20th April 2023

How to Make a Profit When Selling Your Property by Auction

Often seen as a less conventional way to sell your property, auctions can sometimes be viewed as an alternative route to selling a home compared to the open market estate agent route. But by no means does this suggest that selling a property by auction is any less effective. Whether you’re an individual looking to sell a family home or second property, or are a developer selling off your buy-to-let or commercial property assets, auctioning a property can be a highly-profitable selling route to take.

With a long history of helping sellers achieve profitability at auction, our team of experts are here to help you get the price you’re looking for. From maximising the demand for your property pre-sale, to providing all the necessary information to potential buyers to help them when deciding to make a bid, there are a number of steps that can be taken to increase your property’s profitability, all of which we’ll discuss in this blog.

How much does it cost to sell a house by auction?

Before we dive into why selling your property by auction is the best way to maximise profits, we’ll first walk you through the costs involved. Thinking about these costs prior to listing your property is vital to calculating the potential profitability of your sale, particularly if you’re a budding property investor. 

Selling a property by auction can come at no cost to the vendor, but, depending on the property, there is the possibility of some fees being incurred. If this is the case for a sale, all costs would be discussed by the valuer. When not taking the auction route, sellers can expect the average fee of selling via estate agents to come to 1-1.5% plus VAT. Despite the fact that selling your property via auction has the potential to be a more costly approach than the conventional route, depending on the property and its situation, this is often counteracted by the avoidance of additional costs associated with the open market that don’t apply when listing auction properties. One of the main things to consider, for example, is that selling a property by auction tends to see a higher success rate, which, according to consumer advice website, Home Selling Expert, is over 78%, while selling via an estate agent has a lower success rate of 51%. According to the report, sales are also less likely to fall through when selling your home by auction (less than 1%) compared to using the conventional way. This increased confidence in achieving a sale means that fees such as council tax and other monthly bills are less likely to remain a burden during the lengthy sale process, saving you money.

Other costs associated with going via the auction route to sell your property include legal fees, which can cost anywhere between £350 to £500. Once your home is sold, you will also need to contact a solicitor for the transfer of ownership of the property, which has an estimated cost of anywhere from £450 to £750. However, whether you’re selling via estate agent or via auction, it’s usually recommended that you consult a solicitor either way, meaning that solicitor fees are required in both instances, so this should also be kept in mind when calculating the monetary benefits and disadvantages of each selling route. 

While many costs can be carefully calculated, one factor that can’t be assured is the sale of the property itself. Despite the uncertainty, however, it’s common for properties to sell at a significant amount above their asking price in auctions. This means that, despite having to pay higher costs in some stages, you can still end up gaining a higher profit than if you were to sell any other way, as well as sell more quickly. Plus, it’s more than likely that any fees you have to pay will be made up for once the auction is complete, and, at SDL Property Auctions, on average, we sell properties for around 16% over the guide price. In particular, being able to sell your property quicker through auction comes with a whole host of advantages, as properties can depreciate in value the longer they’re on the open market. This is because, as the housing market functions on supply and demand, if there’s little demand for properties during a certain period, such as during an economic crisis when people don’t have the money to buy a home, this could decrease the value of the property.

Is selling your house by auction a good idea?

An increasingly popular choice for sellers of all backgrounds, property auctions are ideal for those looking to sell a house that may otherwise risk being overlooked if it were to be sold on the open market. As a result, an auction may be a good option for you if your home requires a significant amount of restoration work before becoming habitable, or it might have an unconventional appearance or layout. 

This is because buyers tend to come to auctions for a much larger range of purposes than simply wanting to purchase a finished property. After all, home improvement is a rising trend as, according to a report by the online marketplace, Rated People, spending more time at home during the pandemic has driven people to want to make changes to their existing four walls – with the number of home improvements carried out rising by nearly 50% since 2021. This trend extends to those looking to buy a first or new home, as any money saved on an unfinished property can be used to turn it into a personalised space that suits their exact needs and tastes in a way that pre-upgraded homes rarely do. In fact, according to recent Google Trends data, searches for home renovation related terms have significantly increased in the last year. For instance, the term ‘how much does it cost to renovate a house’ has seen a 40% increase in searches. 

Auctions can also attract buyers who are looking to restore a home before selling it on, such as investors and property developers. In most cases, these are knowledgeable and experienced individuals who know what to look out for. Often, they can judge whether your property is worth the price you’re selling it for, as well as whether it has the potential to be developed into a house people will want to buy. But equally, there are homes sold by auction that are mortgageable and ready to move into – just as you would see advertised on estate agents’ windows and on property websites.

