Homes Under The Hammer is one of the BBC’s most popular daytime TV shows and illustrates how easy it is for buyers to pick up a house at a good price; particularly buy-to-let investors and amateur property developers.
The show features homes that are sold at auction which is not the typical way that many people choose to sell their property. So, why do people do it and what are the benefits? We’ve put together a brief summary of the pros and cons so you can make up your own mind.
Reasons Why People Sell Property at Auction
Offering a fast way to market and an almost guaranteed selling position where the buyer can’t back out, auctions are a popular way to sell a home when time is of the essence.
Once the hammer falls at auction then the buyer must put down an unreturnable 10% deposit and they only have four weeks in which to complete the sale and pay the remaining 90%.
Auctions have traditionally been the method used by mortgage companies to realise the capital tied up in an asset against which their customers have defaulted (repossessed properties) or in cases of Probate when liquidating a deceased’s estate.
It is also common for owners of run-down or unusual properties to turn to an auction house as conventional marketing may not be reaching the right audiences.
As can be seen from Homes Under The Hammer, auctions are generally attended by buyers looking for a project or homes that may be offered at lower than the market value. This can be the case with homes that have been repossessed and where the mortgage company is only looking to achieve a value which clears any outstanding debt.
Despite this common perception that homes sold at auction only ever achieve less than the market value, the opposite can also be true.
With the right property, demand from several buyers can drive a price up beyond the market value and help sellers achieve a very competitive sale.
At the end of the day, auctions tend to be the best choice for people who need to sell up within a specific time frame. If your property is priced realistically and there is enough interest on the day then you should get a sale and a completed set of contracts within a month.
How Much Does Selling At Auction Cost?
It is important to remember that, although you don’t have to pay estate agent’s fees when you use an auctioneer to sell your home, you do have to pay a fee to the auction house.
This varies by auctioneer and may be in addition to advertising costs depending on the kind of property you are selling. Prestige homes may well be included in exclusive marketing literature that is distributed to interested parties. This is usually a fixed fee for entry in the catalogue and should be detailed separately to the seller’s fee. These fees are payable upfront and are charged irrespective of whether your home sells.
The seller’s fee can either be a percentage of the value achieved at auction or may be a fixed fee. Again, this varies by auction house but is typically around 2-3% of the price you get for your home when it is sold.
In addition, you may have to pay an additional set of fees for preparing the legal paperwork prior to the property being listed in the auction catalogue. This is generally around £200-£500. This is usually an up-front cost.
Some auction houses work in a slightly different way (see Online Property Auctions, below) in that the seller does not pay any fees at all. Instead, it is the buyer who pays the commission fee and there are no upfront costs for marketing and advertising.
Setting a Reserve Price
The reserve price is the lowest price that you will accept for the sale of your property and is set in advance of an auction, being agreed with your auctioneer. It is not made public information but if the bids on the day do not exceed the reserve price then your property will go unsold and be withdrawn from sale.
If the bids meet, or exceed, the reserve price then the auctioneer will sell your property at that price and you will be unable to withdraw your property after the hammer has fallen.
You should always make sure that your reserve price is realistic in order to give your home the best chance of selling. It should not be too low that you have any regrets about the value and it should not be too high that it restricts the chances of it selling.
It is important that you seek advice before setting your reserve price, particularly if your home has already been on the traditional market and failed to sell It may be that you need to lower your expectations.
Setting a Guide Price
A guide price is different from the reserve price and is an unofficial range in which the value of a property is placed in order to give buyers an indication of what to pay. The guide price may not be met or can be vastly exceeded depending on who is at the auction on the day of the sale.
It is not a fixed price that must be met and can even be much lower than your reserve price in order to tempt buyers in to start the bidding off.
Selling Property at Auction
The auction house that you choose to sell your property should be doing the majority of the work in order to advertise and promote your home for sale. However, you should make sure that you work with the auctioneer and agents to give your property the best chance of selling for its maximum value.
It is usual for the auction house and agent to arrange a day when viewings can be undertaken so make sure that you spend time preparing your home to look its best for potential buyers.
Before the day of the sale, you should also be doing all you can to spread news of the auction across your own social media channels as well as those of the agent. Send links to family, friends and colleagues to the auction catalogue listing and ask them to share these widely.
Once the auctioneers has accepted the final bid on your property (providing it has met its reserve price) then your buyers will pay a non-refundable 10% deposit to secure the deal.
All you need to do is make sure that your solicitors are ready to handle the paperwork from the auction house and get ready to complete the contracts within 28 (or 56 with an online property auction) days.
Online Property Auctions
In recent years, an alternative to the traditional auction house has become popular; the online property auction or ‘modern method of auction’.
Some estate agents, including Property Assistant, can offer this kind of digital auction which follows a similar method to that detailed above but follows a format that may be familiar to us when using sites like eBay.
A specialist property auction service, the timescales are slightly longer for the bidding process and they take place online. Like with a traditional auction house, buyers must pay a reservation fee when the auction ends which secures the property. However, the completion process can take up to 56 days instead of 28.
Property Assistant and Selling Your Home at Auction
Property Assistant is pleased to be able to offer the service of selling your property at auction via our partnership with Pattinsons. Another family run business with over 20 years of experience at auctioneering, this online property auction allows you to sell your home for free.
You can find further details of how this process works via our website or discuss this in detail by calling is on 0118 912 2370.