Selling a house at Auction
What kind of houses and properties are sold at auction?
Selling at auction is best for people who want a quick sale. The whole process takes a maximum of 28 days from the fall of the hammer. Auctioneers will advise you on the suitability of your house for auction but certain types of properties are more suitable to be sold at auction than by normal means. These include:
- The house requires work or has development potential, or are in a very bad state of repair and need substantial investment.
- Repossessed houses - they usually need to be sold as quickly as possible to cover the former owner's debts.
- Houses that are one-of-a-kind or unusual. Unconventional properties are difficult to value and often bought for their individuality.
- The property has a problem or "issue" such as a short lease or it has existing tenants
Advantages of Selling your house or property at auction
You get a commitment to buy. The contract of sale comes into force as soon as the auctioneers hammer falls.
The timeframe is usually shorter than for properties sold through an estate agent.
The format lets bidders drive up prices. Competitive bidding for some types of property can achieve close to open market or better prices.
Disadvantages of Selling your house or property at auction
If there is no demand on the day of your sale, you might end up selling you house for below its market value.
You will have to pay your solicitor to be present at the auction in order to sort out any last-minute irregularities and answer questions. Your sale will proceed more smoothly if you use a lawyer familiar with the Common Auction Conditions. Prepare the legal pack for the property in good time to attract interest prior to the auction.
Selling your house at auction can be more expensive than selling it via an Estate Agent. Also, you will have to cover certain expenses even if your property does not sell.
Selling you house at Auction - Choosing an Auction House
Auctioneers are bound by a ‘Duty of Care’. As a potential vendor, they are obliged to advise you on the best method of selling your property, taking into account the circumstances under which you are selling.
Choose an auctioneer who offers property similar to yours within the same price range. You will have a legal contract with the auction house which outlines your obligations as the vendor. It is referred to as the “Terms of Agency”. Details will include:
- providing proof you have the authority to offer the property for sale
- giving binding authority to the auctioneer to negotiate and enter into a contract
- commitment to pay the fees associated with the sale
- confirming the reserve price
It is your responsibility to make sure the description of the property in the auction catalogue is accurate. If it’s not, it may give your buyer the right to pull-out and claim the return of their deposit. Instruct your solicitor to prepare a contract which contains the terms and conditions of the sale; this will be included in the auctioneer's brochure.
The Costs of selling you house or property at auction
Fees are generally of two kinds: entry fees and sale fees.
The auctioneer will charge you for the advertisement in brochures and catalogues. These can run to several thousand for the top London auction houses. You will have to pay this cost regardless of whether your property is sold or not.
The sale fee is a commission based charge and is typically between 1.5% and 3.0% of the final selling price.
Selling you house or property at Auction - Completion
When the hammer falls, the sale is official and legally binding. Once the buyer has signed the memorandum of sale the buyer is given the legal pack and a copy of the memorandum. In some cases the paperwork will be sent directly to the buyer’s solicitor. The buyer will have to pay you 10 per cent of the agreed sales price straight away, the outstanding balance within 28 days after the auction.