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All You Need To Know About Selling Your House At Auction

There are many ways to sell your property. Either using an estate agent, we buy any house company or an auction company. Have you ever considered selling your house at an auction? Whether you have or haven’t, this article will help you determine if this could be a viable option for you.

Contrary to the popular view, selling your house at auction is not a desperate attempt to keep the bank manager from the door. On the contrary, putting your house up for sale on auction is faster and easier, considering you attract only serious buyers who are ready to make a bid in the heat of the moment.

There is much more to know about selling your house at an auction, as you will find out in this article.  So, read on as we unpack the process of selling a property on auction, with a focus on the steps involved, the upsides and downsides, the costs, along with a few important tips.

What does it mean to sell a house at an auction?

Like you may have known, auction entails buying and selling of services or goods by offering them for bidding. During an auction process, bidders send in bids, and the items are sold to the highest bidder. The bidding starts with the smaller prices, with each subsequent bid usually higher than the previous.

You can sell your home at an auction dedicated to property sales. The process is essentially the same – people submit bids for your property, and you sell it to the person that offers the highest amount of money, as long as the highest bidder meets or exceeds your reserve price. Your house is deemed under offer once the hammer strikes, and the winning bidder must drop a 10% deposit down to secure the sale of the property. 

The sale will be completed in the next month, after which you get the other 90% of the funds.

Glossary of property auction terms

LOT

A LOT is an individual property or land in its entirety, as offered at the auction.

Legal Pack

A Legal pack is a package of vital information related to a specific property intended to be used by prospective purchasers. The legal pack will include some or all of the following information:

  • The reservation agreement or contract
  • The Auction terms and conditions
  • Highlight any special conditions of sale
  • Official copies of the title register, title plan along with some supplementary documents referred to in the registers of title
  • Property search information, including but not limited to local authority searches, drainage and water search plus any other applicable searches.
  • A copy of the Energy Performance Certificate (EPC)
  • The property information form (TA6)
  • The fittings and contents form (TA10)
  • If the property is leasehold, the Legal Pack should include a copy of the lease and the leasehold information form
  • For properties sold with tenants, the Legal Pack should include a copy of the Assured Shorthold Tenancy (AST) Agreement
  • For commercial properties, the Legal Pack should include Commercial Property Standard Enquiries (CPSE) forms
  • Also where applicable, the Legal Pack should include documentation relation to planning permissions and building controls.

Addendum

An addendum is either an amendment or an addition to the lot as seen in the auction catalogue.

Reserve Price

The reserve price is the minimum price that the property will be sold for, this will be agreed with the auctioneer prior to the auction day. Most properties have a reserve price although sometimes, the reserve price will be confidential and will not be disclosed to any interested parties.

Guide Price

Guide Prices are only an indication of what a property might sell for on auction day. Generally a guide price will be within 15 percent of the sale price.

Assured shorthold tenancy

Properties with an assured shorthold tenancy means the property will not be vacant and will be sold with tenant, for a certain pre-agreed length of time.

Telephone bid

One of the most favoured means of bidding if someone is unable to attend the auction, they are able to make a bid for a LOT over the phone, to a member of the auction team, who will place a bid on their behalf.

Internet bid

Auctions can be streamed live over the internet. If someone is unable to attend the auction they will still have the opportunity to place a bid on a property remotely through an auction companies website.  

Proxy bid

Similar to telephone and internet bidding, a potential bidder is also able to arrange for a proxy bid, this is instructing the auctioneers to bid on their behalf if they are unable to attend the auction. This will need to be arranged prior to the auction day, they will agree a maximum bid for the LOT, the auctioneer will then bid on their behalf up to that point.

Deposit

If a property sells at auction the winning bidder will be responsible to pay a pre agreed deposit, based on the sale price for a LOT. Usually this is in the region of 10% and is paid to the seller.

Completion

Completion is when all the property conveyancing has been completed, the sale price is paid in full by the winning bidders conveyancer and received by your conveyancer who then issues you the money. Completion is usually concluded around one month after the auction date.   

What are the steps involved in selling your home at auction?

It is easier to say, “I want to sell my home at auction.” But can you really put in the work? The auction process is not as simple as it appears. There are multiple steps involved, each crucial to the successful completion of the sales.

