Homeowners who are thinking about selling their properties sometimes struggle to know what’s the best method for finding a buyer. Is the ideal option using an estate agent? Or selling the home to a quick home buyer? Maybe using an auction is the best way to sell?
Everyone’s selling situation is unique, and it’s important that if you’re thinking about putting your freehold or leasehold house or flat up for sale that you be confident in the method by which you’re trying to secure a buyer. And to do that you need to know the ins and outs of each approach, including all of the advantages of every method as well as the disadvantages.
There are pros and cons of all three ways to sell a home, and whether a specific choice is right for you will depend on factors like the amount of time you’re willing to wait to find a buyer, whether your top priority is maximising your profit from the sale, and other reasons. For example, some people who need to sell their houses or flats quickly and do so whilst getting a competitive price for their home choose to use fast buyers like LDN Properties that purchase homes quickly and never charge homeowners any fees.
But other methods of selling a property can have some advantages, including auctions. For example, when you sell your home via an auction you are likely to find a buyer much quicker than using an estate agent – a process that often takes several months and in worst case scenarios might take more than a full year. By contrast, you’ll likely list your home for sale using an auction a few weeks before the sale itself takes place. And if your property sells, the winning high bidder will only have about 28 days or maybe less to complete the purchase of the home.
Knowing how an auction works is key to understanding the cons
The benefits of auction above sound good, yes? Unfortunately, there are also some potentially downsides of selling your home this way that you need to know before making any final decisions on what you think is the best approach for finding a buyer for your property.
Understanding the way that property auctions operate is key if you are to also have a full knowledge of the potential cons of this method of selling. If you’ve ever seen the popular BBC television show “Homes Under the Hammer” then you have a good idea that property auctions work like most other auctions.
An auctioneer will work with you to agree on a minimum reserve price for your property, which is the lowest value that you can accept for your home selling. Sometimes auctioneers try to convince homeowners to set this price below market value, because they hope that it will encourage far more people to want to place a bid on the property. The aim is to have many people bidding on the home so that it significantly increases the final sale price, and your profit. Sometimes a property’s reserve price will not actually be high enough to give the homeowner a decent return from the sale, and the worst possible outcome is losing money on an auction.
Once the auctioneer says the classic phrase “going, going, gone” and lowers their gavel, the sale of a particular property is over. If nobody has placed a bid then the home is not sold. If someone has only placed a bid at the reserve price, it sells at that value because a winning auction bid is a binding legal agreement to purchase your property that either the seller or the buyer can sue to enforce. Ideally, your home will sell at a value far above the reserve price and you will make a profit that will help with buying your next flat or house.
The top five disadvantages of selling your home via auction
The overall description of an auction sounds enticing because of the potential that your home might have runaway popularity with the bidders, and you could make much more profit selling this way compared to if you had used a fast home buyer or the services of an estate agent.
But as you’ll see below, there are several potential disadvantages of using a property auction that you need to consider before you choose a method for selling your home.
- You don’t know whether your home will actually sell
Perhaps the biggest negative aspect of selling via an auction is that there is zero guarantee your home will sell on the day of the auction. If nobody places a bid on your property then it will go unsold. This can make it tricky to plan the purchase of your next home if you are counting on someone buying your existing property at the auction. That amount of uncertainty can be enough to deter some people from this type of sale, because it would require having to list the property again for another future auction.
- The fees for selling via auction can be quite high
Auction houses might charge you several fees for selling your home, including what’s known as an entry fee or catalogue fee for joining the auction. You’ll also need to pay your solicitor to create a legal pack for selling the property. And auctioneers will charge commission for selling your home usually based as a percentage of the ultimate sale price.
- You never know what the final sale price will be
Another top uncertainty about selling using an auction is you don’t know how much profit you will actually make until the auction is over. If you only receive a single bid at the minimum reserve price, your home is considered to be legally sold at that value, and this can be problematic if the budget you’ve created for moving to a new property assumes your house or flat would sell at a higher value than the reserve price. That’s why auctions might not be a good idea if achieving the best profit is your primary aim.
- It can take longer to sell via auction than other methods
There can also be some delays associated with selling your home through an auctioneer. Once you’ve decided to sell this way, the auctioneer will create a listing for your property and advertise it for at least several weeks before the auction takes place. And even if your home sells at the auction you could still be facing a wait of up to 28 days until the buyer can complete all of the required legal paperwork for the sale.
- An auction might not be suitable for your specific property
Some auctioneers only have experience with selling certain types of properties. If your home has any type of negative attribute or some unusual aspect – for example having subsidence problems or being built out of a non-standard material such as concrete – then certain auction houses might not know how to market it, and it might not get any bidders. Ask auctioneers upfront whether they’ve successfully sold your type of home, and only agree to sell using companies that can prove that they have done so.
Deciding on the right approach for how to sell your home
Selling your home is one of the most significant personal decisions that you will make, because it affects finances, your future residence, your work, and more. And that’s why it’s imperative you make the decision based on a full understanding of all the pluses and minuses of each approach including using an auctioneer, using an estate agent and using a fast home buyer.
Plot out a budget for each option that considers the time it will take to sell as well as your expected rough profit, and pick the method that will help you best meet your own goals. That’s the easiest way that you’ll be able to decide on the ideal method for selling your home which fits with your plans and will help to remove any stress from finding a buyer for your property.