Selling your house at a property auction can be a quicker and easier way to sell than going through an estate agent...
But according to data from EIG, the industry standard for auction information, about 21% of auction properties fail to sell. So what happens if no one bids on a house in auction and it doesn't sell?
When a property doesn't sell at auction, the auction house will begin trying to tie up a "post-auction sale". Interested parties are invited to come forward with their best offer, and an auction representative will try and agree a sale with the seller. This doesn't always succeed though.
There can be several knock-on effects of an unsuccessful auction sale. These include costs, onward plans being affected, and possibly added difficulty selling the property later on.
There are things you can do to stack the odds in your favour though, and to manage the fall-out of a failed auction attempt.
What happens when a property fails to sell at auction?
Property auctions have a lot of anticipation going in, then they're suddenly over in a flash. According to SDL Auctions, one of the biggest auction companies in the UK, the average auction lasts only about 5-7 minutes. However, if there are no bidders it can be over in as little as 60 seconds.
So if your house doesn't sell in auction, what happens next?
- The auctioneer will ask any interested parties to speak with one of the auction representatives and register their interest. (Even if no one bid on your house during the auction, people may still express an interest afterwards).
- The auction rep will speak with all interested parties and get their highest offer.
- They'll then speak with the seller and see if they're prepared to accept any of the offers.
- If a sale is agreed, it'll still be under auction conditions. This means the buyer must instantly pay their 10% exchange deposit (or the reservation fee, is buying through the modern method of auction.)
This post-auction sales process may happen on the same day as the auction. However, in other instances it can take several days until an agreement is reached. How long it takes depends on:
- How many parties are interested,
- How complex the negotiations are...
- And how busy the auction rep is!
We've even had negotiations go on for several weeks after the auction. This was a unique situation and involved a property with subsidence. The long delay was due to the buyer and seller waiting for a decision from the insurance company before the sale was eventually agreed.
It's rare it takes this long, but it gives you an idea how varied post-auction sales can potentially be.
If you don't get any bids at auction, or if your property doesn't sell, it's obviously a huge disappointment. After all, one of the reasons for selling at auction is because of the level of certainty it offers, compared with selling through an estate agent.
So how often does a property fail to sell at auction?
1. How often do properties fail to sell at auction?
We analysed monthly data from EIG, the industry standard for property auction information. At the time of writing (September 2021), we found that:
- A total of 22,149 residential properties have gone to auction in the last 12 months.
- Of these properties, a total of 17,333 have sold successfully.
- That's a success rate of 78.25%...
- This means 21.75% of properties that went to auction fail to sell.
Don't be too discouraged though. That success rate of 78% is really high! By comparison, estate agents sell around 51% of properties they take on. (And they take a lot longer to sell than auction too).
Read more in our recent article:
1.1. Why do properties fail to sell at auction?
There are 3 or 4 main reasons that properties fail to sell. Of course, sometimes you'll just be unlucky, and simply won't have the right people "in the auction room" on the day.
However, many of those 21.75% of unsold properties made a fatal mistake before the auction that damaged their chances of selling.
- The property was priced incorrectly, so it didn't get enough interest.
- The property got interest, but people couldn't view it.
- Buyers could view it, but the property wasn't prepared suitably.
- People wanted to bid, but there was no legal pack for their solicitor to review first.
Avoiding these common pitfalls helps stack the odds in your favour, and make your property more likely to sell.
Click here for a more in-depth exploration of these issues (and what you can do about them).
2. Consequences of a house not selling at auction
If your house doesn't sell at auction there are some downsides. For example:
- Costs: You may have lost some of the money you invested into the auction process.
- Onward plans: If you were selling your property to make some other plans come together, they may be affected.
- The "failed auction attempt" red flag: If a property doesn't sell at auction it can make it more difficult to sell in the future. This isn't always the case, and it can be minimised...
Let's get into each one in a little more detail.
2.1. Costs of a failed auction attempt
You're likely to be out of pocket for two main things, but you may have incurred other costs elsewhere too. Let's get into them.
When you sell a house at auction you need to provide a legal pack. This is because all the due diligence needs to happen before the auction. So you'll pay your solicitor around £200-£300 to put together the auction pack.
If the property fails to sell, then unfortunately you're out of pocket for that expense.
Some solicitors may deduct it from your eventual legal bill if you do end up selling with them. After all, they've already spent a lot of time on it and have built up some familiarity with the property. This will make it an easier job for them if and when you do eventually come to sell.