Let’s take a look at these steps;

Step 1 – Find an Auction company & Appraisal of your property

After deciding to sell your home at an auction, the first step is to choose the auction you want to sell your home at. It is best that you research the auctions that deal in your type of property to ensure that you attract the right buyers.

After choosing your preferred auction, you need to have your property appraised. The auction you are working with will do the appraisal, which is just the valuation and assessment of your home. In the end, you will know the benefits of selling your home at auction, the best prices you can sell it for, and the best reserve price.

You are not obligated to proceed with the auction at this point. So, feel free to seek professional advice and ask relevant questions.

Step 2 – Instruction / Agree Fee’s & Costs

If you want to proceed with the auction after appraisal, you would be required to sign the terms and conditions of the auction. The auction house will also ask that you provide all the necessary certificates and documentation regarding the property. Lastly, the auction house will develop a description of your home and send it in for your approval. Ensure you read the terms and conditions carefully and make sure you understand and agree with the auctioneer’s fees and costs.

Step 3 – Choose a Solicitor to create a Legal Pack

The third stage is where you factor in the legal aspects of the auction process. As the seller, you will be required to hire a solicitor who will draw up a legal pack comprising title deeds, applicable searches, conditions of sales, and other relevant documents. The legal pack ensures a smooth handing over of rights from the seller (you) to the eventual winner of the auction. You will need a legal pack in place before your home can be bought through an auction.

Step 4 – Marketing the property

In this case, your home is a product, and it should be marketed to attract the right buyers. After the signing and completing your legal pack, the auction house will market your house to drive interests and buyers to show up on the auction day to bid. To inform the right audience, auctions market properties online – social media and websites – and offline – auction boards and publications. Make sure you check that the property details are correct and advice the auction company of any amendments needed prior to auction day.

Step 5 – Reserve Price

Based on the marketing results, the auction can determine the best reserve price. Therefore, it is recommended that you consider both the appraisal advice and the feedback from the marketing when deciding on the reserve price.

The reserve price is the price of the starting bid. Getting your reserve price right is important – you don’t want it to be too high, so it doesn’t scare off potential buyers, or too low, because if a property meets the reserve price on auction day the selling party is legally obliged to sell the property even if you’re not happy with the price achieved.

Step 6 – Auction Day

Potential bidders and buyers will show up at the auction on the auction day. Most auctions verify the details of these bidders legally to prevent fraud and money laundering. If everything checks out, they will be allowed to bid on your property, starting with the reserve price.

The bidding round ends when no one is ready to outbid a particular bid. Once someone wins, there is an exchange of contracts on the spot and the buyer makes a minimum payment of 10% of the selling price as a deposit.

Step 7 – Completion

You can finalise the sale within a month of the auction date. The auction house liaises with all the parties to confirm the completion dates to round up the sales process and hand over the keys.

Advantages and Disadvantages of a Home Auction Sale

Like every other method of selling a home, there are a few pros and cons of selling your home at an auction. Let’s start with the pros.

Advantages

  • Worth considering if your property needs work, has defective title or a short lease.
  • No complicated house chain
  • Process takes around 2 months
  • Price may exceed your expectations
  • If the reserve price isn’t met, you won’t be forced to sell the property.
  • Once the hammer has dropped the property is sold, the buyers can’t back out.
  • The auctioneers will also market the property in their catalogue or on their website
  • You can sell a tenanted property or an inherited property easily at an auction.
  • Buyers cannot drop the price between contract exchange and completion.

Now, to the disadvantages.

Disadvantages

  • Finding a buyer is not guaranteed, the competitive nature of auctions can put off potential buyers.
  • Potential buyers must register their details to attend an auction, this may reduce your potential buyers
  • There is no guarantee that your property will reach its reserve price or sell at all, you may still need to pay the fees regardless of the end result.
  • Cash offers often less than market price – expect to receive around 75% of the market value
  • Auctioneers, like estate agents, may overestimate your property’s value, making it difficult to sell.
  • You lose time and money if your property doesn’t sell at the reserve price.
  • Auctions may not be fast enough for debts or repossession purposes.

Away from the upsides and downsides of selling your house at an auction, let’s also discuss the cost implications of the entire process.

What is the cost of selling a home at auction?

The exact costs may differ across auction firms, considering each firm operates differently. However, you will most likely have to pay the fees listed below, especially when dealing with a traditional auction house model.

