It’s a tough call to choose between selling a property via an auction vs a discreet sale. And one where many sellers get their fingers burned in a property auction if they are ill-advised.
To sell a property through an auction is a daunting experience for novice property sellers, as many auction houses charge upfront fees.
For the best chance of success, it is recommended that the property is marketed as early as possible, your solicitor prepares the legal pack, and it is ready for potential buyers as soon as the property goes live. When the hammer falls, the buyer puts down a 10% deposit and agrees to a completion time of 28 days.
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Is auction better than private sale?
Auctions are home to ‘problem properties’, and you’d have to put in a low guide price, pay upfront fees and hope it sells in three months time. Compare that to selling to a cash house buyer, get £1,500 paid towards legal fees and sell in ten days or less.
Is it better to auction or sell a house?
Selling property in an auction is a faster option compared to selling it on the open market. Auctions offer a higher level of certainty in selling your property as the sale becomes legally binding once the hammer falls.
Why auction a house instead of selling?
Listing a house at auction has become a popular choice for sellers due to various reasons. One motivation is to ensure a quick sale without the risk of a buyer dropping out.
Auctions also eliminate the hassle of lengthy chains often associated with traditional selling methods.
What are the disadvantages of selling a house by auction?
Some buyers may have concerns about the auction process:
- The competitive nature of bidding can be off-putting for some, and there may be uncertainties about securing a mortgage for an auction property. While traditional mortgages can be used for auction purchases, the seller must ensure that their lender can act quickly to avoid breaching the contract.
- There is a level of risk involved in auctions. On one hand, sellers may have a minimum sale price in mind, but they might be tempted to set a lower reserve price to generate interest. This can work in their favour, or it can backfire and result in selling the property at a price they are unhappy with. It requires making risk/reward decisions that not everyone may be comfortable with.
- There is no guarantee that a property will sell at auction. If no bids meet the reserve price, auctioneers may contact interested parties to submit their highest offers. The seller can then decide whether to accept and exchange contracts based on the offers received. If none of the offers are satisfactory, the property can still be resubmitted to auction, but this incurs additional costs with no guaranteed return. It is possible to end up paying more than if the property was sold through an estate agent.
Do houses sell for less at auction?
Auction properties can sell for less than the guide price, depending on the level of interest. To generate lots of interest, you would have to set a very low guide price.
Auctioneers encourage sellers to advertise their homes for as low as possible to make them look like a bargain, then they HOPE that buyers will outbid each other to achieve the eventual price.
What is a private sale?
Many individuals choose to sell their homes privately, avoiding the involvement of estate agents or any third-party agents. In this case, the seller takes on every aspect of the sales process, which an agent would typically handle.
This includes tasks like advertising the property, arranging viewings, and negotiating the sale price.
What is a property auction?
At an auction, potential buyers place bids on your property, and the highest bid wins. Once the auctioneer’s hammer strikes, the property is considered under offer.
The winning bidder is then required to make a 10% deposit to secure the sale. Within a month, the remaining 90% of the funds are transferred to complete the sale.
The pros and cons of selling your house privately
These are some of the pros and cons of selling your house privately.
Advantages of selling a house privately:
- One advantage is the amount of money you’ll save on estate agent fees. By selling your house privately, you can avoid paying the fees associated with hiring an estate agent. This can result in significant savings.
- Another advantage is that you can handle house viewings yourself. You may feel that you are better equipped to represent your home than an estate agent. By conducting the viewings personally, you can provide potential buyers with a more personalised experience and showcase the unique features of your property in a way that you feel is most effective.
Pros - in Detail
If you’re thinking about selling your home without the help of an estate agent or any third party, it’s important to be aware of the positives and pitfalls.
One of the perks that many private sellers enjoy is not having to pay any agent commission. On average, the cost of selling privately is around £500, plus legal fees. This is significantly less than the percentage fees on the final sale price that most estate agents demand. For example, if you sold a property for £250,000 with a traditional agent who charged 1% + VAT, you would be paying £3,000 in fees. And this is at the lower end of the spectrum.
