Property auctions are becoming more and more popular with UK home sellers. Residential auction sales are up 16% on last year alone. That's a huge 21,649 homes sold at auction in the last year.
So, what are the pros and cons of selling your home at auction?
Property Auctions have many benefits including speed, greater certainty, and convenience. You can sell as-is and they’re a great fit for problem properties. The main downside is price, as you’ll typically get less selling by auction. There is also a risk the property might not sell.
In this article, we cover the top 10 pros and cons of selling your house at auction in detail. We’ll give you actionable tips and help you figure out if auction could be the right selling method for you.
If you want to cut right to the chase and see if auction could be right for you and your property, we’ve created a free online quiz to help you do just that. If traditional or modern auction are a good fit, we’ll introduce you to the #1 Leading Auction House in your area on your results page.
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Let’s start with the top 5 advantages of selling your home at auction…
Pro #1: Speed
One of the main pros of selling your house by auction is speed. You can sell your house in as little as 10-12 weeks, depending on the type of auction you choose. This can make it a great fit for people who want, or need, a quicker home sale.
Speed is one of the biggest reasons why people sell their house at auction. You can sell your house in half the time with auction, compared with the average estate agent sale!
Here are the key stages of the selling process for traditional and modern auctions, and how long they take:
By comparison, it takes the average homeowner nearly 6 months to sell with an estate agent. Many home sales can take even longer because, unlike auctions, there are no set timeframes to stick to.
If you need to sell your house even faster, your only option would be to sell to a house buying company. A reputable, well-funded “we buy any house” company can make you an offer within 24-48 hours and buy your house in as little as 7 days.
Find out which option is best suited to your priorities and timeframe by taking our free online quiz here.
Pro #2: Greater certainty
Auctions offer a much greater level of certainty than selling with an estate agent. Less than 1% of traditional auction sales fall through. With modern auction, the fall-through rate is around 5%. By comparison, around 31% of estate agent sales fall through at least once before completion.
Selling your home with an estate agent involves a great deal of uncertainty. Even after agreeing a sale, buyers can change their mind or drop their offer without any consequences up until exchange.
The auction process removes a lot of this uncertainty:
- Due diligence. Buyers must carry out their due diligence before they bid. With estate agent sales, due diligence is carried out after a sale is agreed. So, if the buyer uncovers any unexpected issues, they’re free to withdraw without penalty.
- Chain-free. Auction buyers won’t be reliant on any other sales completing before they’re able to complete on your sale. This can’t be said for estate agent sales, where house chains are very common.
- Financial commitment. Auction buyers pay a hefty non-refundable deposit or reservation fee when they win the auction. There’s no financial penalty for buyers pulling out of an estate agent sale before exchange.
So, it’s safe to say auction has a much lower fall-through rate than estate agent sales. But why do the fall-through rates differ for traditional auctions and modern auction?
Modern Auction – 5% fall through rate
With modern auction, the buyer pays a non-refundable reservation fee once the virtual gavel has fallen. Although this is a large financial commitment (usually around £5,000), in most cases this will be lower than the 10% deposit required at traditional auctions.
Mortgage buyers can take part in modern auctions too, thanks to the slightly longer timeframes. If your buyer fails to get a mortgage, then the sale will fall through.
For these reasons, modern auctions do have a slightly higher fall-through rate than traditional auctions. However, it is still significantly lower than fall through rates for estate agent sales.
Traditional Auction – Less than 1% fall through rate
Traditional auctions have an even lower fall-through rate of less than 1%.
With traditional auctions, exchange takes place immediately upon the fall of the gavel. At this point, the sale is legally binding, and the buyer pays a 10% non-refundable deposit.
Pro #3: No chains
You are almost always guaranteed a chain-free buyer if you sell by auction. Being “chain-free” means the buyer isn’t dependent on selling their own property to finance the purchase of your home. This is a big advantage as it reduces potential delays and disappointment.
House chains are difficult, frustrating, and take a long time. They are also very common amongst estate agent sales.
House chains can massively delay your sale as you are relying on the success of other transactions before you can complete your own. The more houses there are in a chain, the more chance there is of something going wrong and the chain collapsing.
