Sure, we always talk about the role of auction finance and buying a property at auction, but what about selling? Here is our guide on everything you need to know about the process, should you decide to go ahead and put your home up for sale. We take a look at the reasons why you may choose to sell at auction, how it works, and the advantages of doing so.
What happens at an auction?
Selling your house at auction has become increasingly popular in the UK, predominantly due to the advantage of being to potentially sell a house extremely quickly. Before getting to the reasons why you might decide to sell a property at auction, lets look over first as to what exactly happens in this process.
Generally speaking, the auction will usually take place in a conference room or hall, and very rarely will your home be the only one going under the gavel. However, the process is not entirely the same across the world: for example in Australia, it is much more common for the auction to take place at the property location, rather than anywhere else.
More often than not, it is usually the case in the UK that a company will hold the auction on the property owners behalf. If the house is then sold on the day of the auction, the auctioneer and seller will usually take a portion of the funds raised as a commission.
Why choose to sell a property at auction?
If a homeowner is looking to sell a house quickly, many will opt to choose to go to auction. However, there are also other reasons as to why homeowners may choose to sell their property at auction if:
- Get a quick sale
- The property is being repossessed by creditors due to payment defaults
- The house has been on the property market for a considerable amount of time without any offers
- The homeowner would like to avoid as much as possible the long-winded process of exchanging properties
- The fact that the deposit will need to be ready on the day of the auction should it sell. This will usually be around 10% deposit. The following fees have to be transferred to the owner within a month
- Homeowners can end up making more money at auction by deliberately setting an extremely low reserve price. This can end up generating more interest than usual, and so the price can rise exponentially as a result.
- The property has been repossessed as it is probate due to the owner has passed away. As a result, this means that the relatives or the debtor may be putting the house to auction as they intend to consolidate debts and raise money to improve overall finances
How much does it cost to sell a property at auction?
Do not get fooled into thinking that selling at auction is completely free. Whilst you may well find that your house sells at a much quicker rate, you will have to pay upfront costs in order to put it at auction in the first place. Whilst there doesn’t tend to be hidden costs, there are factors that you need to consider:
- Homeowners will have to pay the auctioneer a commission around 2.5% of the sale price.
- Depending on the company, you may have to pay advertising costs for the auction. Check this out before choosing an auction
- You will need to pay solicitor fees for selling a property at auction. This is to pay for the cost of a ‘legal pack’ which must be prepared by a solicitor. The pack is shown to potential buyers. This will cost up to £500 to produce.
- Conveyancing fees need to also be taken into consideration. This may cost up to £750 plus VAT. The cost will depend on things like the sale price of the property as well as whereabouts in the country the auction has taken place.
How do I choose an auction house?
Whilst an established auction house may be more expensive than less well-known ones, it is more likely that you will be able to benefit from their expertise on the property auction market – meaning you may make a quicker sale. Buyers are also more likely to approach established auction houses too, which also increases the likelihood of your house making a sale.
However, you may find that smaller auction houses are cheaper and more accommodating, so you will need to weigh up the advantages and disadvantages of both in order to determine which factors are the most important for you when it comes to selling a property at auction.
