8 reasons to use auctions
There’s an auction for every type of buyer, seller and estate agent, s ay s Lisa Isaacs, who discovers the perks are hard to ignore.
Sam Kinloch at Clive Emson Auctioneers has watched his business transform since 2020. “We have seen a huge increase in traffic to our website over the last few years, with somewhere in the region of 30,000 to 40,000 visits in the last three days of our most recent campaign.”
If you are the highest bidder at or above the reserve price when the timer reaches zero, you become the legally-obligated purchaser and that is enough to deter speculative buyers. Sam Kinloch, Clive Emson Auctioneers.
Although Sam agrees that some of the increases can be attributed to the changes in post-pandemic habits, he also feels auctions are no longer considered a ‘means of last resort’. “The whole auction process is now more accessible to anyone looking to purchase bricks and mortar. While some are still cash buyers, many auction purchasers borrow from banks and other financial institutions, and we have seen increases in first-time buyers and private individuals looking for their own home.”
Data from other auction houses concurs. The Essential Information Group (EIG) monitors the property auction market and has many auctioneer clients. EIG’s latest newsletter revealed a 23 per cent uplift in the number of properties offered at auction in the 12 months to February 2023. “This is a trend we have seen for the past 12 months and it is partly due to the fact that online auctions are now widely accepted,” says CEO David Sandeman. “We are seeing new entrants to the online auction marketplace as they do not need a physical auctioneer in a ballroom calling out the bids, or indeed a paper catalogue to present the lots. The barrier to entry for acting as an auctioneer has dramatically reduced.”
We are seeing new entrants to the online auction marketplace as they do not need a physical auctioneer in a ballroom calling out the bids, or indeed a paper catalogue to present the lots. David Sandeman, Essential Information Group.
The barrier that David mentions used to be estate agents and auctioneers operating as two separate entities but that is no longer the case. White label partnerships and mutually-agreeable arrangements – during which commission rates for agents are frequently higher than those earnt from private treaty sales – are now commonplace, as are online-only auctions.
Here are eight good reasons to offer auction sales for agents still reluctant to embrace the bid process:
1 More upfront information than the open market
While Home Information Packs are a distant memory, and the Buying and Selling Property Information dataset (BASPI) a work in progress, auctions offer buyers the most upfront information.
Justin Beckwith at Pattinson Auction says auctions can offer all parties ‘comfort and security’ by preparing a vital legal pack upfront. “Agents working with auctioneers can be assured that the sales process is secure and transparent. We prepare legal packs in advance and carry out due diligence on all buyers.”
Sellers can also be confident that the winning bid on the day of auction is the guaranteed sale price – no haggling down or lastminute reduction. Bryan Baxter, Auction House UK.
This freely-available detail supersedes the amount of upfront information currently available when buying via private treaty, and purchasers value this level of reassurance and certainty when decision making.
As well buyers finding new efficiencies when buying or selling at auction, Justin highlights that there are added benefits for agents too. “As well as preparing the legal packs, the Pattinson team also ensures the right marketing takes place, due diligence on all buyers is completed and deposits are taken from purchasers before they bid, which helps protect the agent against any fraudulent activity. This is all done in the background, leaving agents with more time to focus on other aspects of their business.”
2 Attract serious buyers, deter time-wasters and improve transaction security
Sam recognises the same auction benefits as Justin, citing the upfront legal pack as one way the auction process almost self-qualifies buyers and ensures only the most genuine purchasers engage with a property.
“While there will always be an element of window shopping, it is fair to say that auction is one of the best ways of sorting the wheat from the chaff,” says Sam. “The main reason for this is that all due diligence required is carried out prior to the auction. If you are the highest bidder at or above the reserve price when the timer reaches zero, you become the legally-obligated purchaser and that is enough to deter speculative buyers.
“An auction’s transparency – plus the advance legal documentation – allows buyers to make informed choices. After exchange of contracts, a standard completion usually takes place within 20 business days – this removes issues with buying chains and giving a high level of security to the sale,” concludes Sam.
