Selling your house through an estate agent can be a difficult, drawn-out process. It typically involves a lot of waiting, not to mention a pretty high level of frustration.
Property Auctions do away with many of these issues though, and have their own set of pros and cons.
Property Auctions have three main benefits:
- They have a high success rate (roughly 78% of auction properties achieve a sale).
- They're fast (an auction sale can be done in as little as 7-8 weeks).
- Sales are legally binding (meaning less than 1% of auction sales fall through).
There's a lot more to auctions than first meets the eye though. So why else should you sell your house at auction? Let's jump into a full list of what makes auctions so popular - including what the customers themselves have to say about them.
1. Auctions are a fast way to sell your house
The time to sell with auctions is much faster. It usually takes a couple of weeks to get ready to enter your property into the auction, and the auction then lasts 3-4 weeks.
At the end of the auction the buyer then pays a hefty deposit or reservation fee, which commits them to the purchase.
By comparison, when going through an estate agent, buyers are only committed to the purchase when exchange takes place. We found data from TheAdvisory.co.uk, an advice website for home sellers. According to their "Time To Sell" benchmark study it takes between 14-23 weeks to exchange through an estate agent.
Once the auction's finished the buyer places a hefty deposit or reservation fee, which commits them to the purchase.
2. Auctions have a high success rate
One of the big advantages of selling your house at auction is the high success rate.
Essential Information Group (EIG) are the industry standard for property auction information. We analysed data from their last 12 monthly newsletters:
- 22,149 residential properties were entered into auction over the 12 month period.
- 17,333 of these sold successfully.
- Resulting in a success rate of 78.25%.
So almost 4 out of 5 properties that go to auction sell successfully. Here's a look at the auction success rate over time (it's pretty much at an all-time high right now).
2.1. How do estate agents compare?
By comparison, a BBC News article reported on a 2018 study by Jefferies Group, an investment bank who had analysed the UK property market. They analysed sales data from over 7,000 estate agent brands, and the results were quite surprising:
Only around 51% of properties listed with an estate agent sell successfully.
It's not just the chance of success though. As we mentioned above, the success comes so much sooner when selling by auction.
3. Auctions are a more convenient way to sell
Simply put, auctions are just an easier and more convenient way to sell your house.
Selling with an estate agent is notoriously stressful, difficult, and frustrating. (To be fair, this isn't just the estate agent's fault! The property market as a whole is so dysfunctional, it's no wonder that estate agents struggle to deliver a convenient service!)
We analysed the reviews left by 52 customers who had sold their property by auction. 21% cited the convenience as one of main benefits. Here's a typical example:
Auctions work totally differently to Private Treaty sales (which is just a fancy term for "estate agent sales"). With auctions there are set timeframes, and real commitments up front.
This means things feel like they happen "automatically" with auctions, without the stressful and mind-numbing chasing that often comes with Private Treaty.
4. You're in control of an auction sale
When you're selling through an estate agent everything is up in the air. There are no set timeframes and no one's really tied to doing anything.
This means things can drag on indefinitely. You end up feeling completely at the mercy of the process, with no control over any aspect of it.
Auctions work differently:
- Property auctions work to set timeframes, and
- They work based on set prices.
4.1. Auction timeframes are set out in advance
From the moment the advertising for the property starts, there'll be a fixed auction date at some point in the future. This is usually 3 or 4 weeks later. Every buyer looking at the property knows the date.
For you as a seller, this means that you know the date you expect to be sold by.
Furthermore, if the property does sell on that date, then the eventual completion date is set out as well.
This means that the completion date can't slip back indefinitely the way that it does with estate agent sales. The buyer, solicitor, and any mortgage lender who's involved all know that there's a legally-binding date they all have to hit.
Because it's all set out in stone like this, you know for sure what will happen, and when.
This gives you a feeling of control over the process, and you know that things will happen without you having to constantly "chase" them.
4.2. Auction prices are locked in
It's not just timeframes that are locked. Prices are set out in advance too.
- You set the Reserve Price. You set the reserve price for the property, which is the minimum price the property can sell for. (If the highest bid is less than this then the property simply doesn't sell, and you hold onto it). This puts you in control: You know the price you'll end up with is your reserve price or higher.