Tips to make a profit when selling your property by auction

Now we’ve discussed what you can get out of selling via the auction route, and the costs that can be incurred, it’s time to move on to the points we advise considering before you sell your property by auction in order to maximise profit. From considering the current state of the property, to setting a reserve price and more, there’s a lot to think about when you’re looking to get the most out of selling your property by auction. However, we’ll walk you through the main points to take into account, which will hopefully help you to achieve the best outcome.

Consider the property’s circumstances

Whether your home is ready to move in to, or needs some work before becoming habitable, it’s important to know your audience. As discussed earlier, many who attend auctions tend to be looking specifically for homes which they can restore, renovate and make their own. According to the finance site, Money.co.uk, 77% of UK homeowners spent money to change or improve their properties in 2021, proving that plenty of people are up for a project. Selling your house by auction can also take most of the stress out of preparing your property for a sale where buyers expect it to be in a brand new condition. 

Many buyers also show an interest in more unconventional properties at auctions. At SDL Property Auctions, we’ve certainly sold our fair share of unique and distinctive lots. In November 2022, we sold a nuclear bunker in Lincolnshire, which not only generated a lot of interest from potential buyers up and down the country, but it also quickly grabbed the attention of the national press, including the BBC and the Daily Mail. The seller bought the bunker for £12,500 in 2003 and sold it for £31,000 in our auction, giving them a profit of £18,500. So, if you’re looking to earn a profit from your property, you might find that unusual properties or those requiring a lot of work might even get more attention at auction than a finished home would.

Negotiate a suitable reserve price

An important part of selling a property by auction, the reserve price is the minimum price that you are willing to accept for your property. Usually, this is decided between the seller and the auctioneer before going ahead with the sale – so don’t be afraid to negotiate if you feel you need to. With this in place you’ll only need to sell your property once it meets or exceeds this price, giving you the same confidence and control you have when accepting offers on the open market, while bidders compete to offer you the highest price they can.

However, we would recommend doing some additional research to ensure you’ll be happy with the reserve price of your property. As mentioned, you can negotiate this with the auctioneer to increase this by a small amount. Whether your property is being sold as a family home or commercial property, taking the appropriate steps to ensure it sells for the right price can help to generate interest, as there will be more justification for what the property is worth. Generally, we advise finding a balance between an amount where you believe your property will most likely sell and isn’t overpriced, while still being content that you’ve sold it for a good price.

Whilst doing your research, we also recommend gaining an understanding on the guide price. With the reserve price being a confidential figure only known to you and the auctioneer, the guide price is the one called out at the auction. This figure is usually 10% below the reserve. Don’t panic at how low the auctioneer has set the price – as this is what is needed to drive interest and push the sale. But if you have any further questions on pricing, get in touch with one of our property auction experts at SDL Property Auctions. With years of experience, we can advise you on the best price for your property to help you reach a level of profit you will be happy with. 

Market your property across platforms

More often than not, most successful auction sales start with effective marketing, which means that you, or the company you’re selling the property through, should promote it to as many potential buyers as possible – as having more bidders can increase the likelihood of earning a high profit for the property you’re selling by auction. 

If you decide to sell through our team at SDL Property Auctions, we take this step in the selling process seriously, and list all our properties on our Property Finder, as well as on the UK’s leading property website, Rightmove, which has an average of 141 million monthly visits. We also advertise in local newspapers and magazines for the area you’re selling your property in. Of course, visibility can only do so much, so in-person viewings can also be arranged to allow potential buyers to see the property and decide how high they’re willing to bid for the property. 

If you’re interested in selling with us, take a look at the properties in our upcoming property auctions to get a feel for the general style of our listings and how your own lot would be marketed in the run up to the auction. 

Increase the value of your property

From small cosmetic details to large home extensions, if you’re looking to add value to your home before selling, then there are some improvements you can make to help with this. Featuring a wide range of tips and advice from our property experts at SDL Property Auctions, take a look at our blog on the best ways to increase the value of your property. 

Sell at a profit with SDL Property Auctions

Whether you have a picture-perfect property, or one that needs some TLC, our team would love to see your property and help you where we can. If you’re interested in selling your property by auction with us, you can request a free sales valuation. However, if you have any questions, feel free to fill in our contact form and we’ll be in touch.