  1. Auction Fee

This is usually between 1.5 to 3% of the sale price of your home, some auctioneers also charge an administration fee in the region of £500 plus VAT in addition to the auction fee. These fees are usually payable upon the completion of the sale. However, you may pay a certain fee upfront if your auction firm demands such.

One important factor to consider is that if your home doesn’t meet it reserve price and fails to sell at auction you will still be liable to pay the auctions fees.

  1. Marketing Fee

This is usually 0 to 1.5% of the value of your home, and it goes into giving your property the right publicity before the day of the auction.

The cost may be payable upfront or on completion, also if the property fails to sell on auction day you will still be required to pay this fee.

  1. Conveyancing Legal Fees

Legal Fees are another cost to consider when selling a property through an auction, usually there will be two sets of legal fees payable. The first legal fee will be in relation to the Legal Pack, in order for the property to be sold through an auction a legal pack must be produced. This will include important information with regards to the property such as any special conditions of sale, official copies of the title register and title plans. The legal pack will usually cost in the region of £500 plus VAT.  

Secondly, once the auction hammer is hit and an offer is above the reserve price, this is deemed to be legally binding sale. In order to complete the sale, you will need a solicitor to undertake the conveyancing of the property sale through to completion. Fees for this service will usually be in the region of £600.

Choosing the right auction house

Choosing the right auction house can be somewhat tricky. However, we recommend that you choose an auction house that specialises in property similar to the property you’re selling. These auction houses will have a greater understanding of the market and ensure you have a good chance of achieving a higher price for your property. Also, large and more established auction firms will usually have an extensive databases of serious-minded property buyers.

Take a look at this article featured in The Telegraph this article gives you a comprehensive guide on some of the top UK auction houses. Also do a quick search online to find out the reputable auction houses around you. When you find them, ensure you check feedback from previous clients, their auction models, and their fees.

Let’s answer your questions.

We hope that we’ve explained this article clearly and you have a good understanding on all you need to know about selling your property through and auction house. However if you have any  questions or require any further information please don’t hesitate to contact us on 0800 644 5311 or Admin@sellmyhomenow.co.uk  

If you would like to sign up to our newsletter please enter your email below

All You Need To Know About Selling Your House At Auction

There are many ways to sell your property. Either using an estate agent, we buy any house company or an auction company. Have you ever considered selling your house at an auction? Whether you have or haven’t, this article will help you determine if this could be a viable option for you.

Contrary to the popular view, selling your house at auction is not a desperate attempt to keep the bank manager from the door. On the contrary, putting your house up for sale on auction is faster and easier, considering you attract only serious buyers who are ready to make a bid in the heat of the moment.

There is much more to know about selling your house at an auction, as you will find out in this article.  So, read on as we unpack the process of selling a property on auction, with a focus on the steps involved, the upsides and downsides, the costs, along with a few important tips.

What does it mean to sell a house at an auction?

Like you may have known, auction entails buying and selling of services or goods by offering them for bidding. During an auction process, bidders send in bids, and the items are sold to the highest bidder. The bidding starts with the smaller prices, with each subsequent bid usually higher than the previous.

You can sell your home at an auction dedicated to property sales. The process is essentially the same – people submit bids for your property, and you sell it to the person that offers the highest amount of money, as long as the highest bidder meets or exceeds your reserve price. Your house is deemed under offer once the hammer strikes, and the winning bidder must drop a 10% deposit down to secure the sale of the property. 

The sale will be completed in the next month, after which you get the other 90% of the funds.

Glossary of property auction terms

LOT

A LOT is an individual property or land in its entirety, as offered at the auction.

Legal Pack

A Legal pack is a package of vital information related to a specific property intended to be used by prospective purchasers. The legal pack will include some or all of the following information:

  • The reservation agreement or contract
  • The Auction terms and conditions
  • Highlight any special conditions of sale
  • Official copies of the title register, title plan along with some supplementary documents referred to in the registers of title
  • Property search information, including but not limited to local authority searches, drainage and water search plus any other applicable searches.
  • A copy of the Energy Performance Certificate (EPC)
  • The property information form (TA6)
  • The fittings and contents form (TA10)
  • If the property is leasehold, the Legal Pack should include a copy of the lease and the leasehold information form
  • For properties sold with tenants, the Legal Pack should include a copy of the Assured Shorthold Tenancy (AST) Agreement
  • For commercial properties, the Legal Pack should include Commercial Property Standard Enquiries (CPSE) forms
  • Also where applicable, the Legal Pack should include documentation relation to planning permissions and building controls.