- The Sale Price is fixed. Once the winning bid has been made, the sale is legally binding. This means the price can't change. There's none of the renegotiations or gazundering you often see with sales going through estate agency sales.
5. Auctions have a higher service level
Yes, we said it.
Auctions simply give you a better level of service than estate agents do. In our analysis of auction house reviews, the service level was most appreciated aspect of their experience (31% of customers mentioned it)
Compare that with the service people expect from estate agents - which is generally very low.
We're actually going to be conducting in a study in the coming weeks about just how high (or low) customer satisfaction is with estate agents. We'll be sure to update this article with our findings.
But in a nutshell, auctions are less about a high volume of low-fee instructions like estate agents are. They have a smaller quantity of more valuable instructions. This means you'll enjoy more time and attention from an often more qualified and experienced property professional.
6. Auctioneers give realistic valuations
When an estate agent comes out to your house to give you a valuation, they're not really there to give you a valuation.
They're there to give you a sales pitch: They want to tell you how much they're going to get you for the house, and what a high price they're going to be able to sell it for.
This is because the estate agent's main aim is just to sign you up. If they sign you up, even at too high a price, they benefit in several ways:
- Another instruction means another of their "for sale" boards up around town - which mean free advertising.
- Another instruction gives the appearance of a larger market share too, which helps them win more business in the future.
- Another listing means another opportunity to generate enquiries from buyers too. More buyers in their database gives them a better chance of selling each one of their properties - not just yours.
- Finally, at least they're in with a chance of winning a commission.
Estate agents know that most sellers will get valuations from 3 local estate agents. And they know most sellers will go with the one that gave them the highest price. This is why estate agents are notorious for over-valuing properties. It's the best tool they have for getting you signed up.
Once they have you signed up they can just call you after 4-6 weeks and recommend a price reduction... After all, they've probably tied you into a 3-6 month contract!
Overpriced properties are one of the main reasons it takes so long to sell in the UK, and why so many people have to reduce their price before eventually selling.
6.1. How do auction houses value properties then?
Auctions work the complete opposite.
The most important stat for an auctioneer's business is their success rate. After all, if they only have a low success rate, then they've got no "hook" or reason for other sellers to use them in the future!
So auction houses carefully protect their success rate by only taking on properties they know are very likely to sell. And, in general, this all comes down to being realistically priced.
This means it's in the auction house's interest to only give you very honest, accurate valuation feedback.
Simply put, they'll tell you what price they'd be comfortable taking the property on at. If this "suggested reserve price" is too low for you, then auction isn't the best option for you, and they'll tell you that.
This is one of the things we most like about auctions. You'll get straight-to-the-point feedback, and if auction isn't right for you then they'll tell you.
7. Auctions use low "guide prices" to generate interest quickly
Estate agents tend to set high asking prices on properties. The expectation is that buyers will offer quite a bit less, and then the seller will then negotiate down from their asking price.
While it might make sense to "set your stall out" at a high price, it makes your property look overpriced. This leads to a smaller number of viewings, which makes it take longer to sell.
Auctions do the complete opposite.
- Auctions set a very low initial price (the guide price).
- This generate a lot of interest in the property very quickly.
- Having several buyers interested leads to competition...
- ... Competition creates "bidding wars".
- And ultimately, this leads to getting a good sale price, fast.
The low guide price is one of the key tools an auction house uses to boost their marketing efforts. It helps get a good price for the property in a much shorter timeframe.
8. Auctions have a short, sharp marketing period
When you sell your house with an estate agent there are no fixed deadlines. Your estate agent just puts the listing live, and maybe puts it up in their shop window... And then you wait.
According to GetAgent.co.uk, "it will usually take at least four to six months to sell a house." According to their research, half of this is typically just advertising the property and waiting for a buyer. (This is only the average though. Remember that it can take less time... Or more).
By contrast, auctions have just 28 days to drum up interest for your property. They do this by completely covering the market in a short period of time:
- Your house will be prominently advertised on Rightmove, giving you complete market coverage.
- It'll be mailed out to their list of active buyers (the ones who are a match for your property).
- It's given a low guide price to attract lots of interest quickly.