It isn't always the case though, and if you end up not selling at all then you'll obviously lose this altogether.
Auction Entry Fee
It's typical for auctions to charge an entry fee of between £250-£500 for you to even enter the auction. Of course, if your property doesn't sell at the auction it's another sunk cost that you won't get back.
It's not all bad news though... I've negotiated preferential rates for Home Selling Expert with many of the nation's leading auction houses.
In most cases, this means you can try to sell by auction without the downside of such a big up-front cost.
To benefit, start with our free online quiz below. It'll help you determine if auction's a good option for you. If it is, I can connect you with leading auction houses I know and trust. That where you'll benefit from the preferential rates I've negotiated for you:
Other costs (mortgage, bills etc)
Another set of costs that's easy to overlook are your normal bills. For example, say you're selling an investment property. The tenant moved out and now you've put it in the auction.
You're probably now having to cover the following costs:
- Council tax. Most councils don't give discounts for empty properties like they used to. In fact, some councils charge you more council tax for having an empty property! (This is to incentivise people to make the property available for tenants or to buyers. The idea is to help tackle the housing shortage).
- Utility bills. An empty property can still run up utility bills. You'll have standing charges for a start, but it may also be a good idea to leave the central heating on low over the winter. This helps prevent water in the pipes freezing, and causing a burst pipe. (After all, a bit of central heating is probably cheaper than a whole load of water damage!)
- Other Costs. Remember, you've got insurance to pay too, and it's not unusual to have to spend a little bit of time (or money) on maintenance and upkeep too.
The auction process may take 2-3 months from start to finish, so you need to budget to cover these costs for that amount of time.
A failed auction attempt can drag things out even further though. If it takes another three months to sell afterwards, how much more is that going to cost you in mortgage payments, council tax bills and so on?
2.2. Your onward plans could be affected
We usually sell a property because we need to for some reason. Maybe we're trying to buy another one, or maybe we're trying to raise funds for a business opportunity or some other plans.
If your property fails to sell at auction it can throw a spanner in the works for you.
When you're entering the auction you should consider what you "plan b" and "plan c" will be if the property doesn't meet its reserve and fails to sell.
2.3. The "failed auction attempt" red flag
If your property has goes to auction and doesn't sell, it can make future sales a little more tricky. It's nothing that can't be overcome, but it's worth considering in advance.
Here are the different types of sales you may end up trying, and how they'll be affected by a failed auction attempt:
1. Post auction sales
As we've mentioned, if your property fails to sell at auction then the auction house will still try and agree a post-auction sale.
Post-auction sales aren't ideal though. This is because you're already on the back foot in the negotiations. The buyer likely knows you came to auction because you were very motivated to sell. If the property has now failed to sell, they may see this as an opportunity to get the property at an even lower price.
Hopefully multiple buyers express interest though. This creates some competition, which means you may still get a reasonable price.
Your reserve price may be disclosed to potential buyers too, revealing the minimum price you'd be prepared to accept.
Of course, you're not obligated to accept any post-auction offer that you're not happy with. If you don't get any post-auction bids, or if they're just too low, then you need to decide whether or not you still want to sell.
If you do, you may decide to try and sell with an estate agent.
2. Trying to sell again after a failed auction attempt
Selling after a failed auction attempt can sometimes be tricky. Buyers may do their research and see the property has been entered auction before and didn't sell.
This can lead to questions. Buyers may think:
- "If no one bought it at this price, is it worth a lot less than that?"
- "If no one bought it, is there something they knew that I don't?" (For example, they may suspect structural issues like subsidence, or the property could be of non-standard construction).
Of course, it's the new auctioneer or estate agent's job to overcome these issues. The "red flag" is there though, and you may expect a trickier sale next time around: The property could potentially take longer to sell, and you may end up getting a lower price 2nd time around.
3. What are your options if your house doesn't sell at auction?
You may have gone to auction because you wanted the certainty of selling. It can therefore be really disappointing if your property fails to sell.
But what are your options? Fortunately, you've still got a few. Here are some ideas.
3.1. Post-Auction sales
As we've covered, post-auction sales can be a good way to tie up a sale at a reasonable price.
The sale will be under auction conditions too, meaning the buyer pays a hefty deposit up-front and needs to complete shortly afterwards.
