your property fast, auction could be a good idea for you.
However, it’s not the quickest or most hassle-free method of sale…
Here at The Property Buying Company, we’re a cash buyer of houses, buying any property in any condition or location. We handle the whole sale for you from start to finish, making us a stress and hassle-free service.
With us being cash buyers, we can complete in a fast timescale of your choice, with our average completion time being 2 to 3 weeks. Not only this, but we cover all your fees, so unlike selling at auction, selling to us you won’t have to pay a penny.
We’re also a guaranteed sale – something that auction can’t promise. We also only require one quick viewing to make sure our cash offer is accurate – something else that you can’t get at auction.
We’re members of The Property Ombudsman and the National Association of Property Buyers and we’re rated excellent on Trustpilot with over 1,000 reviews, so you as the seller can feel in safe hands.
Save the time and money spent selling a house at auction and give us a call or fill in our online form for a no-obligation, cash offer, which you can get in your bank in a timescale of your choice…
Don't waste time selling at auction and...