Pros and cons of selling at auction

Property auctions are becoming an increasingly popular way to buy and sell property, for various reasons. Continue reading to find out why property auctions are becoming more popular and the pros and cons of selling a house at auction.

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Why are auctions becoming more popular?

While property auctions are traditionally associated with distressed and run down properties, or properties with legal issues, auctions are now seen as a viable option for a wider range of properties. With more people looking for a good deal, the growing market demand for houses at auction makes them an attractive option for sellers, especially those looking for a quick sale.

Pros of property auctions

Speed and efficiency

A big advantage of property auctions is the speed at which transactions can be completed. A standard property sale is likely to take months to negotiate the price, secure financing, book surveys and review searches, especially when chains are involved. Whereas auctions typically only take a matter of weeks to complete, from the initial listing to the final sale. This speedier, chain-free, process is beneficial for sellers looking to offload properties quickly and for buyers eager to secure a purchase without delay.

Find out more about conveyancing when buying or selling at auction.

Quick payment

As auction transactions go through much quicker than a standard purchase or sale, you’ll get your final payment much quicker too, especially handy if you need access to your funds sooner rather than later.

Competitive bidding

Although not guaranteed, the auction environment, being competitive, can help to drive up the final sale price. This can be particularly advantageous in property markets with high demand as there’s likely to be multiple buyers interested in the same properties, who could be willing to go above their original budget to secure the property.

Reliability

Auction sales have a higher chance of completion once a winning bid is accepted. Unlike traditional property transactions, which can fall through at various stages, auction sales are typically final. This reliability can be particularly beneficial for sellers who want or need quick payment or those needing to relocate quickly.

Sold as-is

Auction properties are usually sold ‘as-is’, meaning that the seller is not required to make any repairs or improvements before listing the house. This can be appealing to those who have inherited a property, allowing them to avoid the hassles associated with property maintenance and renovation that may be expected going through the standard selling process.

Cons of property auctions

Sale price can fluctuate

Although competitive bidding can help to drive up the price, it is not guaranteed, especially if you don’t have multiple buyers interested in your property. This makes it a risk, as your property could end up selling for less than its market value. If this is a concern, you can set a reserve price, however this could lead to the property having no successful bids on auction day.

Auction fees and costs

Buying and selling property is expensive in itself, and going via the auction route is no different. Auction houses charge sellers a fee for their service, which can include advertising, listing and administrative costs, which all eat into your profit. For buyers, they also charge a buyer’s premium, a percentage on top of the buyers final bid, and a commission charge, which could ultimately lower their final offer.

Find more information on the costs of buying and selling at auction.

Limited financing options

When buying a house at auction, you’re usually required to have your financing in place up front and ready before you bid, typically seen with cash buyers. This is because the completion process is also a lot quicker, and arranging financing, such as a mortgage, in this time is not likely to be feasible. This ultimately reduces the pool of people able to buy through the auction process.

Sale on auction day is not guaranteed

Even if demand seems positive, there are various factors that can unfortunately mean your property doesn’t sell on auction day. Demand and price are the two main reasons, however listing order could even impact a sale. You can do things ahead of auction day to help boost your chances of a sale, such as ensuring you have created a legal pack, be available for viewings and setting a realistic price. However, if a sale still doesn’t take place, most auction houses will let you enter the following auction for free. Additionally, if your property had offers, but the offers did not make the reserve price, the auctioneer may follow up with the interested parties to see if they can agree a post-auction sale.

All sales are final

Unlike a standard property transaction, where you put in an offer and then arrange searches and surveys once the offer is accepted, with property auctions, everything has to be arranged beforehand, as sales are final, and properties are sold ‘as-is’. It’s always recommended to inspect a property before auction, however because of the fast-paced nature of auctions, sometimes people proceed without. This can mean, that as a buyer, you could end up with a property in a worse condition than you had thought, which could lead to unforeseen problems and unexpected expenses.