A sale is a sale, however you sell it, so provided that your vendor gets the best price for their property – and you, as the agent, receive a decent fee, going to auction may, for some properties, be a route worth taking.
Establishing an auction division takes years of experience at the rostrum, time and money, but estate agents now have several options to enter selected properties for auction.
The services differ, but the common major advantage is that they handle all the legal requirements of auction sales, so all the estate agent has to do is refer the instruction and await the commission!
LEADERS IN THE FIELD
One of the best known traditional auctioneers is Clive Emson Auctions, with five strategically placed auction rooms, covering southern England from Essex to Cornwall, with eight auction series a year, offering properties directly listed as well as from agent referrals.
We have 850 estate agents who refer properties to us. They know that local and national advertising will create much more interest. James Emson, Clive Emson Auctions.
Managing Director James Emson, says, “We have 850 estate agents who refer properties to us. They know that the advertising – local and national – and on property portals will create much more interest than offering one or two lots in a local area. By having larger auctions they can be assured that no expense is spared for promotion – we produce 20,000 catalogues for each auction.”
Network Auctions, NAVA Auction House of the Year, operates nationally, with auction events in London (Grosvenor House on Park Lane) and Birmingham (Andrews Stadium), having launched its business model to provide a simple route to market for their partner agents to introduce properties, while they deal with all the legal aspects and logistics of conducting the auctions.
Auction House’s national system is set up so that any agent that has a property suitable for auction can sell it through any Auction House saleroom. Roger Lake, Chief Executive, says, “All we only require is a phone call for the lead to be passed over, we carry out the appraisal, list the instruction, market the property, pull together the legal pack, add it into our catalogue and auction the property.”
Pattinson Auction is part of Pattinson Estate Agents, with 200 staff across the North East. Since diversifying 20 years ago into auctions, they have helped hundreds of householders and to sell their properties.
Pattinson offers estate agents in the North East agents a more streamlined approach to selling at auction, with a personalised login area to manage referrals, sales and viewings and complete all the paperwork.
SDL Auctions (incorporating Graham Penny and SDL Bigwood) holds auctions in Birmingham, Derby, Nottingham and Leicester. They report that one of the most significant changes to property auctions has been their accessibility to orthodox buyers and sellers – which led to many more estate agents selling at auctions on a joint agency basis.
We provide an opportunity to estate agents who have no experience with auctions to discover a new revenue stream and we support them all the way. Jamie Cooke, IAM Sold.
IAM Sold offers a full range of auction services, online and at venues, working with 1100 estate agents. Jamie Cooke says, “We provide an opportunity to estate agents who have no experience with auctions to discover a new revenue stream and we supply advice and support every step of the way.”
COSTS AND COMMITMENT
Network Auctions’ Toby Limbrick says, “In return for comprehensive training, marketing and PR support and the creation of a co-branded auction department we ask for a three year commitment – licences cost £116.50 per quarter so partners are comfortably in profit when they sell their first lot.
We split commissions 70/30 in favour of our partners. Auction fees are higher than sole agency rates, typically 2.5% so the agent has a 1.75% share. Toby Limbrick, Network Auctions.
Jamie Cooke at IAM Sold says that partner agents don’t pay a fee. “We work on the principle that if we help our partners to succeed we will all succeed. We generally work on a 50/50 split of the fee – we have paid over £18m of fees to agents.”
Clive Emson does not impose a joining fee or a long term commitment, “All they need to do is refer a property to us, they can hold auction catalogues in their offices and if they show one of their purchasers a lot which is for letting or refurbishment and they need an agent, there is a fair chance they will get business from them in the long run either for resale or management.
“Equally, if we are asked by the public to go and look at a property and we feel it is not suitable for auction we will refer it back to the local agents within the area without asking for any commission in return.
“Agents receive 50 per cent of our commission, our standard fee is three per cent so in the majority of cases they receive just as much as if they sell direct. Last year we paid £1 million to referring agents.” Pattinson Auction says, “Most auction sales are completed with 28 days, meaning quick returns for agents.
Pattinson offers 2.5 per cent commission, an average of £2,500 + VAT per sale, it’s free to sign up as an agent.”
Auction House partners don’t pay a membership fee, says Roger Lake, “We have removed all barriers, agents can work with us on a one off basis or more closely. We provide web pages, vendor pack leaflets etc. to assist their pitch. Our learning is that the willingness and motivation to refer comes from strong local relationships that develop between the Partner Agent and their Auction House auctioneer.
Commission is normally 50 per cent of the auction commission.”
SDL Auctions says, “We are totally flexible and it doesn’t matter if an Agent has just one property to sell as a one off or several on a regular basis, we are happy to split our sales commission 50/50 with all joint agents.”
GOOD NEWS STORIES
We all like a happy ending and auctions can bring some extremely happy ones. Toby Limbrick became quite misty eyed, recalling the sale of a bungalow with development potential through an auction partner, Richard Godsell in Christchurch. “A family dispute produced constant abortive sales, so auction was recommended to achieve closure. Richard Godsell introduced local buyers while our investor database produced interest from around the country. At the auction fierce competition pushed the price up from a reserve of £350,000 to £585,000 on the fall of the gavel. A fabulous demonstration of local buyers competing with London investors, result: the best price!”
“We split commissions 70/30 in favour of our partners. Auction fees are higher than sole agency rates, typically 2.5 per cent. That equates to a 1.75 per cent share.”
SDL Auctions was instructed by a Joint Agent to sell a three storey property, converted into three self-contained flats. The property needed complete modernisation so obtaining a mortgage could have proved difficult. The marketing period showed very strong interest and from a guide of £150,000 a sale was secured at £220,000.”
James Emson says, “One of our best stories is a Martello Tower on a beach; it had been on the market through private treaty for £140,000 for six months. My advice was to put it into auction at £140,000, which they did, saying that ‘surely at auction it will go for less!’ We showed 147 people around and sold it three weeks after instruction for £267,000!”
Finally, Roger Lake recalled the sale of a former working man’s club, a substantial building in need of significant works, which had been referred by a single branch independent estate agent with no experience in handling this type of opportunity, “We sold it and they earned £4,500!”
Funding auction purchases
It’s one thing holding auctions – quite another to make buying easy for bidders. Scott Hendry at specialist auction finance provider Together, says that buyers need to be confident to make their bids for auction properties.
Our team attends auctions across the UK, with 300 auctions in the last 12 months alone, providing customers with a total of over £82million in the 12 months to 31 March 2016 – an increase of 40 per cent on the previous year.
However, our dealings with bidders often start before the auction itself because of our common sense approach to lending. For people to be able to bid with confidence at an auction and for them to be attractive to sellers, they need to know, before they pick up their paddle, how much they can borrow and how quickly they can access the funds.
This is why at Together we can confirm these details with clients ahead of the auction and this puts them in a strong position to be recognised as a viable buyer that can complete on the sale within the 28 days.
Our auction finance is short term lending with a three to 12 month repayment period and it’s crucial for those buying at auction to have access fast and flexible finance, as often competition for the best properties is fierce.
A seller needs to be aware of how the buyer intends to finance the purchase to ensure everything runs smoothly during the sale. Many mainstream mortgage lenders just can’t turn a request around quickly enough to meet auction deadlines.
Buyers also need to leave a 10 per cent deposit on the day, and at that point, the sale is legally binding. If funds aren’t delivered in time for completion, the buyer will lose the deposit and could also face penalties, so working with a lender that’s really familiar with the nuances of the auction marketplace provides peace of mind, and that’s priceless.