Despite being one of the BBC’s biggest daytime shows – with 1.5 million regular viewers, Homes Under the Hammer doesn’t do much to change the perception of property auctions. The usual band of buy-to-let investors, cash buyers and opportunistic builders are shown snapping up run down wrecks, where as the truth is quite different – property auctions are becoming much more mainstream. David Sandeman, the Founder and Managing Director of EIG, is well placed to make a call on the changing nature of property auctions. As head of the only portal to detail every property coming to auction and a major service provider to the auction industry, David has seen auction rooms filling up with a new type of buyer and seller – one more used to high street estate agency.
The inclusion of conditional sales opened up auctions to a whole new market. I estimate that in excess of 1250 lots will have been offered by the end of June. David Sandeman, EIG.
“The inclusion of conditional sales over the past eight years has opened auctions up to a new marketplace. As a result, the number of entrants and lots using conditional auctions is rapidly growing, I would estimate that in excess of 1,250 conditional residential lots will have been offered by the end of the first half of 2018.”
Conditional sales – also known as the modern method of auction – take the sting out of instant exchanges. The modern way is a comfortable hybrid, offering the decisiveness of a traditional auction and fixed timescales with more flexibility, room for negotiation and, crucially, the ability for buyers to fund a purchase with a mortgage.
“‘In the room’ sales remain steady and online conditional is expanding rapidly,” says David. “Vendors are starting to say they want their lots sold online, although ‘in the room’ auctions will remain as long as buyers and sellers want them.” David also says that feedback suggests homemovers are using auctions as ‘chain breakers’ – selling or buying to keep transactions simple and as stress free as possible.
Speaking to auctioneers and industry suppliers, it’s clear the demographic of the auction room – online or live – is changing and estate agents are increasingly using auctions to bolster their business model.
THE WHITE LABEL SERVICE
Companies like IAM Sold – a pioneer of the modern auction method – are aiming to get more ‘average Joe’ buyers and sellers to auction by working on an outsource basis with estate agents. It trades on the notion that people will be more open to an auction offered by a known agency brand over an unfamiliar auction house direct. IAM Sold is making good inroads too, with 2,300 estate agency branches across the UK enjoying its white-label online and ‘in the room’ auctions. Already almost half of its lots are bought for owner occupation instead of for investment or development.
“The market is changing at a rapid pace and agents need as many ways as possible to service the needs of clients,” says IAM Sold’s Managing Director, Jamie Cooke. “If agents don’t adopt auctions as an offering within their business, they are at risk of being left behind. We’re developing a virtual auction offering, and we own, develop and operate all of our technology to keep us one step ahead.”
We experienced growth of 62 per cent last year and forecast a continuing increase in online auction properties. Justin Beckwith, Pattinson Auction.
Of the same mindset and also offering a white label auction service to agents is Pattinson Auction. “Due to increased uncertainty in the property market, both vendors and buyers are looking to discover more about auctions,” comments Auction Director, Justin Beckwith. “The typical buyer at an auction can now be anyone as there has been a shift in the type of property in the catalogue – it’s not uncommon to find a family home being offered, and people like the transparency and security an auction grants. We experienced growth of 62 per cent last year and forecast a continuing increase in online auction properties.”
Hunters set up its own auction division 10 years ago, starting with the traditional method, but its recent introduction of online auctions highlights the virtual future of the industry: “The emergence of online auctions will continue at pace and occupy more of the market,” says Gemma Jaques, the agency’s Auction Manager.
The emergence of online auctions will continue at a pace and we may soon see live events incorporated with real time online bidding. Gemma Jacques, Hunters.
“We may see live events incorporated with real time online bidding – technological advances, broadband speeds and reliability are the only issues standing in the way of virtually attending an auction and feeling like you’re actually in the room.” Gemma says Hunters’ USP in the auction sector is its huge database of potential buyers – an advantage many other agents could possibly exploit.