When your home is listed with an estate agent, it doesn’t receive special treatment. Your home is competing against every other property on their books. With a private sale, you know that your home is the focus and you can put all your efforts into advertising. Nobody knows your property better than you do, which will benefit both your marketing collateral and the viewing process. Since you will be managing the sale, you can also conduct viewings when it’s most convenient for you.
Lastly, with the middleman removed, sale price negotiations can take place face to face instead of through back and forth phone calls, which is typical when using a high street estate agent.
There are several disadvantages to selling a house privately:
- One challenge is setting a fair asking price, which can be difficult and requires thorough research.
- Getting potential buyers to visit the property can also be a challenge.
- It may be necessary to lower the asking price to attract more buyers.
- Another disadvantage of selling a house privately is the increased risk of being exposed to fraudsters.
It is important to carefully consider the benefits and drawbacks of a private sale before deciding whether it is the right route for you.
Cons - In Detail
Selling your home privately can have its downsides. It’s important to be aware of the legal requirements of a property sale, such as having an Energy Performance Certificate and following legislation under the Property Misdescriptions Act.
Selling a house can be harder than anticipated. Securing viewings, negotiating, and dealing with potential buyers can be challenging. It’s also worth noting that one in three sales falls through after the offers stage, and it can be more difficult to bounce back from setbacks when conducting a private sale.
The pros and cons of property auctions
As a property-buying firm, we have purchased properties that later transpired to have major issues. We are experienced with buying and selling property at auction, so we are able to advise you on the pitfalls.
In this guide, we will reveal some of the dirtiest tricks used by commercial and residential property auctioneers. Whether you wish to sell a house in an auction or you are considering how to sell a commercial property, we believe you should be making an informed decision. Later on, we reveal how you can avoid being just a number in the auctioneer’s online and offline catalogue.
When it comes to auctioning a house, there are pros and cons to consider in your decision-making process.
Pros
When purchasing a home at auction, potential buyers must have their finances in order. After the property is sold, a 10% deposit is typically required immediately, with the remaining amount due within a set timeframe, usually 28 days.
This ensures that buyers are committed to the purchase and reduces the likelihood of them pulling out. If a sale falls through, the seller gets to keep the deposit. Auctions can be beneficial for sellers who want to sell within a specific timeframe or for people looking to sell inherited properties or homes in need of repairs that they cannot afford.
Cons
Selling your home at auction can be a financial headache. You may have to pay again to re-advertise the property if a buyer pulls out, but at least you can use their deposit to cover the costs.
Total fees to sell at auction typically range from £2,000 to £3,000, including an upfront fee of £1,000 and a further £2,000 for a legal pack. You should also expect to pay 2.5% + VAT on any deposit received. Auction houses tend to set reserves low to attract bidders, which may not always benefit sellers.
Low starting bids
A professional auctioneer will advise you to put in a low, enticing guide price to get people bidding up the property. If your property is the lowest property in the catalogue, it will get pre-auction offers as local investors try to secure bargain properties in auctions.
Fees can mount up for the buyer
Buyers may have to pay your solicitor, ranging from £1,000 to £2,000. Not to mention stamp duty and a long list of extra completion fees.
Buyers will also have to pay stamp duty, which can be high. This is also time-consuming, and we all know time is valuable when selling a property.
When buying a property, there are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price falling within a variety of different land tax bands. For example, if you buy a house for £275,000, the Stamp Duty Land Tax will be £3,750, which, when added to the other fees, might make the buyer think twice about going ahead.
On completion, when signing the property contract, the buyer will also be responsible for insuring the property, another cost they probably haven’t considered.
Buyer can back out - legally
Another disadvantage of an auction is that the buyer does not have to go through with the sale, even after the hammer falls. There is no guarantee they won’t change their mind and back out after the winning bid.
