Most people choose to sell their property through private treaty, which often involves using an agent to help, but can be done privately. Other less common methods involve part-exchange or auction.
Private Treaty
The typical way to sell a property is by private treaty on the open market. The property will be advertised with an asking price and the buyer will submit an offer for you to consider if they want to purchase the property.
The exchange of contracts will only happen once the buyer has completed their research, arranged any mortgage necessary and asked all the questions they need with the help of a solicitor.
Both parties are only legally committed to the sale once the contracts are exchanged, up until this time if circumstances change, either the seller or the buyer can pull out.
If the seller is receiving multiple offers from multiple buyers, a ‘sealed bids’ situation may be proposed. This involves each prospective purchaser submitting their best and final offer. After the deadline, the agent and seller will review the best offers and decide how to proceed. They are likely to take the offer they believe to be best, but are not under any obligation to do so.
Auction
Selling a property can be a long process, so using an auction method to sell your property may suit you better. There are two types of auction (Traditional and Modern) that could be used and each has its own benefit.
Selling at auction is often suitable if:
- You need to sell the property quickly
- There are problems with the property that would put off a normal buyer such as:
- Structural issues with the building or the ground it is built on
- The property is in poor condition
- Legal technicalities at issue
- The property cannot be mortgaged for any reason
- The property is tenanted
- It is difficult to gain access to the property
- If price is not your only or primary consideration
Auctions are normally seen as an opportunity to buy or sell quickly, often below the true market value, however this is not always the case. Prices can often far exceed expectations if a bidding war begins due to multiple bidders being interested.
The auctioneer will normally set a guide price for the property giving an indication of the possible price the property may achieve. You can also set a reserve price, which is generally not disclosed, and is the minimum price you allow the auctioneer to sell the property for.
Traditional Auction
During a traditional auction, once the hammer falls, the buyer with the highest bid is committed to the purchase. The contract is ‘exchanged’ on the fall of the hammer, so from this point you cannot pull out. The deposit, normally 10% is payable at the same time – always check in advance what methods of payment are acceptable to the auctioneer. The buyer will also have to pay an auction premium or fee, which is normally a fixed amount stated in advance.
After the auction, you will then have 28 days to pay the 90% balance of the money and ‘complete’ the transaction. If for any reason, the buyer is unable to complete the transaction, you will be able to retain to the deposit monies that were paid.
Modern Method of Auction
This is also known as a conditional auction and offers a little more flexibility than the traditional auction process. At the end of the auction or once an offer has been accepted, the buyer will need to pay a non-refundable reservation fee. This reservation deposit will vary but is normally calculated as a percentage of the final selling price.
The buyer will then have an exclusive 28-day window to exchange contracts and then a further 28 days after that to complete the transaction. This differs from the traditional auction method where contracts are exchanged almost immediately.
The advantage is that the payment of the non-refundable reservation fee shows the buyer is financially invested in making the purchase. This is different to the usual sale process (Private Treaty), where the buyer can walk away from the purchase until the exchange of contracts, without financial loss. From a buyer point of view, it means the seller cannot change their mind about selling the property or change the price.
The reservation fee is not a part of payment of the purchase price, but is often offset against the sellers cost of marketing the property.
Part Exchanges
Some developers offer a part-exchange option for you to be able to sell your home to the developer when buying one of theirs in return. If you are looking to buy a new build home, this can be an effective way of connecting the sale and purchase process and removes a lot of worry.
The developer will value your current home and then, subject to any criteria they may apply, offer you a price to buy it from you. A good developer will offer a ‘fair’ price and arrange for independent valuations to take place in order to back up the offer they have made.
The advantages of selling this way are:
- You are buying and selling to the same company and therefore won’t risk getting stuck in a chain of buyers.
- The developer is doubly invested in making the process work
- You don’t need to worry about trying to find a buyer in time
- It is much simpler to organise the timing of the sale and purchase and so when your new property is ready to move in to, the sale of your old one can complete.
- You won’t have to pay selling agent fees
- The legal process will be simpler as both transactions are between the same people
- If for any reason the completion of your new home is delayed, you don’t need to worry about finding yourself temporarily homeless.
- The developer takes on the risk of selling on your old home.
- It is likely that the process will be simpler and therefore less stressful!
- Each developer will have their own criteria of eligibility for their schemes, which may also include mortgage offer incentives.
Note: part-exchange is not available if you are purchasing using the Help to Buy scheme.
Quick cash sale companies
There are a number of companies now that will offer to buy a property from you, often for cash and within a very short time scale. These companies are looking to buy a property below market value, which is how they make their profit and in return will offer a very quick sale.
This way of selling is generally only of interest to a seller who is already in a compromised position, for example they may have a pending repossession or may be going through a divorce and need to exit the property.
If you decide to use a quick sale company be sure that you do your research to understand how much your property is worth and therefore at what discount you may be selling. As with all transactions, check what additional charges there may be and do not sign any paperwork until it has been reviewed by your solicitor.
