Read our blog post for our advice on selling at auction - everything you need to know.
Our guide to selling at auction
For the right type of property, in the right circumstances, an auction can prove the ideal method of sale. It is quick and straightforward, and it offers the seller a chance to achieve the best possible price.
Because the fall of the auctioneer's hammer (known as a gavel) creates an agreement as binding as exchange of contracts in a sale by private treaty, there is no risk of uncertainties or delays. And although the cost to the seller is greater than that of a sale by private treaty, the additional expenditure, or some of it, may be recouped through a higher sale price.
To auction...or not to auctionWhile an auction is not generally a suitable means of selling the average three-bedroom semi, it may be worth considering if your property has development potential or is:
• Unique, or at any rate highly unusual, and therefore hard to value
• Difficult to sell - perhaps because it is in a poor state of repair
• Of a type that is especially sought after
If your property falls into one of these categories, or you think it may do so, seek advice from an auctioneer. They will assess your property in the light of current market conditions and tell you whether an auction is likely to be your best route to market.
**Choosing an auctioneer
Having ascertained your property's suitability for auction, your next step is to appoint an auctioneer. (In this article, ‘auctioneer' refers both to the firm acting for the seller and to the individual conducting the auction.)
It is wise to compare two or three firms. As well as enquiring the sort of price they would expect to achieve, you should establish:
What experience they have of selling your type of property Their marketing methods. Study the quality of their press advertising and property details. Do they advertise online as well as in the print media? Their commission. This will be a percentage of the sale price achieved (2.5 per cent is usual). You should also ask:
• whether the commission will be the same if the property is sold before the auction
• what fee will be charged in lieu of commission should the property be withdrawn from the auction because it fails to reach the reserve price (that is, the sum agreed between you and the auctioneer as the minimum you will accept)
• the probable total of other costs, including advertising and brochures, which will be charged as extras
Their terms. Some auctioneers require clients to give them sole selling rights before auction day and for an agreed period afterwards. If you agree to this, you have to pay their commission even if you find a buyer yourself
**The run up to auction day
Once you have instructed your auctioneer, the countdown begins.
Advertising will start anywhere from three weeks to three months prior to the auction, depending on the nature of the property and the level of interest expected.
Several weeks beforehand, particulars of sale will be issued. These will consist of a brochure containing full details of the property, including:
• facts about tenure, possession, fixtures and fittings, rateable value, etc
• the Conditions of Sale, including any Special Conditions (which should be drawn up by your solicitor)
• a Memorandum of Agreement (the equivalent of a contract for sale by private treaty), with blank spaces for the buyer's name and the purchase price a guide price
• details of viewing arrangements
From 1 August 2007, a Home Information Pack (HIP), containing preliminary legal and other information, must also be supplied if you are selling a four-bedroom home or larger (see Home Information Packs: a Guide). Your auctioneer is responsible for commissioning this.
Having seen advertisements and/or received particulars, potential buyers will want to view the property - and, if they then decide to proceed, to have surveys and valuations done. It is usual to arrange set times for viewings (generally several per week), but you may well have to be more flexible about surveys and valuations.
At some point before the auction, you and the auctioneer must decide on the reserve price. This is not revealed to bidders, which means that you can adjust it before the auction, according to current market conditions and the amount of interest.
Selling before the auction
It is customary to state in the brochure and advertisements that the property will be auctioned ‘unless previously sold'. Many prospective purchasers do not relish the prospect of bidding, and may prefer to submit an offer before the big day. They will probably be aware that, to tempt you to short-circuit the auction process, their offer will need to be attractive.
Should you decide to accept a pre-auction offer, your buyers will still have to sign the auction contract. Therefore, before auction day, they must make preliminary legal enquiries, commission a survey, and arrange funding. You thus avoid both the uncertainties of an auction and the potential pre-contract headaches of a sale by private treaty.
This solution may seem to offer the best of both worlds, but seek your auctioneer's advice before accepting any offer.
**At the auction
Auctions are held either in a dedicated auction room or in a rented hall. A number of properties may be offered for sale at the same auction.
If bidding is sluggish, the auctioneer will usually let the assembled company know when the reserve price is reached, as a way of reviving interest. If, on the other hand, bidding is lively, he will not reveal that the reserve has been achieved, to keep up the momentum.
Should the bidding fail to reach the reserve price, the auctioneer will withdraw the property. If this happens, you may still be able to negotiate a sale with one of the bidders.
**After the auction
The successful bidder signs the auction contract and pays a deposit (typically 10 per cent of the purchase price) to the auctioneer.
Completion usually takes place 28 days later. At that point, you receive the balance of the purchase price, and the purchaser receives vacant possession of the property.
Don't forget...It is essential to take appropriate professional advice and ensure you have all the facts before deciding to sell a property at auction. Once the hammer falls, you are legally obliged to complete the sale.
With thanks to BuyAssociation.