Does A Property Sell for Less at Auction?

Posted by Clive Emson Auctioneers on 6th June 2023 -

When discussing the best way to sell your home, it’s common to hear the throwaway comment that “properties sell for less at auction.” The reality is that a property, site or plot that is ideally suited to an auction sale will often attract an excellent price (often greater than the perceived market value), where competitive bidding and the expediency of the sale attract both professional buyers and those keen to find a good-value development or restoration opportunity.

Remember, your property is worth what a buyer is willing to pay for it! Much depends on the nature of the property and the guide and reserve prices you set with the auctioneer, but on average, UK properties can achieve upwards of 110% of their market value.

High-quality marketing materials, in-depth video tours and comprehensive legal packs can all support a quick auction sale at a price beyond your expectations, provided a bid is submitted at or above your reserve; you’ll complete within 20 working days.

Looking for a FREE independent auction appraisal to see how much your property can sell for? Let us know the details of your property and we’ll provide you with our recommendations for the guide price and reserve price. Get in touch here.

The Bid Battle: How Auctions Drive Asset Prices Up

Auctions have long been recognised as a powerful mechanism for buying and selling all types of assets, from fine art and real estate to collectables and automobiles. While auctions provide an efficient and transparent way of determining the true value of an asset, they often exhibit a unique characteristic – they tend to drive prices up. Here’s how:

Competitive Bidding

Competitive bidding is perhaps the main driver of prices at auctions. If your chosen auctioneer has a great pool of buyers, the desire to outbid rivals and secure the desired asset can lead to a higher price. The competitive nature of auctions generates a sense of urgency and the dreaded FOMO (fear of missing out), prompting participants to work harder to secure the property and realise its potential.

Related article: Should I auction my property?

Emotional Factors

If you’ve ever been to an auction, you can see that emotions can play a significant role in auction dynamics. Auctions are often quite exciting for all parties and the fear of losing out on a highly sought-after item can trigger an emotional response to secure a property that they love. We’re seeing plenty of buyers relocating to capitalise on the high prices and secure their forever home – which can add to the emotion of the auction and seemingly ‘raise the stakes.’

Social Proof and Herding Behaviour

Auctions can create an environment of social proof, where participants are influenced by the actions of others. When bidders witness others actively bidding and driving up the price, they may interpret it as a sign of the asset’s value. This psychological phenomenon can trigger herding behaviour, where participants follow the crowd, bidding higher due to the perceived consensus on an item’s worth. This social reinforcement further fuels the upward momentum to achieve the true market value.

The phenomenon of ‘Anchoring Bias’

Anchoring bias refers to the tendency of individuals to rely heavily on the first piece of information they receive when making decisions. In auctions, the auctioneer’s guide price, the suggested starting price, acts as an anchor. Bidders often use this reference point as a basis for their subsequent bidding. As a result, the anchor establishes a psychological baseline that increases prices to full market value.

As we can see – the dynamics of an auction actually work in the seller’s favour – especially if you have a desirable property with heaps of potential.

How Does Pricing Work on Auction Properties?

If you are considering selling a property via auction, it’s important that you draw on the experience of a reputable auctioneer, who will provide guidance while you determine the best pricing to meet your objectives.

Experienced Regional Auctioneers have extensive expertise and understand local market conditions, demand, and the guide price that will attract the greatest interest – more interested bidders typically mean more bids and a higher sale price.

Selling at auction is increasingly popular since the efficiency of the sale process removes much of the frustration associated with lengthy delays standard in treaty sales, including gazumping.

Property Auction Guide Prices and Reserve Prices

When your property is marketed, it will state a guide price. The guide price is a rough indication of the reserve which is the minimum the auctioneer can sell the property for.

Guide prices depend on the valuation of the property at the time of the auction and are there to help buyers decide whether to bid on the lot as it is indicative of the Seller’s minimum expectation

The reserve price is private between you and the auctioneer, although they will not accept any offer on the day that doesn’t meet or exceed your reserve.

Auction Sale Prices

The guide and reserve figures are recommended for a pre-auction marketing campaign. If there are, however, two or more prospective buyers bidding on the Lot then the final selling price may very well exceed the reserve and, indeed, the highest guide price quoted. I would strongly advise that pre-auction negotiations are not based on these figures without first testing the market through a carefully co-ordinated auction initiative.

If the reserve price is not met, the property is not sold, although around 80% of properties sell at their first auction, at or above the reserve price.

Related reading: Read our full guide on selling your property via auction 

Achieving the best price: Choose your auctioneer with caution!

The primary factors influencing your sale are the auctioneer and the property auction house you select. Auctioneers can also discuss the likely sale price they expect your property to achieve based on experience and current market demand.

Auctioneers manage most aspects of the deal, including:

• Publishing property particulars, guide prices and auction details.
• Registering prospective bidders prior to the auction day.
• Marketing the property to the widest audiences and potential buyers.

In most cases, a property with an attractive guide price, a competitive bidding system and a limited time period will achieve positive results at or above a similar pricing level you would expect through a private treaty sale for the right property

How to Choose the Best Auction House for Your Property Sale

A capable auctioneer will be a pivotal factor in determining a reasonable price, advertising your property to registered buyers who are ready to proceed, and producing high-quality marketing.

Transparency and honesty are key elements of property auctions and reflected in the detailed property particulars, often with a video tour, ensuring potential bidders are equipped with all the information they need to decide whether to enter a bid.

When selecting an auction house, we advise looking for experience, regular auctions, a strong track record of successful sales, and knowledge of the market in your region.

Why does your choice of auction house affect the price your property achieves? Because a property auction specialist such as Clive Emson Auctioneers will:

• Have an active database of pre-registered buyers, often with both developers and professional investors keen to purchase properties with renovation potential within their preferred locations.
• A great database of first time auction buyers, who will be helped and assisted throughout the process
• Produce quality marketing with clear photography, video walk-throughs and floor plans, ensuring buyers are not deterred by vague information or blurry imagery.
• Use negotiating skills and efficient bidding management processes, offering good customer service and help prospective bidders with further information or organise viewings

Since property auctions are now available online, location isn’t so much of a factor. Still, an auctioneer who routinely manages auctions within the same area will have an engaged list of registered buyers and be better placed to offer guidance with setting your guide price.

At Clive Emson Auctioneers, We have over the last 30 years built solid relationships with local and national media owners – from local newspapers to National radio brands – as well as a growing list of buyers. This ensures our media coverage, campaigns and other marketing strategies get the very best possible outcomes for our sellers and our Auctions.

Average Prices Achieved at Property Auctions

As we have explained, properties can sell for a wide range of prices at auction depending on the interest, auctioneer, marketing quality, guide price, reserve price and the location and condition of the residence.

It is a common misconception that auction properties are all sold cheaply or below market value since those well suited to the auction environment often achieve a much higher price than would have been anticipated through a private treaty sale.

This, combined with the fact that auctions offer a fast, convenient and certain way to sell – make auctions an attractive proposition for sellers, but if in any doubt, we suggest contacting our specialist property auctioneers for more insights into what your property might reasonably be expected to reach.

Read article on Clive Emson website

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