Agents looking for a halfway house between outsourcing and developing their own in-house auction arm can explore LetsBid – a hybrid auction facilitator that launched in February 2018 – with REMAX and Kings already dipping in.
LetsBid is a cross between Rightmove, eBay and an online auction, with pre-verified agents uploading properties to the LetsBid site. The platform uses technology to host a modern method of auction, while the agent controls the listing from start to finish.
Right from its launch the company set out to work with agents – not take business away from them – the service is free for the first 12 months and then it charges a monthly subscription fee rather than creaming off commission from each sale.
“We feel that there is no-one better at managing the buying and selling process than agents – we have simply provided them with the proptech to help them manage the auction stage,” comments LetsBid’s founder, Milton Rodosthenous.
LetsBid asks for a reservation fee to secure the property for 28 days.
Milton says opting in to this process now will make is easier for estate agents to adapt should reservation fees on all transactions be introduced, as favoured by the current Government, “Recent announcements from housing ministers are encouraging all agents to start using reservation fee agreements to protect both buyer and sellers, which is exactly the mechanism the modern method of auction uses. In my opinion, this will continue to help the auction market grow for years to come, as paying reservation fees will simply become the norm.”
Interestingly, the LetsBid business model is applicable to lettings as well – agents can upload a rental property and invite tenants to make bids online in the same way as buyers. Soon the platform will launch a new service enabling tenants to be pre-qualified by credit reference agency Lets Safe before they bid, to speed up the process for everyone involved and to provide letting agents with instant transparency – money and time saving perks much needed in the PRS.
THE PARTNER ‘IN THE ROOM’
While online auctions are noted as the long-term future, Managing Director and Auctioneer at SDL Auctions, Andrew Parker, still believes there is value attached to live ‘in the room’ auctions. “As a business we have always championed the live room and, while there are now opportunities to take part in online or on the phone, the room is still the place where we complete most of our property sales. In April 2018, we offered a total of 450 lots, of which 318 were ‘in the room’.”
Rather than see his business shift online, the biggest change Andrew has noted has been the rise in estate agents wanting to partner with the company, “We launched our Auctions Partnership service in January 2017 because a growing number of estate agents wanted to offer auctions but didn’t necessarily have the resources to develop the service on their own,” adds Andrew. Today SDL Auctions works with 300 agent partners, offering ‘in the room’ and live streamed auctions.
Andrew also alludes to the certainty that auctions provide as a reason why agents should be embracing the gavel. In fact, every auction professional we contacted said the transparency and security offered by auctions was proving to be head-turning for both buyers and sellers. “Conditional auctions are seen as a way to avoid being gazumped or gazundered.”
DIVERSE, DETAILED & DIVULGED
Despite proptech and online advances, traditional reasons for partnering with auction houses are still strong. Auction heavyweight Clive Emson Auctioneers remains a trusted ally for over 900 local agent branches, particularly when it comes to selling unconventional properties: “If an agent is given a water tower, nuclear bunker or a residential property in need of complete modernisation, we can make sure it attracts maximum interest and achieves the best possible price,” says Managing Director, James Emson.
Other properties, James says, perform better at auctions when sold in a clear manner and that’s where he sees the strength of auctions really coming in to their own. “I believe the recent growth in the auction market is due to the clarity of the auction process. Tighter regulation and governance means a great deal more auctioneers are publicising if there are known problems with properties or if there are any unusual conditions attached to the sale.”
NORTH OF THE BORDER
Shaun Vigers, Director at SVA Property Auctions, hosts regular ‘in the room’ events in Edinburgh and Glasgow. For SVA, proptech is having more of an impact on the transactional side of the auction process. “We are seeing more online activity in terms of clients making payments via online banking and the provision of legal packs via online ‘data rooms’. The issuing of hard copy legal packs and large cash deposits is not happening so much.”
Shaun does detect, however, some suspicion about bidding online, “Many people like the buzz of the room – here you’ll still see bidders craning their necks or running up and down the aisle checking there really is another bidder!”