Online auctions press all the right buttons
Auctions are gaining traction in the residential market says Andrea Kirkby, but it’s online auctions that are really changing the marketplace.
It’s striking that the auction space seems much more online-friendly than high street agency. Many agents still identify online agency as ‘the enemy’.
On the other hand, quite traditional auction firms are now going the online route. That may be because they see the ballroom venue clearly as a cost; they don’t own their own venues. However, it’s also because ninety per cent of the business doesn’t happen in the ballroom.
There’s a place for ballroom and there’s a place for online; properties often go in the catalogue but sell online. We believe in giving vendors more choice. Jamie Cooke, IAM Sold.
Jamie Cooke, MD of IAM Sold, says, “The ballroom auction is only about two per cent of the process. It’s the final piece of the puzzle. The marketing, the build-up, is all human, personal interaction” – and it all takes place outside the ballroom.
“So, though the final auction moves from the ballroom to online delivery, the rest of the business isn’t affected.
Neil Singer, founder of Singer Vielle and the technology platform Clicktopurchase, goes even further. For him, the question is “How do we close this deal?” That might be a private treaty sale, best offers, or a full-on auction.
“So we have created a complete toolbox for the seller, whatever method of online sale they choose.”
Clicktopurchase also says that it is able to deliver full online transactional capacity for all types of deal.
The drift to online auctions
More and more UK auctions are now going down the online route. At Pattinson Auction, Justin Beckwith says, “Seventy-five per cent of our transactions now are being done online”, one factor that made Pattinson Auction the fastest growing auction house of 2017.
Jamie Cooke, too, says online is winning. “Seventy per cent of the sales we do are online. In future, we’re going to be doing less and less in the room and more and more online.” However, he also says the mixed model can make it difficult to disentangle the two; quite often properties go in the catalogue but are actually sold online.
Jamie believes it’s still important for auctioneers to offer a choice of both ballroom and online routes. “There’s a place for ballroom and there’s a place for online and we’re a multidisciplinary business and believe in giving vendors more choice.”
While most houses offer proxy bidding online (like eBay), Clicktopurchase offers a real-time bidding war which puts the ballroom online.
Completing the sale
Clicktopurchase goes further. Neil Singer says, “We wanted to enable buyers to exchange contracts online – click a button and legally purchase a property online,” through a private treaty sale, best offers, or full-on auction. While most online auctions then go to a traditional paper-based completion, Clicktopurchase delivers the whole exchange process online, auction and non-auction, including using blockchain and encryption technologies.
That not only streamlines the process; it offers a great audit trail, too. Singer believes adoption of the technology in the legal and property world is accelerating, with the Law Commission giving the okay to e-signatures and increasing use of blockchain and encryption tech for business. “Everything is going to go online eventually,” he adds.
On sale, whenever suits you
Online auctions offer significant advantages, of which saving the money spent on a ballroom venue is the very least. Justin Beckwith believes its flexibility is the key benefit for vendors. “Online auctions have huge flexibility with regard to timing. It’s March 2nd, you’ve missed the March catalogue, you can go at the end of April – that’s two months away. With an online auction, you can go whenever you’re ready.” That gives control to the vendor and their agent.
Jamie Cooke says that while ballroom auctions can work well, the big problem is that vendors’ individual needs come second to the timing of catalogues and auctions. “We would be holding back properties for the event, because we wanted the event to look good, that didn’t always suit the vendors.” An online auction can be arranged to suit a single vendor, without needing to showcase other properties; the whole process can be customised – one reason why most of LSL’s auctions with IAM Sold go the online route.
Online auctions can also change the competitive environment, though. Previously, if an auction house didn’t have ballroom auctions in a given area, it wasn’t really competitive. Now, online auctions allow them to compete nationally, regardless of their original locations. For instance, Justin Beckwith says, “In the North-East, we have an in-room auction every single month, whereas everything we do in London is online.”
