Why auctions are the answer in lean times

The Royal Institution of Chartered Surveyors (RICS) has reported that the number of homes for sale by each estate agent had fallen to an average record low of just 43 per branch. However, Louise Jefferies, Director of Business Development at property specialist SDL Group, argues that this should be seen as an opportunity for estate agents to bring about positive change and broaden their offering to encourage more sellers through the door.

You can’t have failed to notice the recent headlines about an impending property price drop. Add the RICS figures and it’s safe to say that there’s a degree of uncertainty in the market.

There are many highs, but it can be tough to be an estate agent, not least because of public perception. Research by Ipsos MORI found that only 25 per cent of people trust those working in the profession. That’s the same number as journalists, only a slightly higher trust rating than politicians on 21 per cent.

If a property sells too quickly, the seller will often complain that their property wasn’t valued at the right price and, if it takes too long, agents are accused of dragging their heels. Any problem in the chain is deemed to be the agent’s fault too. You often can’t win, which is why many in the industry have started to question whether a traditional approach to sales is enough in a turbulent market.

Auctioning a property is about three things: circumstance, potential and price.

To counteract this problem, many estate agents have spent the past few years reviewing their proposition and increasing the number of services they offer. It’s not unusual to see an agent that is able to handle everything from conveyancing to mortgage services. In all aspects of life, consumers have become accustomed to being provided with options, variety and service providers that can handle everything. We’re seeing a growing trend of auction services being added to that mix too.

THE RIGHT ROUTE

Auction businesses, like our own, partner with estate agents to help deliver auctions as a viable route to sale. It is most certainly a developing trend but a slow burning one, because there are still a lot of myths surrounding the auction process that both estate agents and sellers believe to be true.

The rise of property shows such as Homes Under the Hammer provide compulsive daytime viewing but they also perpetuate the myths. People believe that auctions are for dilapidated properties from desperate seller; that it’s much harder to get a mortgage; massive fees and a process that happens too fast.

These are misconceptions but the auction process isn’t right for everyone. Any good agent that is starting to offer auction services should be saying “no” when asked “is my property suitable for auction?” more than they say “yes”.

Auctioning a property is about three things – circumstance, potential and price. All three should be explored. Good candidates for auction tend to be vacant properties, sales that have fallen through, homes that need selling following a divorce, probate cases, high demand properties and buildings with structural issues.

THE NEED FOR SPEED

In terms of speed, earlier this year property website home.co.uk claimed that the average time taken to sell a property via private treaty is now 196 days, some media reports say it can be up to 10 months. That is compared to just 28 days via auction.

In addition, the traditional sales process has an average dropout rate of 30 per cent, whilst it’s just three per cent at auction, with buyers sacrificing their reservation fee if they pull out.

For estate agents, it’s about increasing their armoury to bring those sellers through the door who may otherwise have gone directly to an auction house – with the added bonus of being able to introduce them to additional services at the same time.

One thing that agents need to consider if they want to venture into the auctions market is that it should feel like a seamless process for the seller. That’s why any potential partner needs to spend time training their team to value for auction. Consumers are savvy and, ultimately, they shouldn’t feel like they are being outsourced to a third party as they are placing trust in the expertise of the agent.

We need to remember that for both seller and buyer, we’re dealing with what is possibly the biggest transaction of their lives. Both parties need to trust that they’re being given the best advice for their individual situation. Estate agents have offered lettings services alongside traditional sales for many years now and, if this current trend continues to grow, we could well see auctions joining that mainstream mix to create a new holy trinity of estate agency services and really open up the marketplace.