Selling a property at auction can be the ideal way of ensuring that you gain the best possible price and avoiding any last minute hitches. But where should you start?
What are the benefits of selling a property at auction?
With property auctions becoming more and more popular, the increase in demand for auction properties can often lead to the price being driven up.
You also have the benefit of knowing that once that hammer falls, the contract is legal and binding. The purchaser has to pay a 10 per cent deposit there and then, and come up with the balance within 28 days. This avoids the uncertainty that is usually associated with selling a property in the conventional manner, and the chance of gazumping, or of the buyer pulling out, becomes negligible.
Why should you sell at auction?
Before putting your property up for auction, it's worth asking yourself a few questions, as some types of property tend to be more suitable for the process than others. For example, if you have a property that is particularly run down, it is well known that auctions tend to attract purchasers who are specifically after a renovation project.
It could be that you have a property which is unique and difficult for a conventional estate agent to put a definitive price on. In these circumstances an auction will determine the market price for you, as bidders will pay the price they feel it is worth. Also, if a property has proven difficult to sell for whatever reason, perhaps because of legal complications with covenants for example, an auction will hopefully end with a definite sale with no chance of it falling through.
Another reason could be that you simply need a quick and uncomplicated sale, perhaps if you are moving abroad for instance.
How do you choose an auctioneer?
If you do decide to sell your property at auction, then you will need to decide on an auctioneer. There are quite a few of these around, some who specialise in auctions, and others who are regular estate agents with an auctioneering division. Like when you're selling by conventional methods, it's best to shop around to find the auctioneer that you feel most comfortable with.
Their costs, reputation and style may vary slightly, but you should budget to pay around 2.5 per cent of the purchase costs. You might also be required to pay for the advertising and legal costs. You will need to instruct a solicitor to prepare contracts and the legal pack, and set out any special conditions that might be pertinent to the sale.
It's worth checking out the auctioneers' advertising catalogues to see the standard of their publications. I personally feel it is usually better to use one of the more established companies, as they tend to have the largest database of potential purchasers. This will mean that the details of your property will be seen in advance by more people, which will hopefully lead to greater success come auction day.
Agreeing the reserve price and guide price
Before the property reaches the auction you will need to decide with your auctioneer what your reserve price is. This is the minimum price that you will accept once the bidding starts, and it's very important to set this at the right level, because once it is reached, there is no going back: the property will be sold.
The auctioneer also has to decide what the guide price of the property should be. This isn't necessarily the same as the reserve price, and once again careful thought will have to go into the decision. The trick is to keep it low enough to entice buyers to attend the auction with the intention of bidding for the property, but for it not to be unrealistically low so that bidders are put off as the price is driven up much higher during bidding.
Preparing the property for auction
After the catalogue has been produced and the particulars of the property are ready for all to see, there will be viewing arrangements set out, detailing when interested parties can come and view the property. Needless to say, as always when selling a property, it pays to ensure at this stage that it is looking as good as it possibly can, in order to entice potential purchasers into making a bid.
Getting offers before the auction
It is sometimes the case that an offer is made prior to auction. This is perfectly legal, and it is up to the vendor to decide whether it is worth taking it, or risk the uncertainty of the auction. I personally would turn down any offer that was made prior to auction. In my opinion, if someone wanted my property badly enough to make such an offer, they would attend the auction to bid for it. There would then be the possibility of the price exceeding the initial offer made.
I know that this is potentially risky, as bidding might stop before the offer price was reached, but I would already know the amount they were willing to pay, and would therefore be inclined to hold out for that.
When your property finally does go to auction, you will find that it usually takes place in a large function room or hall. You are under no particular obligation to attend, but I love auctions and get a great buzz out of going to them. I have sold at auction, and there is nothing like the thrill of hearing the auctioneer reeling off the spiralling figures, as the price gets driven up by the frenzied bidders.
However, if your property fails to meet its reserve, it doesn't necessarily mean that it's all over. If you need to sell the property, and are willing to sell at a price that is lower than the reserve, then it is still possible to negotiate and do a deal with a buyer when the lot has finished. I have done a similar thing myself once before, and bought a property that failed to meet its reserve. The auction terms and conditions still remain, and as long as a price is agreed, then a deal can go ahead.
Is selling at auction right for you?
All in all, if you're in a situation where you would rather not have any uncertainty when selling your property, and want a quick and legally binding sale, then selling a property at auction is a great idea. This, coupled with the potential to see the price driven up by eager purchasers bidding against each other, means that in my opinion, selling property at auction is definitely the way to go. Good luck!
The author, Lucy Alexander, is a property auction expert and TV presenter.