Unsold Auction Property
When the auctioneer’s hammer comes down and no bids have been made, the property is labelled as “unsold at auction”. However, this is not the end of the matter as the auctioneer will ask any interested parties to leave their details before the end of the auction.
As a result, a sale could be made under auction conditions, before the close of trading. In this article, we talk about the ramifications of unsold auction property from the point of view of both the vendor and the buyer. We consider the reasons why a house might not be bought at auction and what the vendor’s alternatives are.
Why are some properties unsold at auction?
It is estimated that on average 18%-20% of properties remain unsold at the end of a property auction. There are three common reasons why this happens:
- Unrealistic pricing of the property
- The lack of a property legal pack
- The inability to view the property
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Let’s look at these reasons in more detail and explain why some lots are classed as as unsold auction property.
Unrealistic property pricing
It is very important that the vendor chooses the right guide price for the property or reserve price during the preparatory stage. Low prices are often used by auctioneers as a way to generate interest in the property and is a key aspect of the marketing procedure.
An attractive low price leads to more prospective buyers taking part in the bidding process which in turn drives up the price. If the guide price is too high, there will be no bidders which means the property is more likely to remain unsold at auction.
The lack of a property legal pack
Property auctions are a classic example of ‘Buyers, be aware!’ in that if there is something wrong with the property, the buyer cannot later bring a court action against the vendor for non-disclosure of crucial information. For that reason, the non-availability of a property legal pack represents a very serious reason for the auction property to remain unsold.
Prospective buyers will not bid for a property if they have not had the opportunity to have the documents inspected by a legal expert. If a problem were to arise later, they might have to spend a lot of valuable time and money putting things right.
Inability to view the property
A final reason for an unsold auction property is that buyers have not had the opportunity to inspect the property. Although looking through the legal pack gives buyers an idea of the dimensions and specifications of the property, it is not the same as viewing the property in person.
Buying a home is a very personal experience and involves the emotions. Homeowners often say things like they ‘fell in love’ with the house at first sight. Apart from this emotional aspect to home buying, a viewing can also give buyers the chance to pinpoint any problems with the auction property such as the lack of natural light, noise levels or even the neighbourhood itself. None of these aspects can be read in a report.
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Tips to avoid an unsold auction property
In order to increase the chances of your property selling at auction, there are a number of things you can do:
1. Choose the right auction reserve price
Putting a price to your own home is extremely difficult as your emotions are involved. Use estate agents, the local press, recent house sales in your neighbourhood, online property sites and the guidance of your auctioneer to settle on a price and then cut this price by 5%-10%.
Although it might seem as if you are reducing the value of your home, this lower price will encourage buyers to bid on your property. Generating interest in this way will lead to a bidding war which means that your property will go for more than you expect.
2. Prepare for the property auction in advance
You may have chosen to sell your property at auction because you need a quick sale. However, before putting it up for auction, you must make sure that all the property’s documentation is in order. Although some auctioneers will ask you to withdraw from the sale if the legal pack is not ready, it should be something you do to avoid an unsold auction property.
3. Arranging property viewing
You can arrange property viewings in two different ways: open house or by individual appointment. If you live or work elsewhere and are working with a local auction house, then the auctioneers might be prepared to help with viewings (for an additional fee).
Otherwise, you could arrange for viewings to be carried out by a relative/friend, neighbour or use a letting agency. The more prospective buyers have viewed the property, the greater your chances of selling it at auction.
Unsold Auction Property FAQ
What information is contained in the property auctioneer’s legal pack?
The auction property legal pack is prepared by a solicitor and contains information about the legal status of the house or flat. It will have the title deeds to the property as well as the results of searches via the Land Registry and other government databases. The legal pack will also inform prospective buyers about any Special Conditions of Sale and list the specifications of the property and any surrounding land.
How can I get a copy of an auction property legal pack?
