Top 6 Reasons Why Houses go to Auction (UK)
Each year, around 2% of all houses sold in the UK are through auctions. Auctions are typically leveraged by sellers who value their speed and the relatively high value properties can fetch – especially compared with “We Buy Any House” type companies. There are a number of reasons why houses go to auction, and in this piece, we’ll explore them to help you understand whether buying or selling a house at auction is right for you.
Why do houses go to auction in the UK?
There are six main scenarios where optimal strategy is to sell at auction:
1. The seller wants a quick and easy sale
Whether you’re a private homeowner or a property professional, there are circumstances where you might value speed as a driving factor for your sale. At Hammered, we often see people choose to auction a house instead of selling:
– Repeat clients who sell when they need additional funds for a new project.
– Retiring landlords selling up and investing in different types of assets.
– Probate sales, where we help executors and administrators sell properties left behind after a family member passes away.
– Property traders who work under short timelines and find auctions a perfect solution.
2. Bank repossession
In cases of mortgage or loan defaults, banks typically leverage asset managers who handle the entire process for them. Their main requirement for selling at auction is the transparency of the process and the sale. The price they can sell the property for is based on an independent RICS valuation and is determined by the 90-day sale value. If the property fails to sell or someone makes an offer after the auction that is lower than the 90-day value, they must request another valuation before they can sell.
Solicitors or administrators of the estate often handle probate sales. This can be an emotional reason for selling, and there are usually multiple beneficiaries. They sell at auction because the process is transparent, and most beneficiaries view the process and outcome as fair.
4. Company liquidation
Liquidations and bankruptcy sales in auctions can be quite common, though not as frequent as bank repossessions or probates. These sales are driven by lenders to ensure that the property does not fall into negative equity or when the borrower is unable to keep up with their payments. The transparency of the process is crucial, as receivers are personally liable in these transactions. They tend to reduce that liability and risk to themselves by entering the property into a public auction.
5. Institutions wanting transparency of sale
Local authorities, housing associations, and other public bodies require a public and transparent platform to sell in an open and unfettered environment. Auctions suit their purposes perfectly. The principle that a property sold at auction will find its true value in a public auction, which is marketed and open publicly, transparent and unfettered, is one that many corporate sellers have and continue to rely on.
6. The weird and wonderful
Some of the best opportunities that sell at auction are the ones that no one (estate agents and valuers) either do not understand or cannot put a value on. This could range from a plot of land on the hard shoulder of a motorway or a patch of grass by the side of the road to a disused airfield, a former Laird’s castle in Scotland, or a sea fort in the English Channel. We have seen houseboats, a house where the owner had built tunnels under his house and other neighbors’ properties, houses with no roof, part-built houses, and even telephone boxes. Auctions are the place to see these properties and determine their worth to you, allowing you to make your bids accordingly.
Why auction a house instead of selling another way?
Auctions are typically seen as a faster, easier way of selling a property, with a possibility for selling at a reasonable or near market value price. They are often viewed as a happy medium between two forms of selling:
1. Selling via an agent on the open market: Agents are generally good at getting you a decent price, but this may come at the cost of a longer time on the market, potential price reductions, and a lack of certainty.
2. Selling to a cash-buying company: Cash-buying companies can offer speed and certainty but may be more conservative on price. This is a fair exchange if your circumstances demand speed and certainty, but allows for flexibility on pricing.
3. Selling through an auction: Auctions offer both speed and unparalleled certainty. The competitive bidding allows for significant upside potential for the property to sell at or above market value. There is risk involved, but the power of the competitive bidding element of the sale process effectively counters it.
Psst! 🤫 We’ve got a cosy little corner on our website where we chat all about selling property at auction in the UK. From the ups and downs to those handy insider tips, it’s all in our Ultimate Guide to Selling a House at Auction. Why not pop over, grab a cuppa, and dive into the world of auctions with us?
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