When it comes to buying and selling property, the two main options you can choose from is using estate agents or property auctions. Everyone’s situation differs depending on the circumstances of the purchase or sale. Therefore, it is essential to consider a couple of factors to determine the most suitable method that best suits your current situation.
There can be considerable differences between both methods, thus checking out and understanding each process is a good starting point. It will help you ascertain the method of getting you a reasonable price – whether buying or selling.
This blog looks at five basic, yet critical differences between your estate agents and online property auctions.
The Marketing Process
As far as marketing is concerned, property auctioneers and estate agents use similar strategies, so there isn’t much to compare. Property listings are added to popular property search websites such as Rightmove to reach a broad audience as part of the marketing strategy.
On average, properties are listed on our website 4 to 6 weeks before the auction date. This allows the property to build interest and put to market before the auction begins. This is the stage where things start to become different with estate agents.
Speed of Sale
When dealing with estate agents, the buyer makes an offer, waits for acceptance, conducts their due diligence, and then exchanges. However, there is not any fixed timescale set for exchange or completion, and current reports state that from sale agreed to completion could take several months on average.
On the other hand, in auctioneering, you first view the property; perform due diligence, bid, and then wait to see how your bid performs.
On the other hand, Property Auctions will see contract exchange occur on the fall of the hammer on the auction end period. If you are the highest bidder and above the set reserve price, then completion timescale typically occurs 28 days later. Therefore, there is no faster way to sell your property.
Success & Certainty of Sale
Property auctions are rapidly growing as an alternative method to buying or selling a property. Reports show the success rates can have grown to over 9 out of 10 properties sold at auction.
In addition, one attractive reason for this is that the auction delivers a legally binding sale. Once the hammer fails, a binding contract is created at auction, the buyer has to pay a 10% reservation fee deposit, so neither party can pull out of the sale or try to renegotiate the price. Thus, the success rates from auction through to completion are far higher than with traditional estate agents.
Another notable difference is how estate agents and auctioneers approach valuing a property. Estate agents offer an asking price for the property, while auctioneers start with a guide price.
An estate agent will normally in most cases suggest a higher price for the property and ask buyers to make offers at or below the asking price. As such, if you make an amount close to what the estate agents are asking (above or slightly below the asking price), they might accept your offer. If estate agents have not received any other competitive offers, then they may also advise the seller to lower this asking price, to create more interest from buyers
By comparison, the guide price set by the auctioneers is usually a more attractive price that aims to encourage potential buyers to bid.
It is worth noting that the guide price is generally set below the property’s market value, and it is normally an indication of the minimum amount a seller hopes to achieve or how much the property is worth. The level of interest in the bidders sets the property’s price, and not precisely the guide price.
Therefore, the key feature of auction is the competitive bidding process, which helps drives the property price up to achieve the best possible final selling price.
Expect to pay a commission of between 0.5% and 2% depending on what you agree with the estate agent. The biggest determiner of the % you will pay your estate agent is based on whether it’s a joint or sole agency. This percentage covers viewings, marketing, offer negotiations, and sale activities.
When dealing with property auctions, we don’t provide a charge to list your property for auction with us and if the property does not sell, you still don’t pay anything. Selling by method of buyer premium also means no seller fees, but the buyer is required to pay an additional fee instead to cover administration costs. Note that as a buyer the administration charges are paid together with the 10% deposit reservation upon the fall of the gavel.
What’s The Best Method?
Based on the above key differences, it all boils down to your priorities and what approach provides you the most comfort. Focus on striking a balance between the pricing strategy, the fees, and the buying process while keeping in mind that the timelines also differ.