Confidence in the Auction method of sale has been growing over the last few years, but not all sellers understand its merits. Estate agents should consider the auction option when undertaking the sale of a house.
Property auctions remain a popular way to sell property in the UK and the changes in the financial climate over recent years makes the auction option even more attractive for both sellers and buyers. Properties are being bought and sold by big organisations like housing associations, pension schemes and investors with large portfolios, through to owner-occupiers with single units. The future for auctions looks robust. As more and more people become aware of the auction process through websites like www.propertyauctionaction.co.uk and TV programmes such as Homes Under the Hammer and Property Ladder, auctions will get more attention from buyers and sellers alike. Read on to find out what is involved in taking your property to auction.
Advantages to selling at auction
With auctions increasing in popularity, higher selling prices are being achieved. There is also a chance that you will receive an offer before the auction itself, which will avoid the hassle of the auction if you are happy to accept it.
If you need to sell quickly, the turnaround time when selling at auction is normally a far speedier process than when selling via an estate agent. Once you have registered with the auction house the auction will generally commence within one month, with the completion of the sale happening typically between 20-30 days after the auction. It is worth remembering that you will need to be in a position to move out of your home to fit with these timescales!
Selling a property by private treaty leaves you open to possible breaks in the chain and the sale falling through, as no one is legally obliged to proceed until exchange of contract. This may mean starting all over again with a new buyer, which is both costly and time consuming. When selling at auction, there is no chain and the buyer will forfeit their 10% deposit if they are unable to proceed.
Auctions attract a variety of buyers, traditionally investors and property developers, who are often able to make cash purchases. Auctions are seen as a great way to snap up an affordable property and while buyers are often in search of a bargain, if there is a lot of interest in your property it could reach a higher price than on the open market.
Properties sold at auction
Typically, the types of property often sold at auction are:
Repossessions – Mortgage lenders often use an auction to sell the properties that they repossess as it offers a fast and cost effective way to dispose of the property. These properties often have a lower reserve price, as the lender is simply interested in recovering the debt.
Properties requiring renovation – this is the ideal opportunity for property investors to find a property that requires work and could therefore be worth more money once improved and re-marketed.
Unusual/difficult to value properties – it is often possible to find something a bit different at auction, where estate agents may not be sure of the market value. If your property generates particular interest, it could go for far more money than any agents estimated value.
Land – with “hope value”. This offers potential development opportunity subject to planning permission.
Choosing an auctioneer
Just as when selling via an estate agent, it is best to shop around to find the auctioneer that you feel most comfortable with.
Use www.propertyauctionaction.co.uk to check out what auction houses are near to you. Talk to several auctioneers. They are very approachable and will be able to give an appraisal as to whether your property is suitable for an auction sale. Auctioneers have many years of valuable experience and will be able to give you lots of good advice. They will also advise on the best guide and reserve price with which you should enter your property into the auction in order to realise the best possible price on the day.
Costs, reputation and practices may vary slightly, but you should expect the selling fee to be around 2.5% of the selling price. You might also be required to pay for the advertising and legal costs.
When contacting an auction house, it may be worth asking the following:
- When the next auction is due to be held
- When the property details will be produced ready for advertising in the catalogue and on-line.
- How will viewings be arranged and if there will be a specific viewing day organised.
- Will they prepare an information pack with details of the title deeds and other conditions of sale? If so, what is the fee for this?
- On the day of the auction, are you expected to attend to sign the contract or will they do so on your behalf and send the money from the sale to your solicitor?
Setting the price
The ‘guide price’ and ‘reserve price’ must be set prior to advertising the property. The guide price is printed in the catalogue and displayed in the on-line advert and gives buyers a general guide as to what the property is expected to sell for. The reserve price is hidden from prospective purchasers. This is agreed privately between you and the auctioneer and is the lowest amount you’d sell the property for. The chances of it exceeding its reserve price are fairly high, especially if the property is in a popular residential location.
Before the auction
The chosen auctioneer will confirm their terms of appointment and all charges (including the commission rates for sale on the day, sale after auction or no sale at all). Auctioneers may also provide services for putting up sale boards and showing potential bidders around the property. This may be done at set times before the auction. Some auction houses also provide the services of Internet and telephone bidding to compliment the bidding in the auction room itself on the day.
Auctioneers put a lot of resources into advertising their auctions using websites such as www.propertyauctionaction.co.uk that will get you maximum exposure on search engines such as Google. They also use newspaper and magazine adverts and produce glossy catalogues in order to gain maximum coverage for your property before the auction.
You will need to have your solicitor on standby well before the auction. They will want to see the auctioneer’s general conditions of sale and the description of the property, making sure that any disclosures that need to be made are fulfilled within the narrative in the catalogue or any amendment sheets that go with it.
You’ll also need to instruct your solicitor to prepare the required documents prior to the auction. Ask them to prepare an auction contract, which includes replies to initial enquiries and the results of any searches carried out, plus a draft contract and Evidence of Title (proof of your ownership).
You will have to satisfy the requirements of the anti money-laundering act to the auctioneer with proof of identity and will also be required to compile an energy performance certificate (EPC) to go in the legal pack.
The auctioneer will keep you informed of the level of interest in the property and also process any pre-auction offers.
You must inform the auctioneer of any circumstances regarding the property which change before the auction or if you are withdrawing the lot.
On the day
Before the auction commences officially, time is set-aside for potential bidders to enquire as to any last minute changes. Final amendments to Catalogue details will be circulated to those attending. Each Lot is described prior to being offered, and hopefully after competitive bidding will be sold on the fall of the gavel, with contracts being effectively exchanged at that point. The clerk or auction administrator will instruct the buyer on signing the sale documentation and transferring the 10% deposit to be paid on the day.
Once your property is sold you will need to settle the selling fee with the auctioneer along with the entry fee, which is usually fixed at a few hundred pounds although some auction houses operate either a fixed or tiered incremental percentage scheme.
If your property doesn’t reach its reserve price and a sale is not agreed during the auction you are able to approach the highest bidder via the auctioneer or your solicitor. You may be able to negotiate a mutually acceptable deal with them directly.