Deciding to sell your home is a big decision. But so is deciding exactly how to sell it. You can sell with an estate agent like most, but there are some serious benefits to selling by auction instead.
So what’s the difference between selling a house by auction vs estate agent?
In general, selling by auction is faster than selling with an estate agent, and you'll have a much higher chance of achieving a sale. Auction sales are much less likely to fall through too. However, auctions typically come with a compromise on the price you'll achieve, and the fees are higher.
So auctions usually give you a faster and easier sale, whereas estate agents tend to get you a better financial outcome.
In this article we'll break down the exact benefits you should expect from each, then we'll give some pointers on how to decide which is right for your property and your circumstance.
1. Auction vs Estate Agent: Which one's better?
When we think about what makes up a "good house sale", I believe these are the factor's we're talking about:
- What's the chance of getting a sale?
- What's the chance of the sale falling through?
- How fast is it?
- How easy is the process?
- How much did it cost?
- How high a price did you get?
We've used each of these criteria to analyse how auctions compare with estate agent sales. It's all summarised neatly in this table:
In the rest of the article we'll get into more detail on each.
1.1. Auctions have a higher success rate
If you're going to put your house up for sale then it'd be good if it actually sold.
Unfortunately, achieving a sale is never guaranteed though.
In fact, a financial services company called Jefferies did a huge research project in 2018, looking into over 7,000 estate agency brands. They found that, on average, estate agents only sell around 51% of the properties they take on.
How successful are property auctions?
We analysed monthly auction data from Essential Information Group (the industry standard for auction information). These show that auctions have enjoyed a 78% success rate over the last 12 months (as of the time of writing).
78% still isn't perfect, but it's worth noting that many of the properties that don't sell weren't prepared correctly. For example the property may have been priced incorrectly, or the legal pack or viewing arrangements may not have been in place.
So if you price your property appropriately and have the proper arrangements in place, you're likely to enjoy a higher success rate than the average of 78%.
Property Auction success rate: 78%+
Estate Agent success rate: 51%
1.2. Auction sales rarely fall through
One of the reasons auctions have a much higher success rate is because the far fewer sales fall through.
Less than 1% of sales agreed via a traditional auction fall through. This is because the sale immediately exchanges upon the fall of the hammer, and the buyer pays a 10% deposit immediately.
With modern auctions, the fall-through rate isn't quite as impressive but it's still believed to be lower than around 5%.
How often do estate agent sales fall through?
Unfortunately the fall through rate for estate agent sales is extremely high:
- 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% so it's hard to know exactly. (It depends how TwentyCi collected their data).
Either figure is extremely high though.
Why are fall-through rates so high with estate agents? It's because none of the due diligence happens until after a sale is agreed, so buyers essentially go in blind. If any issues arise, they're then free to pull out without penalty.
Property Auction fall-through rate 1-5%:
Estate Agent fall-through rate: 25-40%
1.3. Auction sales are faster
The time to sell a house at auction is much faster.
- It takes a couple of weeks to get set up for the auction,
- Then your house will be marketed for about 3-4 weeks.
- After that, the auction will take place.
- At the end of the auction the buyer pays a hefty deposit or reservation fee, and is legally committed to the purchase.
So in total, with auctions it takes about 5-6 weeks to get to the stage of having a legally-binding sale.
When you sell with an estate agent, the buyer is only legally committed to the purchase when exchange takes place. This is much longer than 5-6 weeks. In fact, according to data from TheAdvisory.co.uk's "Time To Sell" benchmark study, it takes between 14-23 weeks.
Property Auction time to sell: 3-4 weeks
Estate Agent time to sell: 14-23 weeks
1.4. Auctions are easier
An estate agent sale is notoriously difficult, stressful and frustrating. (In fairness to the estate agents, this isn't entirely their fault. The market as a whole is just so dysfunctional that they don't really stand a chance).
However, a lot of that difficulty is removed when selling with auctions.
For our article about the benefits of selling a house by auction, we analysed reviews left by 52 customers who had sold their homes by auction.
21% cited the convenience as one of the main benefits.