The legal pack should be available in the weeks or days before the auction and can be downloaded from the website of the auction house. It can also be sent via post to anyone interested in the property. The legal pack will also be made available as a hard copy in the auction room before the auction begins. Information in the legal pack might change in the days leading up to the auction so it is always a good idea for prospective buyers to check through it before making a bid.
How does the auction guide price differ from its reserve price?
The price of auction properties is decided as the result of a joint discussion between the auctioneer and the vendor before marketing of the property begins. The guide price, which is listed on all auction houses’ property listings, gives prospective buyers an idea of the value of the auction property. However, it might not necessarily be the same as the sales price as competitive bidding can push the price higher. The reserve price is the lowest sum of money that the vendor would be prepared to accept for the property. By law, the guide price cannot be more than 10% below the reserve price.
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An unsold auction property – a bargain for buyers?
It’s possible that a property which fails to sell at auction is a bargain for a potential buyer. If no bids are made on the property, the auctioneer will reveal the reserve price. This is a confidential piece of information which is only known beforehand by the vendor and auctioneer and is generally up to 10% cheaper than the guide price.
As long as the reserve price is met, the auctioneer is authorised to sell the property at the close of the day. In this situation, you will be able to pick up a bargain.
However, you should avoid buying an auction property which you have not viewed or whose legal pack you have not checked. If you later find it has a legal or structural issue, you – as the owner – will be liable for putting it right.
Sometimes a property may not sell at auction if the right buyers are not present. This can be put down to bad advertising or promotion of the property or sometimes just bad luck. If the bidders are not there the property may not reach the guide price and therefore fail to sell at the property auction
What can I do if my property does not sell at auction?
Once the auction is over, your property will continue to be featured on the auctioneer’s website but will be listed as ‘unsold’ and the reserve price will be revealed. It is quite possible that you will receive a bid at this price in the weeks after the auction.
Potential buyers might have needed extra time to research the property or to get their auction financing in place. If a late sale does not happen, you have a number of options about what to do next.
Re-auction the property
If your property remains unsold at the close of the auction, you could relist it for sale at a subsequent property auction. Before doing so, re-evaluate the guide price and ensure that potential buyers have access to the legal pack and can view the property.
Whether you stay with the same auction house or change depends on the contract you signed with them. Some auctioneers’ contracts have an exclusivity clause that stipulates that you cannot market the house or flat with another auctioneer for a certain period of time. If it is sold to a private buyer in this period, the auction house might still be entitled to their fee.
Another reason why it is sometimes better to stay with the same auctioneer is that they may waive fees on a subsequent auction and only ask that you pay for any additional marketing or administrative costs.
There are two myths regarding the re-auctioning of a property. One is that it will affect the value of the property. This idea has perhaps arisen from the fact that vendors often re-evaluate their guide price before re-auctioning their property. This usually reflects the fact that their initial price was too high rather than the property losing value and is a marketing ploy to drum up interest.
The other myth is that potential buyers will assume that there must be something wrong with an unsold auction property. As long as the legal pack is available and viewings can be arranged, the sales procedure will be completely transparent.
Remember that those who attend auctions are not necessarily the same people so they might not even be aware that the property had been previously put up for auction.
Sell your property via an estate agent
It might be possible that your unsold auction property is more suitable to be marketed through an estate agent. However, you should bear in mind that you must pay a commission for the sale and a house sale through an estate agent could take months rather than weeks.
Sell your property through a property company
A property-buying company is a fast and easy way to sell property, and you can often receive the money within 30 working days. This is an ideal solution if you are primarily interested in a quick sale.
Some property companies will also pay all your legal fees. However, the main drawback of such companies is that the sale price will be much lower than you could expect through an estate agent or auction.
Unsold auction property – a final word
Despite your disappointment, the fact that your property did not sell at auction is not the end of the world. Once you have ascertained the reasons why it did not sell and rectify them, a subsequent auction will probably be successful. Alternatively, you could look at other ways of selling your property.
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