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Why Do Properties Go to Auction?
HAMPSHIRE SPONSOR ARTICLE
Why Do Properties Go to Auction?
Property auctions account for roughly 2% to 3% of all UK sales, with the majority of lots achieving a successful bid above the seller’s reserve price on the first auction day. This goes to show that property auctions are a popular way of buying and selling a wide variety of land and property - but why do properties go to auction?
Every sale method has merits, but one of the unique aspects of a property auction is that any property of any kind can be listed, including unusual constructions, properties in need of repair or refurbishment, investment, mixed use, and those that wouldn’t generally sell quickly through a conventional private treaty sale.
In these cases there are compelling advantages:
1. Auction sales are fast, certain and binding. Following the marketing phase, on the auction day, one bid at or above the reserve price confirms the sale at the fall of the electronic gavel when the timer reaches zero, with contracts exchanged and a deposit paid immediately with the balance paid within 20 working days. The average time for a private treaty sale is roughly 14 to 23 weeks.
2. From a seller’s perspective, an auction is also comparatively stress-free, with an experienced auction house managing the marketing, bidding process, buyer registrations and transactional details.
3. Some properties are considered more difficult to sell through private treaty or can be expected to take longer than average to sell due to complexities or issues related to the structure, the surrounding land or other considerations such as sitting tenants. For example, you may have a very unique period property or even a commercial property such as a pub!
Another common factor in deciding to sell at auction is personal circumstances, where the seller needs to achieve a quick sale without the risk that the transaction falls through or a party in a chain tries to “chip” the price just before they intended to move.
Broken chains are a particular problem in property transactions, which can cause untold stress, delay and cost where sellers are left waiting for a new buyer to come forward before proceeding with other plans.
If a fast, straightforward sale will allow you to move ahead with another property purchase, buy a new investment residence, finance other costs or relocate to a new area, an auction is likely the ideal solution.
There are also many personal circumstances where a speedy sale would be beneficial all around, such as:
1. Selling an inherited property.
2. Following a separation or divorce.
3. Releasing equity to repay debts.
4. Emigrating abroad or moving to a different region.
The auctioneer can provide guidance through each step, from setting an initial guide price to listing the property, marketing it to registered buyers, and managing the bids on auction day.
Why auctions make sense for buyers
The fast turnaround of a property auction attracts a wide variety of cash buyers, with many being developers or investors who know they can acquire properties within their chosen region and with great potential to renovate or refurbish and achieve a good return on investment. Buyers can also be those looking for a home where they can add value, personal style and their own finishes.
Either way, cash buyers have fewer hoops to jump through with mortgage lenders and are prepared to move ahead there and then – the norm is to put down a 10% deposit on auction day, with the final payment to follow.
Average Property Auction Sale Prices
In many cases, properties that are suited to an auction sale process achieve a better price than they would through a private treaty sale, mainly because the audience is more engaged and usually comprises a number of pre-registered bidders actively seeking properties in the area. Bidding can be highly competitive, driving the price higher. Still, all prospective buyers have access to the guide price at the outset and can make informed decisions beforehand about whether they would like to bid, giving everybody a fair opportunity in an open and transparent way.