Addendum

An addendum is either an amendment or an addition to the lot as seen in the auction catalogue.

Reserve Price

The reserve price is the minimum price that the property will be sold for, this will be agreed with the auctioneer prior to the auction day. Most properties have a reserve price although sometimes, the reserve price will be confidential and will not be disclosed to any interested parties.

Guide Price

Guide Prices are only an indication of what a property might sell for on auction day. Generally a guide price will be within 15 percent of the sale price.

Assured shorthold tenancy

Properties with an assured shorthold tenancy means the property will not be vacant and will be sold with tenant, for a certain pre-agreed length of time.

Telephone bid

One of the most favoured means of bidding if someone is unable to attend the auction, they are able to make a bid for a LOT over the phone, to a member of the auction team, who will place a bid on their behalf.

Internet bid

Auctions can be streamed live over the internet. If someone is unable to attend the auction they will still have the opportunity to place a bid on a property remotely through an auction companies website.  

Proxy bid

Similar to telephone and internet bidding, a potential bidder is also able to arrange for a proxy bid, this is instructing the auctioneers to bid on their behalf if they are unable to attend the auction. This will need to be arranged prior to the auction day, they will agree a maximum bid for the LOT, the auctioneer will then bid on their behalf up to that point.

Deposit

If a property sells at auction the winning bidder will be responsible to pay a pre agreed deposit, based on the sale price for a LOT. Usually this is in the region of 10% and is paid to the seller.

Completion

Completion is when all the property conveyancing has been completed, the sale price is paid in full by the winning bidders conveyancer and received by your conveyancer who then issues you the money. Completion is usually concluded around one month after the auction date.   

What are the steps involved in selling your home at auction?

It is easier to say, “I want to sell my home at auction.” But can you really put in the work? The auction process is not as simple as it appears. There are multiple steps involved, each crucial to the successful completion of the sales.

Let’s take a look at these steps;

Step 1 – Find an Auction company & Appraisal of your property

After deciding to sell your home at an auction, the first step is to choose the auction you want to sell your home at. It is best that you research the auctions that deal in your type of property to ensure that you attract the right buyers.

After choosing your preferred auction, you need to have your property appraised. The auction you are working with will do the appraisal, which is just the valuation and assessment of your home. In the end, you will know the benefits of selling your home at auction, the best prices you can sell it for, and the best reserve price.

You are not obligated to proceed with the auction at this point. So, feel free to seek professional advice and ask relevant questions.

Step 2 – Instruction / Agree Fee’s & Costs

If you want to proceed with the auction after appraisal, you would be required to sign the terms and conditions of the auction. The auction house will also ask that you provide all the necessary certificates and documentation regarding the property. Lastly, the auction house will develop a description of your home and send it in for your approval. Ensure you read the terms and conditions carefully and make sure you understand and agree with the auctioneer’s fees and costs.

Step 3 – Choose a Solicitor to create a Legal Pack

The third stage is where you factor in the legal aspects of the auction process. As the seller, you will be required to hire a solicitor who will draw up a legal pack comprising title deeds, applicable searches, conditions of sales, and other relevant documents. The legal pack ensures a smooth handing over of rights from the seller (you) to the eventual winner of the auction. You will need a legal pack in place before your home can be bought through an auction.

Step 4 – Marketing the property

In this case, your home is a product, and it should be marketed to attract the right buyers. After the signing and completing your legal pack, the auction house will market your house to drive interests and buyers to show up on the auction day to bid. To inform the right audience, auctions market properties online – social media and websites – and offline – auction boards and publications. Make sure you check that the property details are correct and advice the auction company of any amendments needed prior to auction day.

Step 5 – Reserve Price

Based on the marketing results, the auction can determine the best reserve price. Therefore, it is recommended that you consider both the appraisal advice and the feedback from the marketing when deciding on the reserve price.

The reserve price is the price of the starting bid. Getting your reserve price right is important – you don’t want it to be too high, so it doesn’t scare off potential buyers, or too low, because if a property meets the reserve price on auction day the selling party is legally obliged to sell the property even if you’re not happy with the price achieved.

