Why Do Houses Go To Auction?
Property auctions account for roughly 2% to 3% of all UK sales, with around 80% of lots achieving a successful bid above the seller’s reserve price on the first auction day. This goes to show that property auctions are a popular way of buying and selling a wide variety of land and property – but why do properties go to auction?
Houses sell at auction for multiple reasons, but primarily because the seller requires the certainty that their property will likely sell straight away and the speed of the process, where the transaction is completed within as little as 20 working days.
The primary motivation for listing a house at auction is typically to ensure the property sells without delay, lengthy chains or the possibility of a buyer dropping out at the last minute. However, there are a number of other reasons and motivations behind why sellers choose auctions over other methods of selling.
4 Reasons to Sell a House at an Auction
Every sale method has merits, but one of the unique aspects of a property auction is that any property of any kind can be listed, including unusual constructions, properties in need of restoration, or those that wouldn’t generally sell quickly through a conventional treaty sale.
In these cases there are several compelling advantages:
- Auction sales are fast, certain and binding. Following the marketing phase, on the auction day, one bid at or above the reserve price confirms the sale at the fall of the electronic gavel when the timer reaches zero, with contracts exchanged and a deposit paid immediately with the balance paid within 20 working days. The average time for a private treaty sale is roughly 14 to 23 weeks.
- Success rates are high, at approximately 80%, with the assurance that even though the chance of a non-sale is unlikely, an auctioneer can help to secure a sale at a later date if necessary. Related reading:Â What happens to properties that don’t sell at auction?
- From a seller’s perspective, an auction is also comparatively stress-free, with an experienced auction house managing the marketing, bidding process, buyer registrations and transactional details.
- Some properties are considered more difficult to sell through private treaty or can be expected to take longer than average to sell due to complexities or issues related to the structure, the surrounding land or other considerations such as sitting tenants. For example, you may have a very unique period property or even a commercial property such as a pub!
For more information, read our full guide:Â How to sell a house at auction.Â
Choosing a Property Auction for personal reasons
Another common factor in deciding to sell at auction is personal circumstances, where the seller needs to achieve a quick sale without the risk that the transaction falls through or a party in a chain drops out just before they intend to move.
Broken chains are a particular problem in property transactions, which can cause untold stress, delay and cost where sellers are left waiting for a new buyer to come forward before proceeding with other plans.
If a fast, straightforward sale will allow you to move ahead with another property purchase, buy a new investment residence, finance other costs or relocate to a new area, an auction is likely the ideal solution.
There are also many personal circumstances where a speedy sale would be beneficial all around, such as:
- Selling an inherited property.
- Following a separation or divorce.
- Releasing equity to repay debts.
- Emigrating abroad or moving to a different region.
The auctioneer can provide guidance through each step, from setting an initial guide price to listing the property, marketing it to registered buyers, and managing the bids on auction day.
Why auctions make sense for buyers
The fast turnaround of a property auction attracts a wide variety of cash buyers, but many are developers or investors who know they can acquire properties within their chosen region and with great potential to renovate or refurbish and achieve a good return on investment. Buyers can also be those looking for a home where they can add value, personal style and their own finishes.
Related reading:Â Why Londoners are buying auction property
Either way, cash buyers have fewer hoops to jump through with mortgage lenders and are prepared to move ahead there and then – the norm is to put down a 10% deposit on auction day, with the final payment to follow.
Average Property Auction Sale Prices
In many cases, properties that are suited to an auction sale process achieve a better price than they would through a private treaty sale, mainly because the audience is more engaged and usually comprises a number of pre-registered bidders actively seeking properties in the area.
Related reading:Â Does a property sell for less at auction?
Bidding can be highly competitive, driving the price higher. Still, all prospective buyers have access to the guide price at the outset and can make informed decisions beforehand about whether they would like to bid and their maximum offer.
Properties sold via private treaty could stagnate on the market, regardless of the condition of the structure. Where a property has been listed for a long time or has had more than one sale fall through, it can deter other buyers due to perceived issues.
Should I Sell My House at Auction?
To help you decide whether selling at auction is for, we’ve written an article on this very subject here: should I sell my property at auction? If you fall into any of the categories mentioned, then get in touch with Clive Emson Auctioneers today.
There are several ways to sell a property, and an auction may be preferable if you need to achieve a quick sale, would like to use the funds tied up in the property for other reasons, or need a transparent exchange when selling with another ownership party to avoid disputes.
If you would like to learn more about selling a house at auction, how the process works, or discuss the likely value your property would achieve, please get in touch with the expert auction team at Clive Emson at any time.
About the Author:
Sam Kinloch
Sam’s career in the dizzy world of property auctions began when he hung up his chainsaw and headed in from the forest. Joining the team in 2003 Sam now sits on the Board of Directors and has been instrumental in the adoption of online auction services. Out of the office you can find him flying around the velodrome or sipping coffee at a local café.