Auction or private treaty when you need to sell quickly
An auction does not get you a higher price. It gets you a certain one, on a fixed date, and that is a different product.
An auction converts an open-ended marketing process into a dated event. The property is marketed for a fixed period, bids are received either online over a set window or in a room on a set day, and the successful bid forms a binding contract immediately.
For a seller with a deadline, that certainty is the product. For a seller without one, it is usually a worse outcome than private treaty, because competitive tension is created artificially rather than by the market.
The costs on each side
Traditional auctions charge the seller an entry fee and a commission, and the buyer pays a deposit on the fall of the hammer. Modern method of auction and conditional auction formats shift the cost: the buyer pays a substantial non-refundable reservation fee, often 4–5% plus VAT, and the seller may pay little or nothing.
That shift is worth understanding, because it changes what the property is worth to a buyer. A reservation fee of 5% on top of the price means a buyer's effective cost is 5% higher than the bid, which suppresses bids. A property that looks like it sold cheaply at conditional auction may have cost the buyer more than the market price.
- Traditional auction: seller pays entry and commission, buyer pays 10% deposit, completion typically 28 days
- Conditional auction: buyer pays a non-refundable reservation fee, completion window typically 28–56 days
- Reserve price: the figure below which the property will not sell, agreed in advance and confidential
- Guide price: a marketing figure, often set below the reserve to attract interest, and not binding on anyone
When auction wins
Auction works best for properties that are hard to sell conventionally: those needing work, non-standard construction, short leases, tenanted property, or anything where a mortgage lender would be difficult. It also works when the seller needs a definite completion date rather than a hopeful one.
It works less well for a well-presented property in a popular area, where a conventional sale would attract competing buyers and a higher price. Sending a desirable property to auction frequently means selling it for less than an open market campaign would have achieved.
The reserve, and the risk of setting it wrong
The reserve is the mechanism that protects you, and setting it too high is the most common mistake. A property that fails to reach its reserve is withdrawn unsold, having spent its marketing budget, and it returns to the market with a visible failure attached to it.
Setting the reserve at the genuine minimum you would accept — not the figure you hope for — is what makes an auction work. If the reserve is realistic, the property sells; if it is aspirational, you have paid for a campaign that achieved nothing.
Common questions
- Can I withdraw a property from auction before it is sold?
- Yes, before the auction takes place, but you will normally forfeit the entry fee and may owe commission depending on the terms you signed. Once the hammer falls at or above the reserve, the sale is binding on both parties and you cannot withdraw without being in breach of contract.
- What happens if a property does not reach its reserve?
- It is withdrawn unsold. The auctioneer may then negotiate with the highest bidder, and sales are frequently agreed shortly afterwards at or near the reserve. If it does not sell, you can relist it for a later auction, but you will pay another entry fee and the property will carry the history of having failed to sell.