Selling your house via property auction can be a quicker, more convenient way to sell than going through an estate agent.
But what’s the likelihood of success? Do houses usually sell at auction?
78.3% of houses that go to auction sell successfully in the UK. This is according to data from EIG, the industry standard for property auction information. There are a number of things that home sellers can do to make their chance of selling even higher though.
By comparison, only about 51% of properties listed with estate agents sell successfully.
Your chances of selling successfully at auction could be even higher than 78% though. You just need to get your auction preparation right, and avoid some of the pitfalls that many of the unsold properties fall into.
1. Property Auction Data: What proportion sell successfully?
As of the time of writing (October 2021), auctions have averaged a success rate of 78.3% over the last 12 months. This is according to data from Essential Information Group, who are the industry standard for auction information. They publish nation-wide auction results on a monthly basis.
Your success rate could be higher though. Many of the properties that don't sell have failed for one of four main reasons which we'll cover in more detail later.
78.3% is still an extremely high success rate though. In fact, the success rate hasn't always been this high.
The property auction "success rate" over time
- In 2007 the auction success rate was around 60%, and grew to 70% over the next 4 years.
- By 2011 the success rate was around 70%, and it grew to around 75% by 2016.
- It fluctuated from 72-75% between 2016-2020.
- In the aftermath of coronavirus, the monthly success rate rose as high as 80.5%, and now sits at an average of 78.3% over the last 12 months.
The high success rate is one of the main reasons people choose to sell at auction. This is also why auction houses charge more. For many sellers, the better chances of selling is worth paying for.
Let's quickly check in on how this compares to your other option - selling through an estate agent.
1.1. What's the success rate when selling via estate agent?
Estate agents sell only around 51% of the properties they take on. This comes from the findings of a 2018 study by Jefferies, a financial services company. The study made news in a BBC article in 2018.
It's the most comprehensive study of estate agent success rates to date. They analysed sales data for over 7,000 estate agency brands to make the finding.
So when selling by estate agent you have a 50-50 chance of selling. By comparison, your odds increase to around 80% when selling by auction.
1.2. Why do auctions have a higher success rate than estate agents?
One of the main selling points for auctioneers is their high success rate. So they have to protect it by only taking on properties that they know are very likely to sell. After all, if an auction had a low success rate, why would anyone choose to sell with them?
This means that when they approach valuations they'll be very realistic about what the property is likely to sell for.
Auctions don't want to take anything on that's overpriced and is unlikely to sell. This is because the failed sale would "bring down" their success rate, which weakens their sales pitch to future potential customers.
By contrast, estate agents are in a slightly different position. They don't really win new business based on their success rate - it's not public knowledge and doesn't really matter as much to them. They'd rather be "in with a chance" of selling something, so they're happy to take properties on even if they know they're overpriced.
Estate agents often over-value properties to win business
In fact, it's completely normal for an estate agent to actually inflate the seller's expectations, and tell them what a high price they're going to get for their property.
This is because most home sellers speak with 2 or 3 local estate agents, and then go with the one that gives them the highest valuation.
Overvaluing properties is an awful business practice but it's the way the property market works in the UK. By taking on every property they possibly can, even at high prices, estate agents benefit in the following ways:
- They're in with a chance of selling it, and earning their commission.
- They get another "for sale" board up in their local area too, which is free advertising.
- More listings gives the appearance of a larger market share - which helps them win more business in the future.
- More listings means more buyers contact them to register. This can help them sell other similar houses.
In a nutshell, estate agents want to take on every property they can. By contrast, auction houses want to take on only properties they're very sure will sell.
Auctions tend to deal with more motivated sellers
Auctioneers tend to target a more motivated customer too.
There's often a set of circumstances that means the seller wants a quicker sale than most sellers. There may also be something wrong with the property that's making it difficult to sell with an estate agent.
The seller may just want to "wash their hands of it", so they go to the auction house with an attitude of really wanting to sell.
So we've covered the data, and we've covered why auctions have a better success rate than selling via an estate agent. But what about those 21.7% of auction properties that don't sell?
2. Why do some properties fail to sell at auction?
We've covered that 78.3% of properties that go to auction sell successfully, and we know that this is a very high success rate compared with selling through an estate agent.
But the success rate could be even higher.
This is because many of the properties that don't sell have failed to put the odds in their favour. There are four mistakes that sellers make which really harm their chances of selling by auction:
- The property was priced incorrectly, meaning it didn't attract enough interest.
- The property attracted interest, but people couldn't arrange viewings on it.
- Buyers had viewings, but the property wasn't prepared suitably.
- People wanted to bid, but there was no legal pack available.
These are the four major mistakes you need to avoid when selling at auction.
If you were to disregard the properties that failed on one of these checks, then the success rate for selling by auction would be much higher than 78%.
Making sure you tick each one of these off is how you stack the odds in your favour. Let's cover each one in a bit more detail.
2.1. Property was priced incorrectly
As we covered above, auction houses will usually be very selective about which properties they take on because they want to preserve their high success rate.
They'll be very realistic in valuations, and will recommend pricing your property in a way they know is going to attract interest with auction buyers.