Step 6 – Auction Day

Potential bidders and buyers will show up at the auction on the auction day. Most auctions verify the details of these bidders legally to prevent fraud and money laundering. If everything checks out, they will be allowed to bid on your property, starting with the reserve price.

The bidding round ends when no one is ready to outbid a particular bid. Once someone wins, there is an exchange of contracts on the spot and the buyer makes a minimum payment of 10% of the selling price as a deposit.

Step 7 – Completion

You can finalise the sale within a month of the auction date. The auction house liaises with all the parties to confirm the completion dates to round up the sales process and hand over the keys.

Advantages and Disadvantages of a Home Auction Sale

Like every other method of selling a home, there are a few pros and cons of selling your home at an auction. Let’s start with the pros.

Advantages

  • Worth considering if your property needs work, has defective title or a short lease.
  • No complicated house chain
  • Process takes around 2 months
  • Price may exceed your expectations
  • If the reserve price isn’t met, you won’t be forced to sell the property.
  • Once the hammer has dropped the property is sold, the buyers can’t back out.
  • The auctioneers will also market the property in their catalogue or on their website
  • You can sell a tenanted property or an inherited property easily at an auction.
  • Buyers cannot drop the price between contract exchange and completion.

Now, to the disadvantages.

Disadvantages

  • Finding a buyer is not guaranteed, the competitive nature of auctions can put off potential buyers.
  • Potential buyers must register their details to attend an auction, this may reduce your potential buyers
  • There is no guarantee that your property will reach its reserve price or sell at all, you may still need to pay the fees regardless of the end result.
  • Cash offers often less than market price – expect to receive around 75% of the market value
  • Auctioneers, like estate agents, may overestimate your property’s value, making it difficult to sell.
  • You lose time and money if your property doesn’t sell at the reserve price.
  • Auctions may not be fast enough for debts or repossession purposes.

Away from the upsides and downsides of selling your house at an auction, let’s also discuss the cost implications of the entire process.

What is the cost of selling a home at auction?

The exact costs may differ across auction firms, considering each firm operates differently. However, you will most likely have to pay the fees listed below, especially when dealing with a traditional auction house model.

  1. Auction Fee

This is usually between 1.5 to 3% of the sale price of your home, some auctioneers also charge an administration fee in the region of £500 plus VAT in addition to the auction fee. These fees are usually payable upon the completion of the sale. However, you may pay a certain fee upfront if your auction firm demands such.

One important factor to consider is that if your home doesn’t meet it reserve price and fails to sell at auction you will still be liable to pay the auctions fees.

  1. Marketing Fee

This is usually 0 to 1.5% of the value of your home, and it goes into giving your property the right publicity before the day of the auction.

The cost may be payable upfront or on completion, also if the property fails to sell on auction day you will still be required to pay this fee.

  1. Conveyancing Legal Fees

Legal Fees are another cost to consider when selling a property through an auction, usually there will be two sets of legal fees payable. The first legal fee will be in relation to the Legal Pack, in order for the property to be sold through an auction a legal pack must be produced. This will include important information with regards to the property such as any special conditions of sale, official copies of the title register and title plans. The legal pack will usually cost in the region of £500 plus VAT.  

Secondly, once the auction hammer is hit and an offer is above the reserve price, this is deemed to be legally binding sale. In order to complete the sale, you will need a solicitor to undertake the conveyancing of the property sale through to completion. Fees for this service will usually be in the region of £600.

Choosing the right auction house

Choosing the right auction house can be somewhat tricky. However, we recommend that you choose an auction house that specialises in property similar to the property you’re selling. These auction houses will have a greater understanding of the market and ensure you have a good chance of achieving a higher price for your property. Also, large and more established auction firms will usually have an extensive databases of serious-minded property buyers.

Take a look at this article featured in The Telegraph this article gives you a comprehensive guide on some of the top UK auction houses. Also do a quick search online to find out the reputable auction houses around you. When you find them, ensure you check feedback from previous clients, their auction models, and their fees.

Let’s answer your questions.

We hope that we’ve explained this article clearly and you have a good understanding on all you need to know about selling your property through and auction house. However if you have any  questions or require any further information please don’t hesitate to contact us on 0800 644 5311 or Admin@sellmyhomenow.co.uk  

If you would like to sign up to our newsletter please enter your email below

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