Auctions really are pulling away in terms of transaction security. A case in point is Iamproperty’s statistics, which show its auction sales achieve a 95 per cent completion rate, compared with 70 per cent for private treaty sales.
3 Preserve a ‘no sale, no fee’ offering
Delivering a low-risk strategy to sellers is something agents are keen to maintain – we’ve all seen ‘no sale, no fee’ in a marketing headline – and the Modern Method of Auction (MMoA) presents a way for this to continue. Neil McDonald at Town & Country Property Auctions feels agents need to have another string to their selling bow – one that can counteract any market condition, solve any selling conundrum and come at no cost to the seller.
“We expect that if the market gets quieter on the private treaty side, agents will be recommending ‘no fee to vendor’ property auctions as an option to clients – especially when a quick sale is required or the property is un-mortgageable.”
Helping to promote the MMoA option to the masses is Iamproperty, who has just launched a direct-to-consumer campaign designed to raise awareness of the benefits of auctions, increase consumer demand and help partner agents win even more auction business.
4 Reach a wider audience of buyers
David says perceptions of auctions are changing fast – with a little help from a certain TV show. “Owner occupiers have definitely found a place in auction rooms. Thinking back to when I first entered the industry in the early 1980s, it was only dealers, investors and developers – with very few homebuyers.”
David adds that it was from the 1990s that we’ve seen a steady increase in the number of private individuals looking to buy a property at auction, either as their own home or as an investor. “TV shows such as Homes Under the Hammer have helped the general public get a better understanding of how the auction industry works, which gives them confidence.”
That’s not to say property developers, flippers and cash buyers aren’t active. On the contrary. Auctions are more likely to attract the type of buyer a High Street agent wouldn’t, with properties sold at auction reaching a wider audience than those sold via private treaty.
David also adds that the nature of properties coming up as lots is changing to meet the needs of all buyers: “Whilst uninhabitable properties do still come to the auction room, the vast majority merely need a bit of cleaning, redecoration or a minor refit to be ready for habitation,” thus appealing to a wide cross-section of purchasers.
Online auctions also have global appeal, as demonstrated by the statistics from Bamboo Auctions. As well as the team working with close to 1,000 estate agency branches across the UK, it has buyers registering from over 40 countries on a monthly basis.
Many buyers are put off ‘in-the-room’ traditional auctions where contracts are exchanged within minutes as they can instil a sense of panic or haste but with MMoA, the convenience and transparency of an auction is combined with a more leisurely approach to bids, exchange and completion – especially with events that are held online.
It’s a point laboured by Guy Charrison from Network Auctions. “In the last three years, all auctioneers have found that there are so many more regular buyers and sellers using auctions – the intimidation of the auction room is not felt when you are bidding online. This has definitely made auctions more mainstream and it’s clear that conditional auctions are taking market share from the private treaty market.”
Philip Farrell at Offr agrees that conditional MMoA auctions – which can last anything up to 21 days – have become commonplace thanks to their more easy-going nature and similarities with private treaty sales. These aspects may appeal to purchasers who prefer a measured approach and who need a mortgage, with the time to exchange and complete contracts around 56 days.
Most first-time buyers were unable to secure finance, but the time frames of conditional auctions allow for home loans to be arranged before exchange. Philip Farrell, Offr.
“Consumers are becoming more aware of the different types of sales in the marketplace,” says Philip. “Most first-time buyers, for example, were unable to secure finance to purchase an auction property but the time frames of conditional auctions allow for home loans to be arranged before exchange.”
6 Eliminate gazundering and gazumping
As a buyer, being gazumped at the final hurdle is one of the most heart-breaking scenarios possible. Conversely, the act of gazundering can be devastating for a seller, so who wouldn’t want to promise that these unethical practices won’t happen?