Auctions work to strict deadlines. As such, auction buyers must be able to work quickly, have funds available and be in a position to exchange and complete on time.
That’s why auctions tend to attract cash-buyers, investors and other chain-free buyers.
A chain-free auction sale is a much more certain and faster way to sell your house than with an estate agent.
Pro #4: Sell your house as-is
Auction can be a great option if your property needs major renovation work or a full refurbishment. Auction buyers are often looking for ways to add value to a property and love a project. You can save time, money, and stress by selling the property “as-is” at auction. Just remember to tidy up and declutter.
Selling your home as-is at auction can be a great option if you don’t have the time, money, or resources to carry out any work before you sell.
Based on my experience, properties in need of a full refurbishment sell really well at auction.
Developers, flippers, and investors will be looking for a property they can add value to. If you carry out any renovation work before selling, it can actually lead to fewer interested bidders in your auction.
The only thing we do recommend is that you tidy up and declutter the space. This can have a massive impact on the quality of your marketing pictures and success of your viewings.
Pro #5: Perfect for problem properties
Traditional auctions can be a great selling option for problem properties. Problem properties will often achieve a higher sale price through auction than with an estate agent. This is largely thanks to the auctioneer and buyer experience levels, as well as the low fall-through rates.
“Problem properties” are houses that will struggle to sell because they have something difficult or unusual about them. They are often unmortgageable as a result.
Based on my experience, “problem properties” tend to do exceptionally well at auction for the following reasons:
- Auctioneer experience. Auctioneers spend much more of their time selling problem properties than estate agents. They’ll know how best to market, price and position your property to get the best results.
- Experienced buyers. Auctions tend to attract more experienced investors who want to add value. They’re looking for a project and won’t be put off by property issues.
- Cash-buyers. Traditional auction buyers are more likely to be cash buyers too (which helps, as many problem properties are unmortgageable).
- Binding sales. When the hammer falls, a legally binding contract is created between the buyer and seller. Less than 1% of traditional auction sales fall through as a result.
According to Auction House, one of the largest property auction companies in the UK:
“Problem properties will often achieve higher sale prices through auction than they will through estate agents”.
So, as well as getting a faster, more certain sale, you can also achieve a higher price selling a problem property at auction!
There are plenty more benefits to selling your house by auction. You can read about them here: “17 Benefits of Selling Your House By Auction (Including what real customers say)”.
If you think auction might be right for you and you’re looking to save a lot of the homework, headaches, and guesswork, we can help.
Hit the button below to get a direct referral to our #1 Leading Auction House in your area. You can get a free, no-obligation auction appraisal and have all your auction questions answered in the next 48 hours.
So, selling a property at auction can offer a faster, easier, and more certain sale. But there are some pitfalls…
Con #1: Price
The main disadvantage of selling by auction is the compromise you make on price. Properties in auction tend to sell for around 85-90% of what they would get on the open market. There are some exceptions though, such as “problem properties”, that can sell for much more in auction.
If the property has been well marketed and has a competitive guide price, auctioneers can generate a lot of interest in a short space of time. Demand from multiple buyers can turn into competitive bidding wars, which will quickly drive up the price of your home.
We’ve seen properties sell for more than market value at auction because people can easily get carried away in a bidding war!
On the whole though, problem-free properties tend to fetch 10-15% less by selling at auction. That’s the price you pay for the speed, increased certainty and convenience that auctions offer.
Uncertainty on price
Part of the excitement of auction is that there is a level of uncertainty on price. The final selling price is unknown until the hammer falls (unless a sale is agreed pre or post auction).
The good news is you do have some control over price.
You will set a “reserve price” before the auction. The reserve price is the amount the bidding must reach before the auctioneer can sell the property.
If you need to achieve a certain price to pay off your mortgage, for example, you should make sure the reserve price is an amount you can afford to sell at.
We would encourage you to listen to the advice of the auctioneer when setting your reserve price, but make sure it is a price you’d be happy to walk away with (and can afford) if it ended up selling for this amount.
