Buying and Selling Properties at Auction
Buying and selling properties at auction isn’t for the fainthearted, but it’s a fast way to do a deal.
If you’re new to the process of transacting property deals at an auction, here are some pointers to help you decide if it’s a route you want to take.
What sort of properties do people sell at auction?
All types of property can be sold via an auction. However, they’re often used by people trying to sell homes in need of renovation, or unusual properties that are difficult to value.
Auctions are popular with developers and builders in search of properties that need refurbishing or complete modernisation. Buyers looking for a property project are likely to frequent auctions.
The seller will probably set a realistic reserve price, and then bidders will put in their offers based on their opinion of the property's value.
How the auction process works
Usually the auction house will market your property in the weeks before the auction to bring it to the attention of the right type of buyer. You may also decide to publicise it yourself through social media or other means.
You set the reserve price; the lowest amount you’re willing to accept. If bids are below the reserve price, the auctioneer can withdraw the property from sale. You can also set a guide price, which will generally be less than what the property eventually sells for. However, a guide price will give potential buyers an idea of what the property is worth.
Once the auction begins, you’re legally committed to selling the property to the bidder who makes the highest offer. You then receive 10% of the cost of the property before the buyer leaves the auction with the balance to be paid in full within 20 days.
Selling at auction is a fast process, and you must be clear about what you’re doing before you decide to sell your property this way.
The cost of selling a property at auction
You’ll typically pay the auction house around 2.5% of the price you receive for the purchase of your property. You may also incur advertising costs, if you’ve agreed this, and they may apply even if your property doesn’t sell.
Once a sale has been agreed, you’ll also have to factor in solicitor’s fees.
The benefits of selling a property at auction
Speed is one of the main advantages of selling at auction.
If you want to free up cash quickly, then this is one way of doing it. A common reason for properties to end up being auctioned is because of bankruptcy or repossession.
Another reason to choose to sell at an auction is to find different types of property investors. Sellers with a property that could be difficult to sell via an estate agency to a straightforward buyer will often turn to auctions to find alternative kinds of investors.
The benefits of buying a property at auction
For property investors, auctions can be a great place to snap up a bargain. Sellers wanting to offload their properties quickly will often take a lower price to achieve a fast transaction.
But as a buyer, ensure you’re in a position to pay up promptly. If you’re relying on a mortgage, make sure this is in place before you make a bid as you’re going to be legally obliged to complete on the sale in about three weeks.
How to find your nearest auction house
For more information on buying and selling at auction, take a look at the Auction House website.
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