Selling property via auction differs from the common method of listing properties for sale or through an estate agent. Instead of showcasing the property for sale to potential customers and waiting for one to put in an offer, an auction presents it to interested buyers at once and at the same place. The participants bid on the property, and it’s eventually sold to the individual that puts in the highest bid, provided they meet any set minimums.
This selling method has become popular with many property owners because of its simplicity, speed, and security. Also, auctions eliminate the common pitfalls associated with selling via an estate agency, such as extensive days on the market. However, note that auctions also come with their risks. Read on for the pros and cons of selling your property via auction.
Pros
The following are four advantages to selling your property at auction:
- It Is A Fast Way To Sell Your Property
Selling your property at auction is much faster than selling it through a real estate agent. Typically, an auction property can sell within 20 working days (Source: Clive Emson). Once there’s a winning bid, contracts are exchanged, and the buyer pays a reservation fee or hefty deposit, which commits them to the purchase. In most cases, buyers pay 10% of the sale price.
Afterwards, a completion date is set whereby the buyer is legally required to complete the purchase by providing the remaining money. It’s usually within 20 working days. It means you’ll have the funds from the sale much quicker and at a guaranteed date. Thus, you can consider selling at auction, especially if you want to sell your property faster than usual.
- Prices Are Locked In
In an auction, you can set a reserve price in advance. It’s the minimum amount your property can sell for. If the highest bid is below this, the property won’t sell, and you retain it. So, you’re sure the final price the winner will pay is your reserve price or higher. Also, since the sale price is fixed, the sale becomes legally binding once a winner is declared. There are no more negotiations for price changes.
Luckily, with auctions, you can also achieve the best price. Effective marketing is usually designed a few weeks before the auction date to attract potential buyers and generate maximum interest. It ensures competitive bidding, and you’ll likely get the best possible price.
- You Are In Control Of An Auction Sale
There are no set timeframes when selling via an estate agent, and no one is obligated to do anything. Therefore, a sale might drag on indefinitely, and you may have no control over different aspects, such as when the property will sell and at what price. Notably, most private sellers may have to lower the price of the listed property to attract more customers, particularly if it has stayed on the market for a long time.
Fortunately, property auctions work differently. You set the timeline and the minimum price for the property. You’ll choose an auction date, and every buyer interested in the property knows they have to attend the event or log onto the auction site to have a chance to bid and probably win the property. Also, buyers know the minimum amount they can bid. So, with auctions, everything is set out in advance; you know what will happen and when. It gives you more control over the process.
- Auctions Have A High Success Rate
About four out of five properties that come up for auction usually sell. Also, data from the last ten years shows that 77% of properties presented for auction in the UK were sold. And considering estate agents only sell about half of the properties on their books, this represents a high sales rate.
Cons
While property auctions sound ideal, they also have potential disadvantages. They include:
- Your Property Might Not Sell
Though selling via auction gives you the control to set the timeline and the reserve price, there’s no guarantee that your property will sell. It’s probably because of a high reserve price or unconducive market conditions. And if the highest bid is less than your reserve price, you may have to reject it, hold another auction, or consider another selling method.
However, you can eliminate such concerns by working with an experienced auctioneer who can help you formulate a sound strategy. That includes fixing a considerable price and marketing the property to the right target audience. Also, the auctioneer ensures potential buyers have all the information they need to make a sound purchase decision.
- Auctions May Have A Smaller Pool Of Buyers
Mostly, auctions attract specific types of investors, typically cash buyers. Considering the speed of an auction process, there might not be adequate time to make financing arrangements like applying for a mortgage. Therefore, many buyers looking to finance a property purchase through loans might not consider auctions. It attracts a smaller pool of buyers, and the bidding might be less competitive.
Conclusion
Selling residential, commercial, or any other type of property via auction offers many benefits for you as the seller. It’s quicker, gives you control over the sale, has a high success rate, and prices are locked in. Even so, it also has its drawbacks. Although an auction is a viable option if you prioritize speed and control over maximising the sale price, you should be prepared for the possibility that the property may not sell or attract as many buyers as other selling methods. Selling at auction has pros and cons, but ultimately boils down to personal choice. As a seller, you can weigh your options and determine the right choice for your circumstances.
