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Things to consider when selling a property at auction
If your property is unusual, it requires a lot of renovation work, is of a mixed quality, requires planning consent for its use, or simply you wish to avoid the traditional route, you may wish to sell it at auction.
What are the advantages:
The auction sale is secure. As soon as the auctioneer’s hammer falls, the contract for sale becomes binding and the buyer must proceed with the purchase. The buyer has no option of withdrawing without the risk of losing their deposit.
1. The sale can be finalised within a month. At the property auction, potential buyers bid on the property. Once the highest bid is accepted, the buyer signs a binding contract. There is no opportunity to negotiate the terms of the contract and the buyer has to complete on the purchase within one month of the date of the auction.
2. The auction attracts a variety of buyers like cash investors and developers.
3. Due the to the biding process, the property can achieve a higher price than if sold on the open market.
4. During the last few years, the auction process has developed and there are new types of auction like digital auctions (where the sellers and buyers are provided an online bidding platform) and modern auctions (where the buyers are allowed an exclusivity period to purchase the property).
The disadvantages are:
1. The main disadvantage is the significant entry fee for the buyers. Those who enter are usually seasoned investors, landlords and portfolio holders.
2. It is not guaranteed that the property will sell, or the desired sale price will be achieved. Due to the variety and number of properties at the auction, the experienced buyers are not likely to be under pressure to buy.
3. There is a lot of preparation work before the property is listed on the auction.
How to prepare for selling your property at auction:
1. Once you have decided to sell your property at auction you need to do your research and pick a type of auction and decide on an agent or auctioneer that suits the type of the property and your needs.
2. The auctioneers/agents will provide details of when the next available auction dates are and will inform you of the deadline when you have to provide the legal pack/auction catalogue for the property. This includes the full address of the property, photographs, tenure, description of the property, details of the lease (if any), guide price, searches, energy performance certificate, tenancy documents (if any), title documents and special sale conditions/draft contract.
3. Solicitors can assist with the preparation of the legal pack. They will be able to advise on what should be included and they can draft the sale contract. All buyers will have access to the legal pack before the day of the auction and will be able to review all necessary paperwork before making a decision to purchase the property.
4. You will need to set a guide price and reserve price for the property which is the minimum price you are willing to accept. This is usually kept confidential, but you may not fix the final reserve price until shortly before the bidding commences. The seller might agree to sell at a lower price if the bidding fails to meet the reserved price. This could be negotiated by the seller and a prospective buyer after the bidding has been closed.
5. At the auction, the auctioneer will open the bidding for each property (lot). If the bidding reaches the reserve price and the lot is sold, the hammer will be brought down. The successful bidder will be presented with the contract for sale which he/she will sign. The buyer will be asked to pay the deposit to the auctioneers before leaving the auction room and provide details of their solicitors.
6. After the auction, the auctioneers will send the signed contract and memorandum of sale to the seller’s solicitors and confirm the completion date. The usual completion date is 28 days following the day of the auction. The seller could, however, agree to a longer period for completion.
We hope you find this information helpful if you’re considering selling your property at auction. For more advice, please contact Daniela Litsova in our commercial property team to book your initial no obligation consultation on 020 8949 9500 or email email@example.com.