Auctioneers' fees
To make matters worse, if the buyer does back out after realising the price, it’s going to cost them to buy the property on completion – sellers may also face penalty fees if they fail to complete after the exchange.
How much does it cost to sell a house at auction?
This table explains the costs related to auctioning a house:
What does this cost cover?
Cost
Entry fee
When considering selling a property via auction, you need to be aware that you’ll have to pay an entry fee the day you agree to go ahead.
That means you’ve just paid the auctioneer without guaranteeing a sale price. Is that a risk you can justify taking, and is this suitable for your situation?
This fee is used to market the property, costing the seller between £500 and £1,000.
Administration fee
If you buy a property at auction, you’ll have to pay an administration fee to the auction house. This may cover Exchanging of contracts on your behalf but always check with your auctioneer.
Up to £1,000.
Searches & Legal Pack
Your solicitor will need to prepare a legal pack and order searches prior to auction.
Expect to pay around £1,000.
Auctioneer's commission
This is on a no-sale no-fee basis for a traditional auctioneer.
With a Modern Method of Auction, the buyers pay a reservation fee, which is payable to the auctioneer regardless of whether the sale is completed or not.
Around 2% for a traditional auction.
Up to £9,600 or 4% of final resale price in a Modern Method of Auction.
What is the Difference Between Guide Price and Reserve Price at Auction?
When selling a property via auction, many people are confused about guide prices, reserve prices and selling prices – so here’s the low-down.
What is the guide price at a house auction?
Each auction property in the catalogue has a guide price and is also subject to a reserve price – the guide price is the level where the bidding will commence. A guide price can be a range of prices such as £190,000 to £200,000. Within this range, the reserve price must be within the aforementioned range. Usually, the reserve price is at the higher end of the guide price.
What is the reserve price at a house auction?
The reserve price is the seller’s minimum acceptable price at auction and the figure below which the auctioneer cannot sell. The reserve price, which may be up to 10% higher than the guide price, is not disclosed and remains confidential between the seller and the auctioneer.
You must be aware that both the guide price and the reserve price can be subject to change up to and including the day of the auction – this is one of the disadvantages of the auction – as nothing is set in stone, and there are no guarantees. Even a low reserve price is no sure-fire way of achieving a quick sale. A lower reserve price does increase the odds of being able to sell a property. The risk is that you could end up giving away the property.
How to set the right price
A low minimum reserve price will be required in order to guarantee a sale of your house. If the reserve price is too high, you won’t attract any buyers who’ll consider bidding for a purchase.
So, should I sell my house at auction?
Our expert advice would be that although it’s possible to sell at auction, we suggest you weigh up your options first, especially if you’re searching for a quick sale. Do your research, and check out more of our online guides.
Would you be better off selling a house privately?
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
Private house sale - with Property Saviour
Property Saviour can make you a guaranteed offer on your property, and we guarantee a fair price for your house.
As we don’t buy properties on behalf of investors, there are no hefty contracts to sign. We guarantee to buy your home, and you can expect the process to be completed within five to 10 days. Property Saviour will buy any property, meaning you do not need to refurbish.
Property Saviour will exchange contracts quickly without delay. There is no waiting months for the next auction, no upfront costs or auctioneer’s fees to pay upon completion. We will also pay up to £1,500 towards your legal fees.
It’s a huge decision to make, but it costs nothing to give us a call and chat with our experts about your options and what you can expect if you’re considering an auction sale.
When a buyer sees additional admin fees, legal fees, buyers premiums or a contribution towards their legal fees, they realise that suddenly this property seems very expensive, and they back out of the purchase. They risk losing their 10% deposit, which seems less than paying all extortionate fees.
Remember: The auctioneer gets paid first once a sale is agreed upon! The seller is the last to be paid.
If the seller wishes to ‘force the sale’, he/she will have to take the buyer to court. The only real winner will be the litigation lawyers who will charge you £300 an hour. There is no guarantee of winning in court. Even if you do win, if the buyer has no assets, you could throw good money after bad.