With so many benefits including lower fall-through rates and quicker sales, it is no surprise that selling a property via auction continues to rise in popularity. Recent research highlights that as 2022 progresses, the number of properties sold month to month continues to increase, with an impressive £480m raised via auction in May 2022. This is an increase of 24% when compared to May 2021’s total amount raised.
During May, residential sales via auction were up by 17%, highlighting that more people are choosing to buy and sell via auction. Despite this significant uptake, there are still many common misconceptions people have when it comes to buying and selling via auction. Here, I set the record straight with my top five auction myth busters:
Properties sell for less at auction
Perhaps one of the biggest misconceptions is that a property sold via auction goes for less than one sold via a private treaty sale. More often it is the opposite, with many properties selling for more at auction than they would have done if sold privately. Thanks to the transparency of the sale and the ability to see where the bidding is at in real-time, the competitive nature of an auction often drives the sale price up.
This year at My Auction, on average properties have sold for 21% above asking price with the best performing lot selling for 19% above the highest estate agents’ valuation.
Property auctions are for problem properties that can’t sell in the normal way
Many people are under the impression that property auctions are only for properties that come with problems or need major renovation works. This outdated misconception is far from the truth with many stunning homes being listed that are in perfect condition and ready to move straight into. And it’s not just properties being sold at auction, land that is suitable for development is sold too.
Property auctions are only for those who are desperate to sell
Many owners choose to sell via auction to reap the benefits including certainty of sale, faster turnaround times and transparency. Auction sales exchange contract the moment the gavel falls, completing within four weeks, compared to 18 weeks through private treaty sales. Another advantage of auctions is the ability to generate a sale well above asking price.
In a similar vein to auctions for luxury goods such as art, jewellery and cars, property auctions can often generate the best results financially because the market decides what each property is worth to them, not the auctioneer or estate agent.
Property auctions are for cash buyers only
Many people are under the impression that unless they are a cash buyer, they are unable to purchase a property via auction. This is incorrect. If the property you are purchasing is mortgageable then buying via auction with a mortgage is possible, including for first-time buyers which is another misconception. Over the past 12 months, My Auction has seen a 50% increase in the number of first-time buyers purchasing via auction.
Property auctions are risky as you can’t view the property
Before a property goes to auction, there is a marketing period that will give interested parties the opportunity to view the property to determine whether it is something they would like to bid on. My Auction partners with local estate agents to provide potential bidders the opportunity to view the property and ask questions. With auction purchases, you also have the added level of security that comes with the legal pack that is viewable before the auction. This means full transparency of what you are buying before you make a bid, a benefit you don’t get with private treaty sales.
Over the past 12 months, we have seen a significant rise in lots offered as well as potential buyers interested in auctions, with this rising each month. Buying and selling at auction offers both parties much more security and certainty that a sale will go through, which is invaluable in the current market where stock is low and demand is high. Property auctions are a really viable way of buying and selling all types of property and land. Over the last few years, we have seen a noticeable shift of our buyer demographic.
Auctions aren’t just for investment buyers, we’re seeing an unprecedented interest from first-time buyers, second-time buyers, those looking for a forever home as well as those looking for something with development potential, who are all starting to the see the benefits of auction.
*Stuart Collar-Brown is Co-Founder and Director at online property auction house My Auction