The advantages and disadvantages of selling your property at auction
If you’re a commercial or residential property owner, you’ll know how protracted and expensive it can be to sell through an estate agent. We look at whether you’d be better off selling your property through an auction.
Property auctions can be a quick-fire and adrenaline-fuelled route to buying a property, but they’re also a useful avenue if you have property to sell, whether it’s residential or commercial. However, the process does have its advantages and disadvantages for the seller. Let’s take a look in more detail.
- If you’re in a hurry to sell a property, perhaps to release some equity for another investment, an auction can save time in the selling process. If your property sells, the buyer has to make a 10% deposit immediately then has one month to deposit the remaining 90% in your bank account.
- If more than one person is interested in the property the initial, reserve, price can far exceed your expectations – a ‘bidding war’ can push up the price substantially.
- If your reserve price isn’t met, you won’t be forced to take a lower price for your property – the auctioneer will simply withdraw it from the auction and you can re-list it at a later date, if you so wish.
- Once the hammer has been dropped, the property is sold, so buyers can’t back out at the last minute. If they do change their mind, there are legal procedures in place to protect you.
If you don’t sell because your reserve price is too high, there is always the potential to negotiate with any interested parties after the auction has finished.The auction house will assist you with setting a guide price but it’s in your own best interests to do some research to discover exactly what similar properties in your area are selling for so that you can make an informed decision.
- The auctioneers will also market the property in their catalogue or on their website which will give potential buyers advance notice of the forthcoming sale. However, it’s up to you to make sure the property is available to view by purchaser and surveyors if needs be.
- Selling at auction can deter some buyers because of the competitive nature of the bidding process – not everyone enjoys that scenario.
- Potential bidders must register to attend an auction and this may also put potential purchasers off.
There is no guarantee that your property will reach its reserve price or sell at all. In this eventuality you may have to relist it which will incur further costs. If you are relying on the proceeds of an auction to buy another property immediately it may make the process difficult or impossible.
- The price you receive may not fully satisfy your expectations. If it only just reaches slightly over the reserve price you may be disappointed. However, by then it will be too late.
- The costs of selling at auction may exceed those of using an estate agent, and you’ll have to pay the auctioneer’s fees regardless of whether the property is sold or not.
- On the day of the auction, your solicitor must attend with you. You will need to pay for their time and associated costs for their attendance.
If you have a commercial or residential property to sell, an auction may be a great way to do so. However, it’s up to you to decide on whether that’s the best method for you as an individual or a company. If you need independent, impartial advice about any aspect of selling a property at auction, talk to one of the Eddisons team.
Written by: Rob Limbert on Thursday 31/03/2016