Recent data reveals a growing trend in the sale of properties through auctions. Auction House achieved its highest performance in May, surpassing its 16-year history. The number of lots offered for sale last month increased by 29% compared to the same period the previous year, and the volume of properties sold rose by 16%. Experts anticipate that the number of homes traded through auctions will continue to rise in the second half of 2023, particularly due to concerns about a potential decline in house prices.
The property auction sector has become more attractive to certain sellers in light of the slowing housing market. This includes individuals reaching the end of fixed-rate mortgage agreements and those seeking quick sales. However, this upsurge raises some questions: What is driving this trend? Is auctioning off your home a wise decision? And what are the significant pitfalls to be aware of?
Jonathan Rolande, a leading property expert from the National Association of Property Buyers, provides insights:
Why is the trend rising?
The increasing activity in auctions is not a cause for celebration for those hoping the property market will recover from the current downturn and return to more balanced times. Various factors contribute to a home being sold at auction, most commonly due to an influx of lots that are in poor condition, unsuitable for mortgage approval, or vandalised. However, the current trend suggests a greater need for urgent sales from individuals who lack the time to sell through traditional channels, such as estate agents.
It’s worth noting that one auctioneer witnessed a 29% surge in lots offered, but the volume of properties sold increased by only 16%. This outcome might disappoint sellers whose entries did not sell as expected.
Is auctioning off your home a good idea?
Auctions can be an effective way to quickly sell an unwanted property. The increased interest in auctions reflects the current market conditions, where factors such as the expiration of fixed-rate mortgages, unviable buy-to-let properties, financial difficulties, and stagnant “problem properties” contribute to buyers becoming more risk-averse.
Important considerations if considering auction:
- Many auctioneers charge an entry fee, usually around £500 or more, regardless of whether the home sells. Additionally, if the property does sell, there will be more commission to pay.
- A significant proportion of lots do not sell, with a common sales ratio of around 50%.
- Sellers are responsible for legal fees associated with preparing an auction pack, regardless of the sale’s outcome.
- Auctions tend to achieve lower prices, typically around 80% of the property’s open market value.
- Most auction buyers are cash buyers, resulting in a more limited demand compared to traditional channels.
- If an urgent sale is required, considering a cash-buying company that pays less than the full value may be an option. However, ensure to choose members of The NAPB (National Association of Property Buyers) for peace of mind.
It’s advised to take proactive steps early on to address any issues to avoid selling a home for less than its full value. Homeowners facing payment struggles can seek assistance from their lender. Increasing income through room rentals or cutting unnecessary costs may also help. Alternatively, some individuals choose to rent out an unwanted property and wait for the market to improve. Delaying action until the last minute is not advisable.