Selling Property via Auction

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Guide to selling your property via Auction

Auctions are considered to be the best place to pick up cheap, run down, repossession properties. Property investors go to auction to pick up a bargain property, so in order to attract interest you need to sell your property at a low guide price.
You can see examples of this on the BBC programme ‘Homes under the Hammer’. Auctions are one option of how to dispose your property. However, there is a good chance you will fall well short of what you had hoped to sell your property for.

In the auction situation, contracts are exchanged upon the fall of hammer; the seller and buyer are both committed to the sale and the result is often that a savvy buyer gets a bargain, while the seller gets a price way below the property’s true market value.

Before we start on the advantages and disadvantages of selling a property at auction, let’s look at some of the key terms used so that we really understand just how property auctions work:

  • Guide price’ is the price at which bidding will begin. It is an indicative amount. The guide price is not necessarily the price that a seller would be prepared to accept. In most situations, the seller will be looking for an amount higher than the guide price, although in some cases a lower than guide price may be accepted.
  • Reserve price’ is the price at which the seller is obliged to sell their property; this is usually a secret between the auctioneer and their client, the seller.
  • The reserve price cannot be more than 10% above guide price i.e. if the guide price is £100,000 the reserve must be £110,000.
  • The reserve price can also be within a specific range i.e. on a guide price of £100,000 to £110,000 the reserve price cannot exceed £110,000. We offer you a fair price if you decided to sell your property. Find out what your house is worth?

Advantages of selling at auction:

  • Certainty and speed of sale if the property is perceived to be a real bargain!
  • The auctioneer cannot sell your property below your agreed reserve price.
  • Contracts are exchanged immediately upon the fall of the auction hammer.
  • Completion usually takes place within the 30 days following the auction.

Disadvantages of selling at auction:

  • You could end up getting a lot less money for your property than anticipated, especially if you have a low guide price.
  • You may be practically ‘giving away’ your property to savvy buyers.
  • Contracts are exchanged immediately upon fall of the hammer, whether this suits you or not.
  • Some auctioneers operate a modern auction method whereby the buyer pays an additional premium of £5,000 plus VAT – this means that a prospective buyer is going to be paying you around £6,000 less as they will be factoring this cost into their total paid for the property.

Our Top Tips for Selling at Auctions

Martin Roberts is the host of the popular TV programme ‘Homes under the Hammer’. He is also a property investor and trains property investors on how to spot a bargain. Listen to this video to understand what buyers are looking for and when they get their cheque books out in the auction room.

Courtesy of Martin Roberts as seen on BBC Homes under the Hammer.

  • Pick an Auctioneer who sells at least 80% or more of their properties and who has at least 50 to 100 lots. In London, certain auctioneers have 200+ lots.
  • Set a very realistic guide price to attract interest. Be warned there’s no guarantee that your property will be sold on the day of the auction, as it depends on what else is being offered.
  • Agree a ‘no sale no fee’ sale. Do not pay any fees upfront under any circumstances.
  • Your solicitor will prepare the legal pack once you have instructed them to do so.
  • Do not use a modern auctioneer as they charge buyers a premium of £3,000 to £6,000 – resulting in a huge reduction to your achievable price. Ultimately you end up paying for the estate agent’s or auctioneer’s fee. Do not fall for this sales tactic. We will never charge you a fee to sell.
  • Top Tip: You can get buyers to cover your legal fee. Be reasonable, anything up to £500 would usually be considered acceptable. Include that in the “special conditions” of your contract.

We are always buying properties across England and Wales. Get in touch if you are looking to sell?

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