However, not all sellers fully take this advice on board.
How auction prices work
The idea of auction prices if that you set a low starting price for the property. This is how it works:
- A low price attracts a lot of interest in a short space of time.
- A lot of interest leads to competition between bidders.
- And, ultimately, competition and "bidding wars" are how you end up getting such a good price so quickly in auction.
Related: Do houses sell for less at auction?
This is why it's typical for properties to sell for much more than the guide price.
(Again, this is the total opposite of how estate agents price properties. They price the property high and expect buyers to negotiate down from there)
Although is can feel risky setting a low price - and in some ways it is, you also get the best results by trusting the process.
One of the worst things you can do is straddle the "middle ground":
- You set a lower price than an estate agent would recommend...
- ...But not as low as the auctioneer recommends.
It's this kind of approach that can lead to a lack of interest, and sometimes culminates in the property failing to sell (or only having one bidder).
Risk and reward when pricing your property for auction
When selling by auction you do risk getting a lower price than if you went through the estate agent. But you'll also get a much faster, more certain, and easier sale.
If the possibility of a slightly lower price is worth the risk for you, then your best bet is to find the best auction house you can, and then follow their advice.
2.2. No access for viewings
It's true that action buyers tend to have a higher risk tolerance than ordinary home buyers. But they're usually comfortable taking on more risk because of the amount of due diligence they do before bidding.
This due diligence is particularly important when buying at auction because of the types of properties they attract: It's not unusual to find "problem properties" there, including issues like subsidence, structural issues, or houses struggling to sell due to Japanese Knotweed.
Because of this extra risk, most auction buyers will want to view the property and see it for themselves. They may even want to arrange for a surveyor to come and inspect it before the auction.
(Contrary to popular belief, it is possible to get a survey on an auction property.)
If buyers can't view the property or arrange a survey before the auction, they may decide against bidding.
It's therefore critically important that you can accommodate viewings somehow. This could be you showing buyers around, leaving a key with a local estate agent, or using an accompanied viewing service like Viewber to meet buyers there.
2.3. Property presented incorrectly
It's always important to clear the property of any clutter before viewings take place. Even if the house if full of old things, we think it's worth paying a removal service or local handyman to clear it before the auction.
Although it's a small investment it allows potential buyers to see the space.
But what else should you do to present the property appropriately?
It depends on the type of property you're selling, and who your "target market" are. We've written about the topic in more detail here:
To summarise that article:
- If you think the property's going to be sold to an investor or developer, sell it as-is. (As we suggested, just clear it out first).
- If you think the property's going to be sold to a first time buyer or family, it may be worth putting a bit more effort in. This may be more likely to be the case if you're selling via Modern Auction, for which buyers can get mortgages.
Presenting the property appropriately for your market will boost your chances of selling (even if that means leaving the house as-is).
2.4. No legal pack to provide
As we mentioned earlier, auction buyers do their due diligence before they actually bid. This means viewing the property (and possibly getting a survey), but it also means having a solicitor review the legal pack.
The legal pack is the set of documents a solicitor prepares when a house is being sold. It's essentially all the important legal information about the property, its contents, its surrounding area, and any issues with it.
If you don't provide a comprehensive legal pack then buyers may assume the worst: They may assume there are complicated legal issues you're trying to skirt around, and this can put them off entirely.
Of course, you may get lucky and have someone buy the property regardless. But in all likelihood you'll discourage buyers from wanting to bid.
This is why it's almost always recommended to have a full legal pack in place for your potential buyers to review with their solicitor.
3. What happens when a house doesn't sell at auction?
Selling a house by auction can be a strange experience. There's a lot of build up and anticipation, and then the auction's over in a flash.
If you don't manage to sell, things aren't over though. There are still things you can do afterwards to try and salvage a sale. And if that fails, it's on to the next plan.
We've got a full article for just this subject. We cover:
- The costs you may incur,
- The onward plans that may be affected (onward purchases, business opportunities, etc),
- The obstacles to overcome with selling a property that had a failed auction attempt.
4. How to improve your chances of selling at auction
As we've covered, about 78.3% of residential properties that go to auction sell successfully. Unfortunately, this leaves 21.7% unsold.
BUT... There's a lot you can do to make sure you're in that 78%!
- Follow the auctioneers advice and price your property correctly. If the auction price is too low, then consider whether or not it makes more sense to sell via an estate agent. Straddling the "middle ground" between the two can lead to a failed auction attempt.
- Make sure buyers can view the property. If you don't live at the property and can't attend to host the viewings, ensure the auction company can. With new services like Viewber popping up, this isn't as big a challenge as it used to be.
- Present the property appropriately. If you have a nice home and you're hoping to sell to a first time buyer or family, then present it the best you possibly can. If the property needs a complete renovation then just clear it out, and sell it as-is.
- Provide a complete legal pack. Ensure your solicitor completes a full legal pack and has it ready by the time the advertising for the property starts. If it's not ready, consider delaying your start date. Otherwise it could hurt you in the long run.
If you take care of these four things, and if you choose the best auction company you can find, you should enjoy a much higher success rate than 78%!
By Matthew Cooper, Founder of Home Selling Expert