Row of cows at farm in Shropshire

Going, going, gone: what is an auction?

12/06/23Going, going, gone: what is an auction?

Auctioning is the process of placing bids to buy or sell goods. Auctions are commonly opened with an ascending price, and bidders bid openly against one another, with each subsequent bid required to be higher than the previous. If you’re selling or buying a property at auction, interested bids will place a bid and the highest bid will win. The 10 per cent deposit will then need to be made and the further 90 per cent paid within the month. The sale price achieved is the highest bid offered, with a legally binding contract being entered into at the fall of the auction hammer.

Selling at auction is a quicker process, because it puts the emphasis on the buyer to undertake their due diligence upon the property prior to bidding on the property, as opposed to when a property is sold by Private Treaty where this process is undertaken following agreement of the sale. Therefore, auction provides a quicker and less risky sale process for the seller.

The auction processes

Once you have decided to sell your house by auction the first thing you need to do is find the right auction house for you to use. It’s good to find one that specialises in the type of property you’re selling and has a history of successful sales. Your auctioneer will then appraise your house and let you know what they think it is worth, this will help decide the reserve price placed on it. If you decide to go ahead, you will then be asked to present all the documentation required for the sale including a legal pack so you will need a solicitor. Your house will then be marketed in the auction booklet, on property sites, such as Rightmove, social media and an auction board outside the property.

On the day of the auction, potential bidders will need to register for the day. It is usual for finance checks to be done to ensure all bidders are legitimate. It can be a nerve-wracking day for all those involved, disappointment if someone is out bid or elation if they win. As the seller you aren’t required to be present for the auction.

The benefits of auctioning a property

Some homeowners have benefitted from huge house price increases since the pandemic, bidding wars in house sales is now quite common practice. However, in the current climate with the high mortgage rates and impending tax changes, some require a somewhat speedier method of selling a property and are turning to auction.

Auctioning a property can be useful for problem properties, which would struggle to sell to someone who requires a mortgage; this is relevant to properties which may have structural defects or are in need of significant improvement. It is also applicable to unusual properties, for which there is no certain market demand. Auctions are also useful in a situation where it is considered that there will be a good deal of competitive interest for the property, because that can be used to maximise the sale price that can be achieved.

Selling a house through an estate agent on average takes 4-6 months, and much of this time frame is taken up with marketing. An auction, in contrast, has 28 days to drum up interest in the property. Auctioned properties have roughly 78 per cent success rate because sales are legally binding; only one per cent of auction sales falls through. Another advantage to auctioning a property is that you can set the reserve price, which is the minimum price your house can sell for. Selling a property at auction can drum up lots of interest from potential buyers and drive the price higher than it might on the property market.

Forge Property Consultants is a firm of Chartered Surveyors and Valuers, which provides high-quality and strategic advice on a wide range of property and land matters. With bases in Shropshire, Staffordshire and Wales, the company covers a huge area and works with all types of property, including agricultural, rural and country properties. For more information regarding auctions contact us here.

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