Property Auctions: Can You Offer Less Than The Guide Price?

The most appealing thing about buying a property at auction is the chance to bag a bargain. But how you approach the bidding process can have a big impact on the price you’ll eventually pay.

Auction properties are listed at a guide price, but can you offer less than the guide price?

You can't offer less than the guide price at a property auction. The guide price is the “starting bid”, and the property will eventually sell for more than the guide. There is one exception. If there is no interest in the property then the guide price may be reduced to encourage bids, giving you an opportunity to offer less.

However, this still doesn’t mean you’ll win the auction for that bid. You could still be outbid as bidding starts to rise again.

Even if you do win the auction, you may still not get the property if the reserve price hasn’t been met. This means the property simply won't sell, and will remain in the hands of the current owner.

That doesn’t mean there isn’t still an opportunity to bag a bargain though, and potentially still buy a property for less than the guide price. Read on for more.

1. Trying to offer less than the guide price

Guide prices in property auctions work differently to prices with estate agents. When offering through an estate agent you can submit any offer you want. In fact, it's typical to negotiate the seller down from their starting price.

With auctions it's the opposite. The auction guide price is essentially the "starting bid". Once bidding starts the price increases until the highest bid is eventually reached.

1.1. Are auction guide prices accurate?

On average properties sell for around 15-25% more than the guide price. This is just an average though, and it can vary significantly on individual properties.

For example, for a recent article we spectated a live auction by Bond Wolfe, one of the leading auction houses in the West Midlands. The sample of 15 properties we followed actually sold for more than double the guide price! (129% higher!) 

We wrote about this topic in more detail here: How accurate are property auction guide prices?

1.2. What happens if there are no bids?

So on average properties sell for 15-25% more than the guide price, and some sell for much more than average. But what about the ones that get below average? Or what happens if there are no bids at all? 

How often does this happen?

First of all, it's worth noting how often this happens. We analysed data from EIG's monthly newsletters. EIG are the industry standard for auction information in the UK. We found that 78% of properties that go to auction successfully sell, leaving 22% unsold. So it's fairly common.

Note that some of those 22% will still have received bids in excess of the guide price. The property will just have remained unsold because the reserve price wasn't met.

But "unsold properties" is where it gets interesting for buyers, and where there may be opportunity to get a property for less than the reserve price. In some rare cases you may even be able to buy a property for less than the guide price.

2. Buying unsold property after auction

When a property fails to sell at auction the auction house won't just give up. They'll continue trying to agree a sale on it.

PropertyMark are a professional self-regulating body for auctioneers and valuers. In their consumer guide about buying a property at auction, they cover post-auction sales: 

In the instance that the property remains unsold, the auctioneer may have the authority to sell it privately in the room immediately after the sale. Make sure to register your interest with the auctioneer prior to the sale and stick around at the end of the auction.

The auction house has two "tools" they can use to try and get a sale agreed after the auction. They will try to:

1. Get the seller to reduce their reserve price, and
2. Get the buyers to increase their bid.

If the auctioneer can get those two prices to meet then the property will be sold. In most cases the sale will still be under auction conditions, even though it was agreed outside of the auction.

This is where buyers have the opportunity to get the best deals. However, it can also be the place for the least desirable properties to eventually be sold, or those that were overpriced to begin with.

For this reason it's really important to express caution at this stage and to make sure you've done your research before you try and tie up a deal.

2.1. What price do properties sell for post-auction?

Buying a property after the auction doesn't guarantee you a good price. For example, the property may not have sold because it was overpriced to begin with. Although this is rare with auctions it does happen. If the seller won't reduce their reserve price from the lofty starting figure, it's unlikely you'd want to buy it!

There can be good deals for a buyer here though. It usually depends on the seller's circumstance, and how eager they are to reduce their reserve price and agree something.

If you have the right combination of a lack of competition from other bidders, and a very motivated seller then you can secure a good price. It can be lower than the original reserve price, and may even be where you can have an offer less than the guide price accepted.

3. Conclusion

As we've covered, guide prices are the starting price for auctions, so you cannot bid below it. However if there's no interest or bidding then the starting price may be reduced before, or during, the auction.

Even if you bid at this stage it's unlikely you'll win the property for less than the guide price. This is because other bidding can start, which pushes the price higher. And even if that doesn't happen, a bid below the guide price will have failed to meet the reserve price. This means the property remains unsold.

Unsold auctions are where you have the chance to secure a property for the best price. But this relies on a lot of luck. You'll need the right combination of a lack of interest from other bidders, and the seller being extremely motivated.

Just remember to express caution. If a property has gone unsold then other prospective bidders may have spotted something you haven't. That may have deterred them from purchasing. There are always more risks involved when buying at property auctions, so always, do your due diligence before bidding.