It’s a tough call to choose between selling a residential or commercial property via an auction vs a discrete 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, the legal pack is prepared by your solicitor 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 completion time of 28 days.
Property auction pitfalls
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 catalogue, both online and offline.
When it comes to auctioning a house, there are pros and cons to consider in your decision-making process.
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 property in auctions.
Fees can mount up for the buyer
Buyers have to pay your solicitor or conveyancer which can range from £1000 to £2000. Not to mention stamp duty and a long list of extra completion fees.
Buyers will have to pay stamp duty, too, which can be high. This is also a time-consuming process, 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 £3750, 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, which is 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.
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 exchange.
How much does it cost to sell a house at auction?
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. This fee is used to market the property and can cost the seller up to £3,000.
That means you’ve just paid the auctioneer without any guarantee of a sale price. Is that a risk you can justify taking, and is this really suitable for your situation?
If you buy a property at auction, you’ll have to pay an administration fee to the auction house, which is typically between £900 and £1,500 but can be higher depending on the auction house.
Online auction fees calculator (UK)
Many people looking to sell a house at auction are aware that there will be fees they need to consider before going ahead which could take money from the final price. In the search for a total figure they will look online for an auction fees calculator, however, unfortunately, there isn’t one – and that’s because auctioneers don’t want to reveal these extortionate costs before they’ve reeled the seller in.
Guide price v reserve price
When selling a property via auction, many people are left 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 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. Lower reserve price does increase the odds of being able to sell a property.
How to set the right price
A low minimum reserve price will be required in order to guarantee a sale for your estate, as 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 entirely possible to sell at auction yourself, we suggest you weigh up your options first, especially if you’re in search of a quick sale. Do your research, and check out more of our online guides.
Private house sales - 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 and we guarantee to buy your home and you can expect the process to be complete the process within five to 10 days.
Property Saviour can exchange contracts quickly without waiting months for the next auction, with no upfront costs or auctioneer’s fees to pay upon completion. We will also pay up to £1,000 towards the costs of your legal fees too.
It’s a huge decision to make, but it costs nothing to give us a call and have a chat with our experts about your options and what you can expect if you’re considering an auction sale.