The Disadvantages of Selling Property by Auction

Disadvantages of selling property at auction house image by hans slegers from Fotolia.com

Auctions are a popular method of selling off property because of the widespread belief that a seller can often attract very good offers on a property of debatable value. It is important to note that auctions work best in a healthy, yet capricious market where a buyer may have no upper limit on price. Often, buyers would offer amounts in excess of what the seller anticipated in a competitive atmosphere, and within a relatively shorter time frame. However, as advantageous as auctioning may seem as a marketing method, there are considerable pitfalls to contemplate.

Cost

The biggest drawback to selling your property by auction is the cost. Most times overlooked, the expense of auctioning off your property can be more than whatever profit you, as a seller, might look to gain from the sale. An official auction involves a commission for selling at the auction, a fixed fee to cover the auctioneer's costs and, if an appraisal of the property is necessary (depending on the auction, this may be required), payment of the appraiser's costs as well. So, even if your property is not sold at the auction, you still have fixed fees and costs to bear.

Volatility

Another big disadvantage to selling property by auction is the volatile nature of an auction. As much as this can work in your favor as a seller, it can also be a disaster as the market value of your property is virtually decided on the spot. Through bad luck, or lack of research on your part, the buyers at the auction may decide that your property is barely worth the asking price, or worse, much lower. This would result in your property being sold at a lesser price than anticipated, or even remaining unsold.

Publicity

Lastly, there is a negative public element to selling your property through an auction. Auctions are frequently considered to be the best method of determining market value of a property, and the feedback from buyers can result in a drop in market value of your property, even if you do not sell it. Furthermore, your property is exposed to examination by all and any interested buyers, which might be an invasion of your privacy.

References

• The Advisory.co.uk: Selling a House
• The Move Channel: Selling at Auction Advantages and Disadvantages