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Part two: disadvantages

In the first installment of this guide, we set out the principal benefits of selling a residential property at auction. To recap, these are:

- The speed with which you can complete a sale
- The certainty. In other words, once the hammer falls at the auction, there is minimal risk of the buyer backing out of the deal
- These sales can be surprisingly lucrative
- Auctions can make it easier to offload so-called "problem" properties
- The experience and the insight you gain into this part of the housing market can be invaluable.

These are powerful inducements to sell your property at one of Britain's many property auctions. Nethouseprices would, however, point out that there are some important drawbacks to this type of sales and you should consider them carefully:

1. Public perception

There are two main strands to this point. Firstly, for whatever reason, there is a persistent public belief that properties sold at auction are either bank foreclosures or homes with structural or other issues which make them hard, if not impossible, to sell via more traditional means. This means that many potential buyers are put off attending the sales. The observation is unfair, of course, since people have all sorts of reasons for wanting to sell at auction. They might, for example, need to liquidate their assets as quickly as possible or wish to move to pastures new without delay. However, the notion is remarkably entrenched that there must be something amiss with properties sold at auctions.

Secondly, there is a perception that auctions are hectic, high-pressure and aggressive sales environments, which can impair your judgement and encourage you to make unwise bids. Again, this idea might deter buyers who would otherwise be very interested in your house.

2. No guarantee that bids will meet your reserve price

You will have had a house valuation or researched sold property prices in the neighbourhood to give yourself a shrewd idea of the market. This information will inform the reserve price - the price below which you are not willing to sell your home - that you agree with the auction house. There is no guarantee that the reserve price will be achieved. In this situation, you have a choice. You can re-list it for a future sale with the same or another auctioneer, or you can withdraw the property and try to sell it through an estate agent. Either way, you will be required to pay the auction house fees.

Similarly, the reserve might be met, but it's possible that you will still be disappointed with the eventual sale price. Again, there are no guarantees, and, once the final bid has been accepted, you can't opt out of the deal, as the sale is final. As we mentioned in part one, these sales can be surprisingly lucrative and there's a chance that your house or flat will be the subject of a "bidding war" and even exceed the market house valuation. However, you really can't depend on this outcome and you need to be absolutely certain that, as underwhelming as it might be, the agreed reserve price represents an acceptable sum for you, your family or your business.

3. No backing out

The certainty around auction sales is a bonus for many vendors. It means the elimination of worries about the buyer dropping out of the deal or problems with the conveyancing process delaying or disrupting completion. On the reverse side, of course, should your circumstances change, you too will be compelled to stick to the deal or face potentially serious legal consequences.

Likewise, if you currently reside in the property you are selling, you need to be aware of the astonishing speed with which auction sales are executed, in comparison with standard conveyances. It's no exaggeration to say that there is only a matter of weeks between listing the dwelling with an auction house and completion. So, the moral of the story is that you should be 100 percent sure that you can vacate the premises by completion day and that you have contingency plans in case of any delays.

4. Costs

There are costs associated with selling your home and these are considerable, whether you choose to engage the services of an estate agent or to sell at an auction house. The auction house’s fees might well be higher than a typical estate agent’s charges. Researching this piece, for instance, we found that the average estate agent's fee in the UK is between 0.75 per cent and 3.0 per cent of the agreed selling price, plus value added tax. An auctioneer will charge you a commission of around 2.5 per cent of the sale price, plus marketing fees and a portion of the sale room hire price. It's crucial, then, that you make sure you are happy with the overall costs.

Do remember that you will also have to pay professional fees to a solicitor to prepare the necessary documentation, including contracts and the legal pack. Your lawyer will also need to attend the auction to oversee the deal and make sure it is carried out correctly. Depending on their experience and expertise, solicitors' fees vary rather dramatically, so do shop around to make sure you are getting the best possible package. The Money Advice Service offers the following advice for choosing a conveyancer: https://www.moneyadviceservice.org.uk/en/articles/find-the-right-solicitor-or-conveyancer.

Conclusions

Property auctions clearly have their upsides and downsides and you need to be clear in your mind that you understand how the process of selling your house via this route differs from using an estate agent. While they aren't right for everyone, auctions nonetheless provide an excellent marketplace for the quick and potentially profitable sale of your home, whether you are an owner occupier looking to sell up or a property investor moving on to a fresh business project.

Visit the team here at Nethouseprices for more tips and guidance on housing matters. We also cover all the latest property market news, as well as offering analysis and commentary of wider property issues.