Although most people still choose to sell their property via the standard estate agent route, an increasing number of property sellers are turning to auctions.
But, what are the pros and cons of selling property at auction and is it an option you should consider?
We look at the main advantages and disadvantages of auctions for sellers, to help you decide if they are right for you.
Pros Of Selling Property At Auction
Seeing the hammer fall when your property has just sold for a great price is a fantastic feeling. But it’s not just the adrenaline rush that makes selling at auctions a good choice for many homeowners.
One of the biggest attractions of selling a property at auction is the fact it allows you to sell very quickly. Not only will you have a set date where you know you will find a buyer (providing your reserve price is met), once the hammer falls, the buyer is legally bound to complete the purchase within a set amount of time (usually around 28 days).
This makes it great if you need to complete the purchase quickly, either to free up the cash or to avoid losing out on the purchase of your onward purchase.
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One of the biggest drawbacks of selling a property via the standard routes is the existence of chains. Chains exist when the purchase of one property, relies on the successful sale or purchase of another. For example, when the buyer of your property needs to sell their current home to fund the purchase of yours.
Although they cause less of an issue in Scotland, chains have the ability to slow down sales and even cause them to fall apart completely. Selling a property at an auction avoids chains as people can only buy at an auction if they have the funds available and are chain-free.
This gives you much more security that once a sale is agreed, it will actually happen.
If the auction house does a good job of marketing your property, you could benefit from increased competition for your home.
Think about it, when your property comes up for auction, if there are several potential buyers fighting it out to be the highest bidder, it can cause the final sale price to shoot up higher than you anticipated.
Auctions do not always lead to increased competition, but when they do, they become extremely favourable to the seller.
Seller Remains In Control
When selling a property at auction, you always remain in control. That’s because, once a sale is agreed, the buyer cannot renegotiate or pull out of the deal without financial or legal penalty.
Compare this to selling via an estate agent where the agent fields all offers for you and the buyer can attempt to renegotiate at any point up until contracts are exchanged. When considering this, it’s easy to see why many people prefer the control and certainty they get from selling at auctions.
Easier To Sell Renovation Projects
If your property is particularly run-down or requires some substantial work doing to it such as underpinning or a complete refurbishment, auctions are often your best chance of selling.
That’s because they tend to attract property investors who are looking for projects that they can maximise their return on investment on. The more work that needs doing, the easier it is for investors to add value to a property.
Also, selling a property that needs a lot of work via a traditional estate agent risks the buyer wanting to pull out or renegotiate the sales price once they get the survey back and realise the scale, and cost, of the work that is required.
When selling at auction, the successful bidder cannot simply pull out of the purchase if they find out later that the property needed more work than they realised.
Cons Of Selling Property At Auction
Although there are plenty of positives of selling property at auction, the vast majority of homeowners still choose to sell via an estate agent. That’s because there are some negatives to property auctions that put many sellers off.
No Guarantee Of Sale
Although you’ll have a fixed date for when your property will be ‘sold’ at auction, there’s no guarantee you’ll find a buyer on that date.
If the auction house haven’t marketed your property particularly well, or your reserve price is set too high, your property may not be sold even if there are interested bidders on the day.
The point during the auction at which your property is available to bid on can also affect whether it will sell. Often, properties at the very end of an auction are less popular as only a few potential buyers will stick around until the end.
Uncertain Sales Price
While you can set the minimum price that you will accept as your reserve at an auction, you can never be sure how much over the reserve price your property will fetch (if it meets the reserve price at all!).
That can make it difficult if you are selling the property to fund your next purchase, as you won’t know how much budget you have available until the auction has finished.
That means if you are selling your main residence, you’ll need to be prepared to move into alternative accommodation after the auction to give you time to get your finances in order before you buy a new home.
Many auction houses will charge an entry fee of around £300-£400, plus around 2.5% of the sale price. That makes them a fair bit more expensive when compared to high-street estate agents, and extremely expensive when compared to most online estate agents.
When you think you can sell your home via an online estate agent for as little as £99 all in, it does make it difficult to justify the additional cost of an auction.
That said, if you think an auction will generate a higher sales price for your property, you may feel it’s worth paying the extra amount. Just keep in mind that most people who go to auctions are seeking a bargain!
You’ll Have To Move Out Quickly
One of the advantages of selling at auction, the speed of sale, is also a potential negative. As most auction houses require a sale to be completed within a few weeks of the auction, you won’t have much time to sort out where you will move to next and pack up all your belongings.
Of course, this won’t matter if the property is not your main residence and is currently empty, but it’s still worth keeping in mind that things will move fast after an auction so you’ll need to have everything ready to go.
All Sales Are Final
Again, this is something that can be either an advantage or a disadvantage, depending on your circumstances.
Once the hammer falls and the auctioneer announces that the property has been sold, there’s no going back, even if the sales price is less than you hoped for.
That means, if your personal circumstances change and you decide you don’t want to sell the property anymore, it’s already too late. That kind of finality means selling by auction isn’t suitable unless you are 100% certain you want to sell.
As you can see, there are several pros and cons of selling property at auction. Whether it’s right for you, or whether you decide to stick with the standard route of listing your property on Rightmove will depend on your own personal circumstances and attitude to risk.
If you decide selling at an auction is not for you, make sure you check out our online estate agent reviews to see how much money you could save when you avoid traditional high-street estate agents.