Selling Flat via a Property Auction

richdeniro

Hi All,

Just wondering if anyone has any advice or experience with selling property via online property auctions?

I am having to go this route due to a horrendous year in which my flat in Penge has been up for sale which has included two sales falling through including one on the day of exchange. The main reason for the urgency now is that my fiance is 6 months pregnant and the flat just isn't fit for purpose.

I paid 200k for the flat in 2016 and initially had the flat listed for offers over 220k with the two accepted offers that fell through being around that ballpark.

After the last sale fell through and having spoken to my solicitor I decided to go the auction route and put the reserve price at 200k hoping to generate the interest to make a bit more but having just spoken to the auction company today they want me to lower the reserve price to around 150/160k as there is zero interest and it sounds like the market is in tatters. This feels like a huge kick in the teeth and if I sold for this amount would likely not even be able to make an onward purchase elsewhere as I'll effectively have such a small deposit taking a 40-50k loss even despite 6 years of mortgage payments.

I guess I'm just looking for some reassurance that even if I lowered the reserve price it might still sell for a decent amount. The flat has nothing wrong with it and is a fairly bog standard top floor Victorian studio conversion. 95 years left on the lease and in a good location.

Thanks in advance.

t1redmonkey

Well I sold my house via auction in March this year.  They put it on Rightmove at £199k, but the reserve was £220k.  The head auctioneer asked me what I would be comfortable selling for if anyone wanted to buy pre-auction, I said £250k (but wasn't actually expecting to get that, I thought I'd get £230k max if I was lucky).  However after the first open day of viewings, I had an offer of £250k.  Obviously was super happy, accepted straight away, and wrapped everything up in a month.

Obviously though the housing market outlook is totally different today compared to how it was 6 months ago when I sold - a lot of analysts are saying interest rises are going to shoot up over the next 1-2 years and that's going to end up bringing prices down due to mortgage affordability issues, so there's probably a lot of people sitting on the sidelines waiting for prices to fall.  So you may not get as much interest in yours as you are hoping for.  I think only advice I'd give is try and think of a realistic minimum price you'd be happy to sell for, and make sure the reserve is not lower than that.  That's how I approached it anyway, £220k was the minimum I'd sell for (or I would've just stayed put) so that's what I got the reserve set at.

jj_43

Purchasers at auctions expect a property with problems, thus even if there was nothing wrong with your property you would need to sell below estate agent market value. In return you get completion within 4 to 6 weeks. The first thing i would do buying at auction is to see if it was previously listed for sale, as yours has been twice I would be wondering why it didn't sell. I wouldn't want to pay market prices (220k you state) and I would take into account auction fees (up to 2.75%), so £150k reserve might get interest upto £180k.

However there is one auction house that has guides 80%-100% below the sales price which no one considers to be accurate.

t1redmonkey

As @jj_43 says, also double check what fees they are charging.  Again, because I was selling mine during a period when a lot of estate agents were competing against each other to get listings, I only had a 1% fee to pay at the end of it all, they waived a lot of usual fees they would've charged under normal market conditions (e.g. no listing fees).

youth_leader

I wouldn't sell at auction again.   Unless your flat needs £££ spent on it do continue with the agents. Patience and the belief it will sell are key.  

london21

What were the reasons for the buyers pulling out?

Auction is a quick sale but might not get maximum.

Be careful with auction, read the terms and conditions, aviod modern method auction.

Can check Auction house, Mchugh and Co etc.

Might be worth trying a different estate agent, list at a good price, decent pictures and description and might be lucky this time around.

[Deleted User]

Realistic pricing isn't always what we deem our property to be worth, i agree with @london21 last sentence, it's key to a sale.

gwynlas

You do not say why buyers pulled out but if you are both living in a studio there are likely to be space and storage issues. You can address these by renting a storage unit and ruthlessly clearing away anthing that you do not need for day to day living. Then get back on estate agents lists and be guided by them re price it will sell for. Couples have babies in all sorts of circumstances and manage. You should be able to continue to live there for the next twelve months at least, look at tiny houses on line and if necessary spend some money on things such as a good sofa bed etc.

eddddy

richdeniro said:

I guess I'm just looking for some reassurance that even if I lowered the reserve price it might still sell for a decent amount. The flat has nothing wrong with it and is a fairly bog standard top floor Victorian studio conversion. 95 years left on the lease and in a good location.

Why did the buyers pull out?

Was it because they couldn't get a mortgage? Is the studio less than 30 square metres?

Most mortgage lenders won't accept a studio/flat less than 30 square meters. Some won't accept any studios at all.

Did your Estate Agent warn you about this? And more importantly did they explain it in advance to the buyers? If they didn't, they're pretty useless Estate Agents.


It makes sense for Estate Agents to explain this upfront...

• To manage buyers' expectations - rather than getting a nasty surprise later
• To attract cash buyers (e.g. BTL investors)
• To make buyers needing a mortgage aware that they'll need to go to a specialist lender / broker

Otherwise you're likely to just get a series of failed transactions - which wastes everyone's time and money. (As you've found.)


If you think this may be the problem, maybe look for another Estate Agent - who is more "professional" and understands the challenges of selling studio flats.

GDB2222

“I guess I'm just looking for some reassurance that even if I lowered the reserve price it might still sell for a decent amount. “

There’s no way for anyone here to reassure you of that. Generally, guide prices at auction are set quite low, so as to generate lots of interest, and achieved prices are often above the guide. 

Decent auctioneers try to keep guide prices and reserves roughly in line, but there’s no firm connection. You are in the position, if I understand correctly, that you would rather not sell at all unless you can achieve £200k. Is that correct? Although the studio flat is not ideal with a baby on the way, at least it’s a roof over your heads. If you sell for £150/160k that’s the worst of all outcomes, as you won’t be able to afford something else. 

I suggest that you encourage the auctioneers to reduce the guide price to £150k, whilst keeping the reserve at  the lowest figure you are prepared to sell at. It’s usually possible to adjust the reserve right up to the day of the auction. So, if you have nerves of steel, you might agree a £150k reserve now, then increase it at the last minute.

Expect to pay the auctioneers even if it doesn’t sell. 

eddddy

GDB2222 said:

Decent auctioneers try to keep guide prices and reserves roughly in line, but there’s no firm connection.

The ASA has made a ruling that the Guide Price must not be more than 10% below the Reserve Price - to avoid misleading consumers. They say they will take enforcement action against auction houses who break this rule.


People sometimes suggest that the Reserve Price (and hence Guide price) could be increased just before the Auction - but I suspect that the ASA would say that's just as misleading to consumers. So, again, they might take enforcement action.

So it's best to check with the auction house in advance if they'll agree to that tactic - as it's the auction house who will face enforcement action from the ASA. Whilst I don't think the ASA can issue fines, the auction house might not want to risk the reputational damage of being 'named and shamed' for misleading consumers, and risk the potential resulting loss of future business.