Selling Real Estate at Auction

By Emily Southey | 9 minute read

Interested in selling your home at auction? Then you’ll need to make sure you’re fully prepared. Below is a step-by-step guide to selling real estate at auction, including a list of pros and cons. By the end of this article, you’ll have a new understanding of how house auctions work and the benefits and drawbacks of selling your home through one.

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How to Sell a Home at Auction

Selling a home at auction is an excellent option for many homeowners. However, many sellers are unfamiliar with the process. As real estate auctions tend to move quickly, it’s important to understand how they work before starting the process. From finding a real estate auction company near you to negotiating the fee structure, keep reading to discover how to sell a home at auction. 

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1. Set a realistic timeline

Before putting your home up for auction, you’ll need to consider your ideal timeline. As mentioned, selling a home at auction tends to be quicker than selling a home the traditional way, so sellers must be ready for this. Keeping in mind that the entire auction process can take 30 days or less, you must choose an ideal auction date. This date should be far enough away that you have ample time to find an auction company and advertise your property (you usually want to start promoting the auction at least a month in advance).

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2. Find an auction company near you

The next step to selling a home at auction is to find an auction company near you. Not just any auction house will do. Rather, it’s crucial to find a qualified auctioneer (that is, one that specializes in real estate auctions). Research real estate auction companies online and be sure to read reviews or testimonials from sellers who have worked with them in the past. Finding a local auction house with experience auctioning off homes is of the utmost importance. To determine if a real estate auction company is right for you, ask them questions relating to the number of homes they’ve sold at auction, their marketing strategy for selling homes at auction, and their credentials. We also recommend asking about their fee structures, as selling a house at auction can come with hefty fees (not just for the buyer but for the seller, too). Sellers might be surprised to learn that some auction company commission rates are between 6% and 10% of the sale price, which is way above the average REALTOR®’s commission rate. Therefore, ask each prospective auction company what fees they charge and at what rates. It’s also worth asking if they are open to negotiating the fee structure (more on that below).

3. Negotiate the fee structure

Once you’ve found a real estate auction company you want to work with, it’s time to negotiate. Most auction houses are open to negotiating the fee structure with the seller. Doing so can significantly reduce the number of fees the seller is required to pay. As mentioned, a typical auctioneer commission rate can fall between 6% and 10%, but with the right negotiation tactic, you could cut this rate in half. Generally, an auction house’s fees include an advanced deposit, buyer’s premium, commission rate, and marketing costs. The former two are the responsibility of the buyer while the latter two are the responsibility of the seller. However, the seller can try to negotiate with the auctioneer to reduce their commission rate (for example, in exchange for raising the buyer’s premium) or to include other costs, like the marketing fees, with their commission. Ultimately, negotiations are crucial if you want to pay minimal fees to sell your house at auction.  

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4. Make a list of auction terms and conditions

Next, it’s time to create a list of auction terms and conditions. As the seller, you have the right to determine many of the rules and restrictions of the sale. For example, you get to decide on the type of auction, the reserve price (if applicable), and the bidding style. You can also work with the auction house to determine the starting bid price or the buyer’s premium fee. 

When it comes to choosing between a reserve or no reserve (absolute) auction, be sure to ask the auction company about a no-sale fee. Some auctioneers have no-sale fees, which are fees owed by the seller if the house does not sell. This is especially important if you are considering a reserve auction that gives you the right to reject the highest bid, regardless of the price. To determine which type of auction is right for you, you’ll need to consider your priorities along with the condition of the market. While reserve auctions give the seller more control over the sale and are generally less risky, no reserve auctions breed competition, which can lead to a higher purchase price. 

Another important auction term to consider is the type of purchases to allow. Some auctions are only open to cash bidders, while others permit financed purchases, allowing buyers to fund their purchases through mortgage loans. Although cash buyers offer plenty of benefits, prohibiting financed purchases can significantly narrow the pool of buyers. If you’re selling your home at auction in a buyer’s market when demand is already low, limiting your auction to cash bidders could be a risky move. 

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5. Market your home

Promoting your auction is critical, as a well-marketed auction is likely to attract more buyers and therefore more bids. Since you won’t have more than a month to promote your home, every second counts. We recommend coming up with a relevant marketing strategy and taking advantage of several marketing channels. For example, beyond simply listing your home on the auctioneer’s website, you could promote the auction on social media, create a dedicated website for the property, put an ad in the local newspaper, or print out signage and brochures to place around the neighbourhood.