Selling the benefits
IAM Sold has a similar distribution; Jamie Cooke says, “For half the country we don’t have live auctions. South of Birmingham, all our sales are online.” That suits the nature of the market in the South East, too. “It’s a faster market,” he explains, “and so online suits the way properties are sold.”
That suggests ballroom-only auctioneers won’t just lose out on the additional flexibility of online auctions, they’ll also see increased competition in their patch. It’s easy to see why an agent like Andrew Grant, which ran its own auctions in-house, has now partnered with IAM Sold.
However, selling auctions to vendors isn’t always easy for agents. “Sometimes,” Jamie Cooke says, “sellers think it’s a dirty word.” That’s why agents need to be able to sell the benefits – for instance, much faster completion. The average private treaty sale takes from 112 to 126 days, three times longer than auctions, with an average of just 49 days.
Horses for courses?
Online auctions also bring in a different crowd from the ballroom. Robin Rathore of Bamboo notes that the demographic of buyers at auction changes markedly when auctions transfer from the ballroom to the online environment, with many more women buying online than in the auction room. And the type of buyer changes too, with more owner-occupiers.
The demographic of buyers changes markedly when auctions transfer from the ballroom to an online environment, with many more women buying online than in the room. Robin Rathore, Bamboo.
Jamie Cooke hasn’t noticed a changed gender mix but wouldn’t be surprised if that was the case. He says, “In a ballroom you’re dealing with serial, professional investors who are often connected with the building trade, whereas online auctions have a more diverse buying type.” Iam sold’s experience is that owner occupiers now account for over 50 per cent of all their online auction sales, while buy-to-let landlords account for 18 per cent. That’s true for vendors as well. Pattinson Auction sees over 60 per cent of transactions now coming from standard home movers, not the stereotypical probate sales.
That’s helping online auctions grow fast and making them much more relevant to the average high street estate agency. You can add to that the fact that although not all online auctions are ‘modern method’, online gives agents exposure to both traditional, unconditional auctions (at which the fall of the gavel constitutes exchange of contracts), and conditional auctions (which allow bidders a month to secure finance).
Online auctions also seem to have attracted the interest of housebuilders, with both BidX1 and Allsop winning business. Irish housebuilders seem to have been more interested than the English, but online is useful for agents and developers who sell to an international investor base. That’s one reason Allsop gained traction in the London market. However, it still feels like early days for this market sector.
Agents – get on board!
There’s a convincing case for agents to use online auctions. Like traditional auctions, they deliver better fee income than a traditional sale (as Justin Beckwith (left) says, “We pay the agent quite a hefty fee, so it’s a 100 per cent no-brainer for agents”). Plus, as Robin Rathore points out, if auction leads to a much quicker completion, it will deliver the agent’s commission much more quickly, too. But with an online auction, that process can start as soon as the vendor and agent have put all the documentation in place – it doesn’t have to wait for a catalogue and the property doesn’t have to share the limelight with any others.
75 per cent of our transactions now are being done online. In the North-East, we have an in-room auction every single month, whereas everything we do in London is online. Justin Beckwith, Pattinson National Auction.
While auction houses offer a large amount of hand-holding, they’re all aware that agents want to protect their key relationships. Robin Rathore promises, “We don’t disrupt the agent’s relationship with their vendor”, Bamboo simply delivers the auction process, but the agent remains in charge of marketing and presenting the property.
Even agents who have successfully run their own auctions for years are now teaming up to make online auctions work for them. For instance, Norwich based agent Brown & Co, with four ballroom auctions a year, now runs an extensive list of online auctions using EIG’s platform. Hunters has got together with Bamboo to offer an increasing range of online auctions and continues to offer auctions in the room as well.
Twenty years ago, most people never went anywhere near an auction room unless they were antiques dealers or art buyers. Nowadays, just about everyone uses eBay or another online auction site. And while they may only be buying vintage teddy bears or second-hand furniture, that means they’re used to that style of transaction. How long will it be until purchasing a property in an online auction becomes second nature, too?