Con #2: Auction fees are higher than estate agent fees
The fees charged by auction houses range widely but tend to be higher than estate agent fees. Auction fees are made up of the commission (payable once the property has sold), and most charge an up-front entry fee. You can pay as little as 1% + VAT or as much as 4% + VAT.
If you sell your house with an estate agent, their fees will typically be in the region of 1-1.5% + VAT. The fees will be payable on completion of the sale.
Auction fees are higher, and will vary depending on the auction method and company you choose:
- Traditional Auction. Fees tend to be around 2% + VAT, payable when the property sells. There will also be an up-front cost of around £300 known as the “entry fee” or “marketing fee” (though these are sometimes waived).
- Modern Auction. Fees are higher, averaging at around 3-4% + VAT. Fees are usually subject to a minimum fee of around £5,000 + VAT. Although the buyer usually pays this fee, it comes off what they’d otherwise be able to offer. This means the seller still ultimately foots the bill.
Auction fees are higher because they offer you a faster and more convenient way to sell, with a higher likelihood of success. Auction companies tend to have higher costs too, so they have to charge higher fees in order to make a profit.
Con #3: Not 100% guaranteed to sell
Another risk of selling at auction is your property might not sell. The average success rate at auction for residential properties in 2023 is 70%. This is much higher than estate agents, who only sell 51% of the homes they take on. There are things you can do to boost your chances of selling at auction even further.
Essential Information Group (EIG) are the industry standard for auction information. We analysed data from their last 9 monthly newsletters for 2023.
As at the time of writing (November 2023), the average success rate at auction for residential properties is 70%. However, many of the best auction houses have a success rate of 80-90%.
By comparison, estate agents only sell around 51% of the properties they take on.
Boost your auction chances!
If you’re considering selling by auction, there are things you can do to boost your chances of success even further:
- Legal pack. Ensure the legal pack is available when the auction starts.
- Preparations. Tidy, declutter and prepare the property for your target market.
- Viewings. Ensure viewing arrangements are in place.
- Pricing. Listen to your auctioneer’s advice and be realistic with your pricing.
You can read more about our tips here: Do Houses Usually Sell At Auction? (And how to boost your chances).
Sometimes a property doesn’t meet its reserve during the auction. If that happens, the auction house will contact everyone who has expressed an interest in your home and invite best and final offers. You may be able to agree a post-auction sale.
If there are still no suitable offers, most auction houses will let you enter the next auction for free.
Con #4: Not an option if you’re in a house chain
Auctions aren’t really an option if you have an onward purchase. Auction sales tend to take around 8-10 weeks on average and are held on set dates. This makes it hard to sync up with an onward purchase. There’s also no guarantee the property will sell in the first auction.
One of the many benefits of selling your house at auction is that it has fixed timeframes. However, this means it’s not a great fit if you’re selling in a chain. The fixed deadlines make the sale hard to co-ordinate with an onward purchase.
There are ways to “break the chain”, if you think auction would otherwise be a good fit for you. One way to do this would be to sell your home first and move into a rental property or move in with family in the interim.
This means your home sale and purchase will no longer be dependent on each other.
You can read more about breaking the chain in our article: “Breaking the house chain: What it means and 5 ways to do it”.
If you do need to sell quickly and are in a chain, a house-buying company might be a better option for you.
House buying companies are the quickest way to repair a broken house chain as they buy your house from you directly.
You can take our free quiz to see if a house-buying company could be right for you. If it is, we’ll introduce you to the company we know and trust on your quiz results page.
Con #5: Finding the right auction house can be hard
Finding the right auction house for you can be hard. Different auction houses specialise in different properties, price brackets and regions. Rather than focusing on finding the “best” auction house, try to focus on finding the one that’s right for you and your property.
With so many auction houses to choose from, it can be difficult to know which one to pick.
There’s lots to consider, which is why we’ve written an entire article on this subject: “My Guide To Finding The Best Auction House In The UK”.
We want to help you find the best auction house for your sale.
If you’re looking to save a lot of the homework, headaches, and guesswork, we can help. Hit the button below to get a direct referral to our #1 Leading Auction House in your area. You can find out what your property may be worth at auction and have all your questions answered (for free and with no-obligation).
By Matthew Cooper, Co-Founder of Home Selling Expert