Part one: advantages
In a previous column, we set out the central benefits and drawbacks of buying a property at an auction. As anyone who has bought a house or flat in England or Wales will confirm, probably with a great deal of passion, the traditional process can be and often is lengthy, expensive and frustrating. Buying at auction avoids a great many of the baffling convolutions and meandering by-ways of a typical conveyance. As we explained, though, there are some important downsides to purchasing real estate at auction. The same is true of selling a property. There are pros and cons and you alone are best placed to evaluate whether, in your circumstances, the former outweigh the latter. Starting with the positives, then, auctions can be:
In contrast with selling a property through an estate agent, listing your property at an auction and receiving the final payment can take a matter of weeks. This can be a huge boon if you have pressing reasons for wanting to sell up quickly. You might want to liquidate your assets to fund an exciting investment or business project, or maybe you need to relocate for work and have limited time to organise your move. Perhaps the property hasn't been maintained as well as you would like and you suspect that you will struggle to offload it via more conventional means. Whatever your motivation, selling at auction is usually the speediest option.
This sounds somewhat counterintuitive. While auctions are a quick way to sell up, they typically aren't the most financially rewarding route, surely? Well, up to a point, that's right. But it's not outside the realms of possibility that more than one potential purchaser will take an interest in your property, with something of a "bidding war" ensuing. This can drive the eventual selling price upwards, giving you a pleasant surprise when the auctioneer's hammer falls on your listing.
At the same time, you can set a reserve price, below which you are not prepared to entertain bids. If your property fails to raise this pre-agreed sum, you can just withdraw it from the auction and either sell it through an estate agent or re-list it with the same or another auctioneer. You can also quite legitimately engage with interested parties after the auction has ended, to negotiate a price that is acceptable to you both.
In determining your reserve price, you will need to research house values by postcode and find out house prices for homes like the one you propose to sell. This will give you a shrewd idea of the market value of your house and help you decide upon a minimum acceptable selling price. This process is much less arduous and time-consuming if you check out the Nethouseprices house valuation service.
Once the auctioneer has accepted a bid, the buyer is required immediately to pay a ten per cent deposit. He or she will have registered with the auction house and will bring paperwork confirming residence, identity and financial suitability. The ninety per cent balance must be paid within weeks, usually a month. While purchasers do occasionally change their minds, this happens very rarely for the very good reason that dropping out of the deal at this stage constitutes breach of contract and they would, as a result, be liable to pay you a significant sum of money by way of redress.
This means that you avoid the sleepless nights worrying about buyers backing out and the conveyancing process throwing up unforeseen obstacles. You can, to all intents and purposes, get on with the next stage of your life.
4. "Problem" properties
It may be that are problems with the house you want to sell. Perhaps you have inherited it from an elderly relative who didn't have the financial or physical resources to decorate the property or keep it in good repair. Maybe tenants have caused a huge amount of "wear and tear." If you don't have the time, money or inclination to carry out the necessary improvements, you can enhance your chances of actually selling the property, if you market it via an auction house.
In truth, prudent buyers will have carried out careful due diligence and thoroughly checked out the residence before bidding. They are also sure to have engaged the services of a surveyor to assess its structural integrity and they are unlikely to make an unexpectedly high offer. They will know the average market house valuation in your area and will make adjustments to reflect the degree of disrepair. If selling quickly and at little inconvenience to yourself is your priority, though, then listing the house at auction may well be the best option.
The main objective of selling at auction is, of course, selling your property quickly and at a price that you view as reasonable. It may be that you never attend another sale once this deal is completed. But if you are looking to buy a house either as an occupant or as an investor, you will gain an invaluable insight into this part of the market. In many ways, it's a dry run for when you attend as a buyer. You will learn the procedures and the idiosyncrasies of the auctioneers and the bidders, and crucially, you’ll come to appreciate how easy it is to get carried away with the excitement and competition of the bidding process. Veterans of the property auctions in fact have one key tip for beginners: attend a few auctions before you start bidding for houses and flats that interest you.
So much for the advantages. They are, you'll agree, fairly compelling. In the next installment, though, we will turn to the principal disadvantages of selling your property at auction, so you can decide whether this is the best option for you.
Visit the team here at Nethouseprices again for all the latest news on house prices in the UK and wider property market developments, as well as for our detailed commentary and analysis of the housing issues affecting you, your family, your investments and your business.
Part one: advantages