Selling at auction is best for people who want to sell their house as quickly as possible. But remember to pack your bags in time - you will have to hand over the keys 28 days after the auction date.
Make sure you choose the right auction house. This involves picking an auctioneer who offers property similar to yours within the same price range. Choosing an unsuitable auction house greatly diminishes your chances of getting a favourable deal on your house. Also, obtain a property valuation before you decide on the reserve price in order to protect yourself against a highly unfavourable sale.
The auctioneer will charge you for the advertisement in brochures and catalogues, a cost that you will have to cover regardless of whether your property is sold or not. You will also have to pay a commission of around 2.5 per cent of the sales price. Before signing any agreement, find out about all the expenses you will have to cover, even if your house is not sold.
- Set the reserve price - this is based on your valuation; however, you should consult with the auctioneer before setting the price.
- Prepare a contract - 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.
- Open your property for viewings - potential buyers will want to have a look at your house, and some will even want their surveyors to inspect it.
When the hammer falls, the sale is official and legally binding. 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. If he fails to do so, sue him!
Which properties to sell at auction
There are certain types of properties more suitable to be sold at auction than by normal means. These include:
- Houses that would be hard to sell by traditional means, because they are in a very bad state of repair and need substantial investment. You might not get very far advertising the miserable leftovers of a former factory with a local Estate Agent.
- Repossessed houses - they usually need to be sold as quickly as possible to cover the former owner's debts.
- Unconventional properties - they are difficult to value and often bought by aficionados for their individuality. You can get a much higher price for a lighthouse in Cornwall selling it at auction than by putting an advert in your local paper.
- Properties that are in high demand - in the heat of an auction, the price paid for such properties can exceed their estimated market value substantially. If you have ever seen the bidding wars ensuing over art at auctions, imagine what your East London penthouse might sell for!
You can never know how much your property will sell for. An auction is a highly volatile marketplace - if there is no demand on the day of your sale, you might end up selling it 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. Depending on how enthusiastic your solicitor is about travelling, this can be quite a costly affair.
Some people feel their privacy is violated at auctions, since the properties have to be open to potential buyers and their surveyors.
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.