If your property has failed to sell at auction this is always the first port of call, especially if it didn't sell because the reserve price was just too high.
But what if a post-auction sale fails to materialise?
3.2. Try to sell by auction again
Trying the auction again may be your best bet. This is especially the case if you failed one of these four things:
- If the property was priced incorrectly,
- If viewings couldn't take place due to access arrangements,
- If the property was prepared incorrectly for your target market,
- If you didn't provide a comprehensive legal pack to buyers.
Make sure you've maximised your chances of selling at auction, then try again.
Make sure you're using the best auction house for your property too. (Need help with this? Take my free online quiz and I can help connect you with my leading auction house given your property, location and price bracket).
3.3. Try to sell with an estate agent
Perhaps you don't want to try the auction again, or perhaps you simply can't. (This may be the case if the auction house feels the property was overpriced, but you can't afford to reduce it).
Just make sure your new estate agent has all the information about the auction in advance:
- Let them know about any issues with the property,
- Let them know how the auction went. (For example, any viewings or bids you received).
This will give the estate agent the information they need to shine the best light they can on the failed auction attempt, rather than letting it become a huge red flag.
Explaining a failed auction attempt to future buyers
For example, a common explanation is simply that "the owner really needed to sell at the time so they went for auction. Their other plans have fallen through now though, so they aren't in such a rush to sell".
This can easily explain why you've put it up for sale with the estate agent at a higher price than you went for with the auction.
If you have a good estate agent then a failed auction attempt really doesn't need to be the end of the world.
3.4. Sell to a house buying company
Selling to a professional house buying company is by far the easiest and fastest way to sell a house. However, it comes with a heaviest compromise too: You'll get the lowest price this way.
This is because genuine house buying companies typically offer 80-85% of the market value of your property.
After a failed auction attempt they may take a dimmer view on exactly what that "market value" figure is too. This means they may end up making an even lower offer.
For most home sellers, I advise against selling to a cash house buying company. They're a great option if really just want the sale done or have exhausted other options, but it's just such a significant compromise for most sellers.
If you do want to explore this route, take the free online quiz I designed for you below. It'll help you quickly see whether or not you're a match for their service. If you are, I can connect you with #1 leading house-buying company. (A company I know and trust). Take the quiz now:
3.4. Hold onto the property (consider remortgaging or renting)
If you've tried everything else or if holding onto the property is an option for you, now might be the time to consider it.
You may be able to remortgage the property to reduce the amount it costs you each month. If it's a vacant property, you could get a tenant in too to start earning you some income.
And just because the property hasn't sold for the price you wanted now, it doesn't mean it never will. House prices may rise in the future and make a higher sale price achievable. It's very hard to forecast house prices though - so just be aware that the value of your house could go down as well as up.
As we've learned, if you're worried about your property failing to sell at auction then the odds are actually in your favour. About 78% of properties sell successfully at auction, leaving only around 22% that don't.
Increase your chances of auction success
You can increase your odds too by:
- Pricing your property it correctly,
- Having access arrangements for viewings,
- Presenting the property appropriately for its target market, and
- Providing a comprehensive legal pack.
If you have these four things in place then you should feel confident about selling at auction.
Picking the best auction house for your property is also crucial.
Deciding whether or not to sell at auction is the biggest thing auction sellers struggle with. Finding the best auction house to sell with is the next biggest.
We've designed a free online quiz to help you with both. It takes just 1-2 minutes and will help you determine if auction's the right fit. If it is, I can connect you with my #1 leading auction house in your area.
Click below to take the quiz:
What if your house has already failed to sell?
Costs of a failed auction attempt
For starters, the costs to enter an auction aren't drastic, meaning you won't be out of pocket for too great a sum. (Especially if you go via a referral from us. I've negotiated preferential rates with our recommended auction house. Click into the quiz above to get started).
Options if your house doesn't sell at auction
If it doesn't sell, the auction house will try and tie-up a post-auction sale.
Failing that, you can try the auction again, go to a cash house-buying company, or consider selling via an estate agent.
If it still doesn't sell, or if you don't want to give those options another go, then you can always hold onto the property:
- You can consider a remortgage to reduce the overheads,
- If it's a vacant property you could look at tenanting it to start bringing in an income.
House prices may rise in the future too (although no one knows!), which would make your target price achievable.
Our free quiz is designed to help you decide what to do next. Click here to start it now.
By Matthew Cooper, Co-Founder of Home Selling Expert