Bryan Baxter at Auction House UK and East Anglia says auctions offer a fair playing field, with guarantees of no gazundering or gazumping. “If you are the winning bidder, contracts exchange on the fall of the hammer and purchasers enter into a legally binding agreement, with no-one else entering into the picture at the last minute. Sellers can also be confident that the winning bid on the day of auction is the guaranteed sale price – no haggling down or last-minute reductions.”
Sellers can also be confident that the winning bid on the day of auction is the guaranteed sale price – no haggling down or lastminute reduction. Bryan Baxter, Auction House UK.
Bryan adds that for estate agents, the security of a sale at auction, with little to no risk of falling through, offers much-needed certainty and confidence in a challenging market.”
7 Keep cash flowing
While sellers are receptive to an auction sale where zero costs are incurred, Jamie Cooke at Iamproperty says many of its agents offer clients MMoA as a way of preserving cash flow and, ultimately, delivering secure and quicker payments. “With us, agents receive a percentage of the buyers’ fee, which can be higher than with a private treaty sale,” says Jamie.
Iamproperty offers agents their fee paid in seven days, from receipt of draft contract, and partner agents can also tap into auction-specific ‘no sale, no fee’ conveyancing. Jamie Cooke, Iamproperty.
“In addition, Iamproperty offers agents their fee paid in seven days, from receipt of draft contract, and partner agents can also tap into auction-specific ‘no sale, no fee’ conveyancing via Medway Law. This gives the agent and the seller the added security of knowing that they will get a quick and reliable conveyancing service, tailored for auction transactions.”
8 Beat the current 150 day ‘offer to completion’ timeframe
Although this figure may not be true of your agency, when Rightmove publishes statistics like this, it tends to find its way into the mainstream media. It’s a figure movers will use as a benchmark and honestly, it’s rather off-putting. “Home movers are more than tired of the long transaction times and the stress is enough to put someone off moving,” says Robin Rathore at Bamboo Auctions. “I believe that if we can make transactions faster and simpler, we might add greater liquidity to the market – people might move house more.”
Home movers are more than tired of the long transaction times… if a vendor wants a same-day completion, it can be accommodated in the legal pack and by the agent. Robin Rathore, Bamboo Auctions.
With Bamboo, agents can choose whether to offer a property for sale by traditional or conditional auction but Robin says he is seeing more traditional online auctions and even transactions that complete in 24 hours. “Whilst we have default durations built into the process, agents can tailor this on a property-by-property basis. This means that if a vendor wants a same-day completion, it can be accommodated in the legal pack and by the agent.”
Even the more gently bubbling MMoA can have super speedy results. Stuart Matthews at Miller Metcalfe estate agents, who uses Iamproperty’s MMoA service, enjoys quick turnaround times. “The 56-day completion timeframe of MMoA, based on standard properties, from receipt of draft contract, is a lot faster than the average completion time in our area.”
AGENTS IN ON THE AUCTION ACTION
Pattinson Auction
and Chestertons
AMY REYNOLDS
“Pattinson Auction has given Chestertons an additional revenue stream, supporting clients who have needed a quick sale but not wanted to compromise on the net result.
We have had auction-sceptic clients but once they receive the bid and exchange instantly, they are delighted, finding the process far less stressful than selling via private treaty. Giving people choice takes some of the stress out of the selling process.
The transition from traditional marketing to sale through Pattinson Auction is quick and straightforward.”
Iamproperty and
Stephen Tew Estate Agents
STEPHEN TEW
“I love working with Iamproperty because it gives you quick and easy cash flow, and certainly boosts your commission fees. It has saved me a lot of time. The number of properties going through with Iamproperty allows our sales progressors to focus on other properties. Once we achieve the sale, we can forget about it and Iamproperty deals with the rest, all the way through to completion. We used MMoA to list a property another agent had struggled to sell. We sold it within a couple of weeks and got great reviews. It gives us security knowing that when we agree a sale, we get paid the following week.”