9. Auctions tend to have more experienced buyers
Every property is different. But some are really different.
For example, some have unusual issues or defects and this can make them really difficult to sell through an estate agent. (We're talking about properties that may have structural issues, or Japanese Knotweed, or legal complications)
You'll often see these types of "problem properties" for sale with estate agents, but unfortunately they have a harder time selling.
"Problem properties" being sold via estate agent tend to:
- Take longer to achieve a sale.
- Sell for a lower price.
- Be more likely to have sales fall through.
One of the major reasons they take a long time to sell and are more likely to fall through is because of the types of buyers that mostly see them.
Firstly, inexperienced buyers are more likely to be scared off when they come across an unusual issue. Secondly, they tend to be reliant on mortgages - and lender's don't usually like unusual properties either.
This means it can be really difficult to sell a "problem property" if your audience are a less experienced set of buyers.
By contrast, auctions tend to attract more experienced investors. They're the kind who won't be so put off by property issues - and may even see them as an opportunity.
They're more likely to be cash buyers too, which removes the issue of relying on a mortgage lender.
9.1. You can sell tenanted properties at auction too
Selling a tenanted property with an estate agent can be difficult. But it's far more straight-forward to sell a tenanted property by auction.
This is largely because auctions tend to attract more investment buyers. Investors may even see it being tenanted as an advantage, because it means they'll be generating income from day one.
Just remember you'll have to provide tenancy agreements and bank statements to show they're paying their rent on time.
The other benefit of this is that you'll earn income right up until the day you sell the property. Also, in the unlikely event that the property doesn't sell at auction, you'll still have your tenant in there earning you money afterwards.
10. Auctions use "open house" viewings
As we've mentioned, auctions tend to use low guide prices and a big marketing push to generate a lot of interest quickly.
They'll often then host the property viewings all at once, in what they call an "open house". Essentially a 1 hour slot is booked and buyers show up at a time to suit them.
Open houses are great for two reasons.
- They're convenient. Why do 10 separate viewings if you can do 10 viewings all at once? ... But convenience isn't the main reason.
- Open house viewings drive competition. Buyers see other buyers who are also interested in the property - and who want to take it off them. This seems to "stoke the flames" of our inner competitiveness.
Seeing other buyers interested in the same house we are also seems to "validate" that it's a good deal. Again, this encourages bidding when auction time comes.
All in all, block viewings or "open houses" often lead to more competition in the auction room, which ultimately mean a higher price for the seller.
11. Due diligence is done before a sale is agreed
One of the craziest things about property sales in the UK is that sales are agreed with no commitment, and at a point where a buyer doesn't really know anything about the property. They just do a viewing, and if they like what they see then they agree to buy it.
But as we all know, that's not the end of the story.
After the sale is agreed, the due diligence starts. The solicitors start looking into the legal aspect of the property and a surveyor inspects the building itself. If either party uncover any unexpected issues then all bets are off: A buyer can withdraw without penalty, or they can renegotiate the price.
It's a bit of a back-to-front way of doing things.
As you may have guessed, auctions do the complete opposite.
12. Auctions are transparent to all parties
With auctions, all bids are public. Everyone's aware of the highest bid and can make an informed decision on whether or not they want to increase theirs.
By contrast, the process of agreeing a sale through an estate agent is very opaque. An estate agent in an office goes back and forth on telephone calls between buyers... But there's always a lot of doubt about whether or not there really is that other "interested party" the agent tells you there is.
A lack of transparency is bad for the seller in the long run though. Seeing the price that others are willing to pay actually encourages buyers to offer more - especially in the heat of the moment. And ultimately this leads to a better price for the seller.
13. Auctions get a fair market price
According to Investopedia, fair market value (FMV) is defined as follows:
"Fair market value (FMV) is the price that an asset would sell for on the open market... An asset's fair market value should represent an accurate valuation or assessment of its worth."
One of the advantages of selling your house at auction is that by:
- Pricing the property competitively, then
- Aggressively marketing it, and then
- Taking all the bids on a set date...
...Auctions actively demonstrate that they get a good and fair price for a property.
As Auction House UK say on their website, "this can be especially important for properties coming to auction by probate, as the executors of the estate have a duty to achieve the best price possible."
