Auction Advantage?

There are broadly two routes to buying/selling property assets,

• A ‘traditional’ sales process through an agent, placing advertisement, submission of an offer and negotiation. This process is tried and tested, affords opportunity for prolonged market testing and is clearly appropriate in many cases….   but not all.

• By contrast, property auctions can be a quick-fire and adrenaline-fuelled route to buying a property ( as borne out by popular programs such as Under the Hammer ), but they’re also a useful avenue if you have property to sell, whether it’s residential or commercial. 

  

Against the landscape of the reported increases in open market transactions and the recent rush to beat the changes to stamp duty, the decision on access to the market remains a consideration of the relative advantages and disadvantages of the alternatives.

On the basis that more people are familiar with the traditional route, for those who are perhaps less familiar with auction, set out below please find the relative advantages and disadvantages with the Auction route:


Advantages

• If you’re in a hurry to sell a property, perhaps to release some equity for another investment, an auction can save time in the selling process. If your property sells, the buyer has to make a deposit ( usually 10% ) immediately then has one month to deposit the remaining balance in your bank account.

• If more than one person is interested in the property the initial, reserve price can far exceed your expectations – a ‘bidding war’ can push up the price substantially.

• If your reserve price isn’t met, you won’t be forced to take a lower price for your property – the auctioneer will simply withdraw it from the auction and you can re-list it at a later date, if you so wish.

• Once the hammer has been dropped, the property is sold, so buyers can’t back out at the last minute. If they do change their mind, there are legal procedures in place to protect you.

• If you don’t sell because your reserve price is too high, there is always the potential to negotiate with any interested parties after the auction has finished.

• The auctioneers will assist you with setting a guide price but it’s in your own best interests to do some research to discover exactly what similar properties in your area are selling for so that you can make an informed decision.

• The auctioneers will also market the property in their catalogue or on their website which will give potential buyers advance notice of the forthcoming sale. However, you need to bear in mind it is the seller’s responsibility to make sure the property is available to view by purchaser and surveyors if needs be.


Disadvantages

• Selling at auction can deter some buyers because of the competitive nature of the bidding process – not everyone enjoys that scenario.

• Potential bidders must register to attend an auction and this may also put potential purchasers off.

• There is no guarantee that your property will reach its reserve price or sell at all. In this eventuality you may have to relist it which will incur further costs. If you are relying on the proceeds of an auction to buy another property immediately it may make the process difficult or impossible.

• The price you receive may not fully satisfy your expectations. If it only just reaches slightly over the reserve price you may be disappointed. However, by then it will be too late.

• The costs of selling at auction may exceed those of using an estate agent, and you’ll have to pay the auctioneer’s fees regardless of whether the property is sold or not.

• You will need to consider costs associated with your solicitor attending with you.



So, if you have a commercial or residential property to sell, an auction may be a great way to do it. However, it’s up to you to decide on whether that’s the best method for you as an individual or a company.

If you need independent, impartial advice about any aspect of selling a property at auction, my suggestion would be to speak with a agent who offers both routes to market, as they will have a good understanding of the market specifics relating to your property.

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