Selling a Property at Auction
- The auction conveyancing process is typically faster than selling through an traditional estate agent.
- The buyer normally pays the auction house fees, but you'll have to pay a commission of around 2% of purchase price plus reservation fee, on successful sale
- Online auctions give you more access to a broader range of potential buyers.
Selling property at auction is becoming increasingly popular. In simple terms you pay an auction house a fee to sell the dwelling as a lot at auction and, if it is successfully sold, you'll normally have to pay an additional commission – often around 2.5% of the selling price – to that auction house. Auction buyers should read our Buyer's Guide to auction conveyancing, instead.
It is vital that you instruct experienced auction conveyancing solicitors very early on in the process so that they have sufficient time to carry out required actions such as preparing the pre-auction legal pack and can address any other critical matters that may be involved, particularly, for example, if you are selling a freehold interest that itself contains leasehold interests.
Are you looking at Selling your Property at Auction?
You should always instruct conveyancing solicitors with experience in the auction selling process because there are time limits which, if they are not met, might derail your sale and there are many other potential pitfalls.
Our solicitors can also carry out additional specialist work, as if necessary. For example, if you are selling a portion of land with no previously agreed right of access, our solicitors can ensure that this is addressed and incorporated in your selling contract prior to selling the property.
Experienced Auction Sale Solicitors & Speedy Delivery of Auction Pack
What are the Pros and Cons of Selling Property at Auction?
Pros
- The auction process is speedy and predictable; a successful buyer must immediately pay a 10% deposit (contracts are exchanged at this point) and is then contractually obligated to complete in 28 days (normally)
- Multiple potential buyers at auction can drive up potential purchase price significantly
- If a property is run down, 'peculiar' or otherwise not mortgageable, there's more chance of selling than via an estate agent - auctions attract specialist buyers (investment, cash buyers, DIY 'doer-uppers')
- Can fix a broken property chain if one of the buyers has backed out
- No risk of protracted negotiations with buyer or 'gazundering' at the last minute
- You can set a reserve price, which is the minimum price for which you are willing to sell; so, if no one makes a reasonable bid, you don't have to sell your house for peanuts
Cons
- Expenses incurred through auction house's fees and commission (normally around 2.5%) on successful sale
- You have a smaller pool of prospective buyers
- The property may remain unsold
- Auction properties may sell for less than expected/less value than an estate agent might have achieved
- An inexperienced solicitor can make mistakes on timescales meaning the auction is postponed - or worse
- An inexperienced auction house may reduce the chances of a sale or potential sale value
- If a house at auction is unsold you still have to pay the auction house, plus an additional cost if you want to make a further attempt to sell it by auction
- You might also have to pay more legal costs if you wish to retain your solicitor for the purpose (unless you're protected by a No Sale No Fee Guarantee)
How much does it cost to sell a house at auction in the UK?
This depends on the auction house. You normally pay a few hundred pounds in fees, plus a commission of around 2% of the sale price plus the reservation fee. You'll need a solicitor to handle your conveyancing who will also prepare your legal pack.
Who pays auction fees?
The auction fees are often paid by the buyer in open bidding, but the commission is paid by the seller on a successful sale.
What is the process of auction sale?
Although we've described a scenario where you choose your auction house before you instruct your solicitor, as will be seen further on, there are scenarios where you might be advised to instruct your solicitor first, such as if you're selling a freehold interest with leaseholders involved.
- 1
Select an auctioneer/auction house
Ideally you should select an organisation with experience of the type of property you're selling and the location. You should expect to have to pay the auction house at this point for the marketing costs that will follow, including your listing in the auction catalogue. You should get advice from your auctioneer/valuer about any reserve price you wish to set: this is the lowest price you'll accept for the property.
NB
The reserve price is not disclosed to prospective buyers: they only get the guide price.
You always need to provide an Energy Performance Certificate (EPC) to the auctioneer.
- 2
Instruct an Auction Sale Conveyancing Solicitor
You must do this well in advance of the auction date - your auction house should advise you of this - because your solicitor will need to examine the legal title to create a contract of sale and will also need to resolve any issues, such as the removal of redundant notices and restrictions which could deter prospective purchasers.
To do this, your solicitor will book a local authority search which may take a few weeks to be returned.
Most importantly, your solicitor needs to prepare the property auction legal pack.
What does a property auction legal pack contain?
The legal pack contains essential legal documentation relating to the auctioned property. It needs to be made available to the auction house about 3 or 4 weeks before the actual auction and is essential for the auctioneer to have so they can circulate the particulars of your property to prospective bidders.
The legal pack (not dissimilar to a standard seller's draft contract pack) usually includes:
- the title deeds
- results of any searches
- any special conditions of sale*
- property information form
- fixtures and fittings/fittings and contents form
- a management information pack and the lease itself [if the property is leasehold]
- any existing tenancy agreements
- any existing or lapsed planning permission
*What are "special conditions"?
You can choose to instruct your solicitor to put additional conditions in your legal pack, which normally concern a requirement for a successful buyer to pay additional costs relating mainly to costs you have incurred.
These might include:
- Costs of local authority and other search fees
- A contribution to your own legal conveyancing costs - this might be a fixed fee
- A clawback or overage clause - this is a sum that may be payable in addition to the original sale price following the completion of a specified condition e.g. an uplift on the original sale price where planning permission for residential homes is subsequently granted
You should think through the implications of imposing special conditions; depending on the size of any costs you choose to pass on, you might reduce interest from potential bidders.
- 3
Auction takes place
A: Property Is Successfully Sold
The buyer immediately has to pay you 10% of the winning bid price and sign the contract of sale which then gives them 28 days (normally) to complete.
For a successful sale, you usually have to pay the auction house around 2.5% of the selling price as their commission. They commonly expect this to be paid when you complete and receive your completion monies at the latest.
If the auction does not result in your property reaching its reserve price, the auction house normally canvasses interested bidders to present their best-bid offer and consults you about whether you are happy to sell.
When the buyer has signed the contract, you send it to your conveyancing solicitor, who then prepares for completion. The buyer's solicitor has to make an electronic transfer of the balance of the sale money on the day before completion. On completion day, the auction house releases the keys to the buyer, and the process concludes.
B: Property remains unsold
If the auctioneer is unable to sell your property at the auction (and you decline any best bid offer), you would normally get the auction house to relist your property for a future auction - this may involve an additional cost - and you'll have to retain your solicitor for carrying out the subsequent conveyancing, which may also involve a further cost.
SAM Conveyancing offers a No Sale No Fee guarantee to protect you if you are unsuccessful in selling your property at auction on the first attempt.
Are you looking at Selling your Property at Auction?
You should always instruct conveyancing solicitors with experience in the auction sale process because there are time limits which, if they are not met, might derail your sale and there are many other potential pitfalls.
Our solicitors can also carry out additional specialist work required. For example, if you are selling a portion of land which has no previously agreed right of access, our solicitors can also ensure that this is addressed and incorporated in your selling contract prior to auction sale.
Experienced Auction Sale Solicitors & Speedy Delivery of Auction Pack
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