Here's one of the examples:
The set timeframes of auction result in less chasing
These are the two things that have personally frustrated me the most about estate agent sales over the years:
- There are no deadlines, so estate agent sales can drag on indefinitely.
- You have to chase your agent and solicitor a lot to actually get the work done, and stop things from dragging.
With auctions you just don't get these issues though.
This is because auctions work to set timeframes that everyone has legally committed to. You have the auction date itself set in stone, and the completion date too once the hammer falls. There are serious penalties in place if a buyer misses their deadlines.
Having these set dates mean that things just happen, which means less chasing (and an easier sale) for you.
This sentiment was echoed in a recent case study we did. We referred one of our readers to an auction house, and she sold with them successfully within a few weeks. Her final comment was this:
To have your own free consultation with us, call 0330 223 5568.
1.5. Estate Agent Fees Are Cheaper
So we've covered that auctions have a better service in pretty much all aspects: Auctions are faster, easier, and more likely to find you a buyer. Once they've found you a buyer, your sale's much less likely to fall through too.
But when it comes to the financial side of things, estate agents are usually better.
For one, their fees are cheaper.
Fees with estate agents average around 1-1.5%+vat. Some will charge more and some will charge a little less, but that's a safe average.
- Traditional auctions tend to be around 2%+vat when the property sells, with an additional of around £500 in up-front costs
- Modern auctions average 3-4%, and are usually subject to a minimum fee of £5,000+vat.
It is worth mentioning that with many auctions, the buyer will actually pay the fee. There are two things to bear in mind from this:
- Even though you as the seller don't pay a fee, it still comes out of your pocket. This is because the buyer will have to adjust the best price they an afford to offer to factor in the fee they'll need to pay.
- When the auction house come with to you with a suggested reserve price, there may not be any fees to come out of that amount. (Whereas when an estate agent gives you a valuation, your fees are going to come out of that amount).
Property Auction fees: 2-4%+vat
Estate Agent fees: 1-1.5%+vat
1.6. Estate agents will tend to get you a higher price
This is probably the trickiest one to really pin down. If you sell at auction, do you take a hit on the price and sell for less?
How to get the best price for your property
We generally tell customers that you'll get the best price by:
- Putting your house on the market with a good local estate agent
- Pricing is realistically
Eventually you'll get offers, and with time you'll get a sale that completes. This may take 4-8 months (or longer in some cases), but you'll end up with a fair market price for your property.
So the question is...
How much less might you get by selling at auction?
Unfortunately this is impossible to answer with real data, as no house sells by both estate agent and auction!
However, it's believed that properties in auction sell for about 80-90% of what they'd get on the open market.
However, some properties can actually sell for much more by auction than with an estate agent. This tends to be the case if you're selling a problem property. (For example, a property with subsidence, Japanese Knotweed, etc). These can really languish on the market with an estate agent, and may end up selling for less overall.
By contrast, putting them in an auction helps them find the right audience of buyers. The auction process is then designed to generate competition between these buyers in order to pull the highest price from them.
So the general rule is this:
If selling a "problem property", you may get a higher price by selling at auction.
If selling a problem-free property, you may get 10-15% less by selling at auction.
2. Should you sell by auction, or by estate agent?
We've covered that, in general:
- Auctions will give you a faster, more certain and easier sale.
- But estate agents will usually (though not always) get you a higher price.
Which one's right for you?
It really comes down to two things:
- If you've got a problem property, auction may be the best solution regardless of any other factors. This is because not only are auctions faster and easier, but you'll often get a higher price by selling at auction.
- Assuming you don't have a "problem property", how do you feel about that trade-off between price vs speed and convenience?
If speed and convenience are important to you, auction can be the best way to sell. For example, if you've relocated or are living abroad, or if you've inherited the property. In each case a quicker and more hands-off sale can make sense.
If you're considering sell by auction, call 0330 223 5568 now and we'll help find the best auction house for your sale.
On the other hand, if price is the most important factor to you then estate agents are going to be the best (or only) option. You'll get the highest price selling this way - it may just take longer to get there.
By Matthew Cooper, Founder of Home Selling Expert