Of course, the property can vastly outperform expectations as well - especially if a couple of stubborn buyers get into a bidding war.
No one knows what a property will sell for on the day, but it is fair to think you've at least achieved a reasonable market price given the process it's been through.
14. Auction sales are legally binding
This is a big one. As we've already covered, a lot of traditional house sales fall through. In fact, we've dug up some data:
- 225,000 sales fall through each year, according to research from TwentyCI's Property & Home Mover Report.
- A total of 651,987 houses were sold in England and Wales during 2020, according to data from the Office For National Statistics.
- This means around 25.65% of sales fall through after they've been agreed.
Anecdotes from estate agents themselves actually indicate a higher percentage of around 30-40%, but who are we to argue with the data?
This figure of 25-40% is unbelievably high. But fall-throughs on estate agency sales happen so easily for two reason:
- There's nothing to legally commit the buyer to the purchase.
- There's no financial penalty if they pull out.
As we've said so many times through this article, auctions work the complete opposite.
14.1. Binding sales with financial commitments
The auction hammer is actually imbued with special powers. Seriously.
According to Section 57(2) of the Sale of Goods Act 1979:
"A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner"
When that hammer falls, a legally binding contract has been created between buyer and seller.
For traditional auctions the sale legally exchanges instantly. (That's pretty fast considering that it usually takes 4-6 months to reach exchange in a normal estate agency sale!)
For sales in the modern method of auction, exchange doesn't usually take place but a binding contract is still created.
In either case, the buyer is legally committed to buying the property and faces steep financial penalties if they try to pull out after the auction.
They're also required to pay a hefty sum immediately upon winning the auction: Either 10% of the purchase for traditional auctions, or a reservation fee of around £6,000 for modern auctions.
This gives the buyer a heavy incentive to complete the purchase, and it's one of the major reasons auction sales carry so much certainty, and such a small fall-through rate.
15. Auction sales complete quickly
Auction sales are stipulated to complete either 4 weeks or 8 weeks after the auction. (Which one depends on the type of auction that you and your auctioneer chose). But either way, that timeframe is set in stone: The buyer has to complete by then, else they risk being in breach of contract.
The buyer knows this, and so does their solicitor and any lender they're relying on. This means there's a hard deadline everything needs to be done by.
Because everything's set out from the start and everyone knows the deadline, there's no excuse for things running over. Therefore auction sales almost always happen on the date they're supposed to.
It's a stark contrast to house sales through estate agents. These are notorious for stretching out indefinitely as solicitors, lenders, buyers and other parties add countless delays into the mix.
16. Auctions can be flexible (if you want them to be)
We've covered that one of the major benefits with auctions is that everything is set in stone from the start. But there's a bit of flexibility too:
If you and your auctioneer want to allow up to 8 weeks for completion, rather than just 4 weeks, you can. This often happens with modern auctions, and the main reason is to allow buyers enough time to arrange a mortgage afterwards.
17. You don't pay the auction fees (your buyer does)
There are so many benefits to selling by auction, but two questions always persists: What price am I going to get by selling at auction, and how much will I have to pay in fees?
Well, with most auction companies you won't have to pay anything in fees.
Instead, the buyer will usually cover them. This means that when the auction house come to you with the valuation, you don't have to account for £000s disappearing in fees. The only fee you need to consider is your legal fee, which is about the same as when selling your house with an estate agent.
Of course, because the buyer needs to budget for these additional costs it means they'll have to adjust their offer accordingly, but it's nice knowing that the price you sell for at auction is pretty much what you'll end up with. There won't be lots of deductions reducing that amount.
Selling your house by auction has lots of benefits. We've listed 17, but there are probably more.
The main ones are that you're going to enjoy a faster, more convenient sale. You'll have a much higher level of certainty than selling with an estate agent too, and it's far less likely to fall through afterwards.
If an auction sale sounds right for you, it's important to find the best auction house for your particular property and circumstance. Choosing the right type of auction is also important.
Contact us now for free advice. We can help you find the best auction house for your property, and may even be able to negotiate favourable fees.
Call now on 0330 223 5568 to learn more.
By Matthew Cooper, Founder of Home Selling Expert