Selling your home due to financial distress can be an incredibly emotional experience. Fortunately, auction houses can ease some of the burden by facilitating a fast and efficient sale.
Auctioneers are often perceived as the “grim reapers” or “undertakers” of the property world. This perception likely stems from their frequent involvement in the sale of deceased or insolvent estates. However, “nothing could be further from the truth,” says Greg Dart, executive director of The High Street Auction Company.
He explains that the industry has evolved significantly since auctions were viewed as the domain of distressed sales and a haven for opportunistic buyers seeking bargains. “The auction platform has the ability to unlock optimum market value for assets—distressed or otherwise,” says Dart.
“Auctioneers play an important role in rapidly unlocking true market value, freeing up much-needed funds to assist both executors and homeowners in financial distress.” As a result, auctions are increasingly being used to sell estates that are not limited to deceased owners.
There is also a misconception that auctioned properties do not achieve their true value. In reality, many auctioned homes fetch higher prices than those sold through traditional channels, which is especially reassuring for those facing financial hardship.
What is a distressed property?
This typically refers to a home where the owner is in arrears with their mortgage repayments and may be at risk of repossession by the bank.
What is an insolvent estate?
An estate is deemed insolvent when its liabilities exceed its assets. In such cases, the estate is placed under the control of a trustee who is responsible for recovering owed money—often through asset sales—to repay creditors.
Why use an auction house?
There are several advantages to selling your home at auction:
Speed: Auctions provide a much faster sales process compared to traditional methods—ideal for urgent sales.
Multiple buyers: Competitive bidding among several buyers can drive up the final price.
Reserve price: A minimum bid can be set to protect the seller from receiving too little.
Commission: Auctioneer fees are typically between 5%–7.5% of the final sale price, plus VAT.
Same-day confirmation: All bidders must meet certain conditions and pay a deposit beforehand, ensuring serious and qualified interest.
Comprehensive service: Auction houses often sell both the property and its contents, saving time and effort.
Voetstoots: Properties are sold “as is,” meaning sellers are not obligated to fix any issues.
Eviction responsibility: If the property is tenanted, the new owner assumes responsibility for eviction.
How to choose an auctioneer
Choosing a reputable auctioneer is crucial. Do your research, check reviews, and ask for referrals. Evaluate:
Track record: How often do they achieve higher-than-expected sale prices? What is their average sale volume?
Website: Do they list upcoming property auctions?
Marketing: How and where do they market the properties?
Viewings: How many days will your home be available for viewing before the auction?
Bidding process: What are the rules, and what reserve price do they suggest?
Costs: What fees will be passed on to you, the seller?
Should you attend the auction of your distressed property?
This depends on your emotional state. For some, attending can be enlightening. But if you're feeling anxious or deeply upset, watching the process may be distressing. Bidders are generally uninterested in the reasons behind the sale, and if the bidding starts slow, it might heighten your anxiety.
However, if you feel emotionally prepared, attending offers valuable insights:
You’ll better understand the bidding process.
You’ll learn how perceived value compares to actual sale value.
You’ll benefit from the transparency, as all bids are made publicly.
What buyers should know about purchasing a distressed property
It’s worth noting that buying a distressed or insolvent property can present a unique opportunity—if you know what to expect.
• Due diligence is key: Distressed homes are sold voetstoots (as is), which means buyers take on the property in its current condition, including any hidden defects. Always inspect the property beforehand and request access to supporting documents, if available.
• Financing may be tricky: Some financial institutions may be cautious about financing auction properties. Make sure your funding is pre-approved, especially if you plan to bid at auction.
• Understand the process: Auction rules differ from traditional sales. Deposits are usually required upfront, and sales are typically non-refundable. Familiarize yourself with the auctioneer’s terms and conditions before participating.
• It’s not always a ‘bargain’: While these properties can be more affordable, increased competition and renovation costs should be factored into your budget. Focus on value rather than just price.
For informed buyers, distressed sales can offer excellent long-term investment opportunities—provided you do your homework and approach the process with clarity.
