Auction rooms across the UK are filled with people seeking to acquire property, from bargain hunters to private investors, ensuring that hundreds of homes are sold under the hammer every week, reflecting the rising popularity of auctions, spurred by popular TV shows, such as Homes Under the Hammer, and a significant increase in the volume of new national and regional property auction houses.
The word ‘auction’ is still synonymous with ‘bargain’ and for good reason, as there are plenty of ‘below market value’ properties available. But that does not mean that a wide range of homes cannot be sold for well over their listed guide prices – at times selling for more than would have been achieved on the private sales treaty market; it is a seller’s market in some parts of the country.
Speaking after a recent auction, Robin Cripp, Chairman at Andrews & Robertson, said, “Our results continue to indicate a strong demand for auction property exists. The large turnout demonstrates a keen interest from investors, institutions and the public, and hammer prices are encouragingly positive. We continue to prove yet again that for the right properties competitive bidding can get better prices than private treaty.”
With this in mind, more estate agents that find that they have properties on their books that have been languishing on the market for months without receiving any suitable offers may wish to consider auction as an alternative means of selling their property.
In fact, it may even be worth considering it as a primary means of disposing of certain types of housing stock, because market conditions really are improving.
There’s a real hunger, translating to fierce bidding in an extremely positive atmosphere in the auction room.” Andrew Binstock, Auction House London
“There is a real hunger for our properties at the moment and that is translating to some fierce bidding in an extremely positive atmosphere in the auction room,” said Andrew Binstock, Managing Director and Auctioneer at Auction House London.
Binstock, who describes auctions as the “barometer” of the property market, insists that a combination of “correct pricing and successful marketing” ensure that auctioneers deliver top results, as reflected by a noteworthy rise in the number of lots sold at auction last year.
Auction sales rise
Official figures provided by the Essential Information Group (EIG) reveal that 21,838 lots were sold in 2014, up 2.1 per cent year-on-year and surpassing the previous record set in 2007, although this increase was owed in part to 3.8 per cent annual hike in the volume of lots offered for sale to 28,526.
One man not surprised to see property auction sales increasing is Toby Limbrick, Managing Director at Network Auctions, who firmly believes that a growing number of buyers are attracted to auctions because of their proven ability to provide a “transparent and fast method of sale”, making it a tried a tested method of selling almost any property.
“Any property anywhere can be sold successfully at auction,” he said. “Of course it’s often the circumstances of the seller that dictate auction rather than the type of property – for many the speed of the process and the ability to close the deal are the drivers.”
Launching an auctions department can be costly and requires knowledge and expertise in this area of the property sector, but teaming up with an established auction company to create a “bolt on auction department”, with companies such as Network Auctions can really work.
Network Auctions’ partners can expect to retain 70 per cent of the commission which in most cases equates to around 1.75 per cent plus VAT of the selling price.
Another company keen to work with more agents is Midlands-based Graham Penny Auctions, which recently launched its agent partnership programme, partly in response to a rise in referral entries received from agents looking to sell properties, on behalf of their clients, via auction.
Andrew Parker, Director at Graham Penny Auctions, said, “Our new agent programme will allow our partner agents to extend their property sales services and generate additional income. Plus, we always carry out at least four weeks of intensive marketing for all our properties and so there is minimal additional effort required from our agents.”
Elsewhere, estate agents working with iam-sold have collectively received more than £15 million in fees from the auction provider over the past five years, representing around 3 per cent of the £500 million capital value generated through the sale of over 5,800 properties via the company’s auctions.
Ben Ridgway, Development & New Business Director for iam-sold, said, “We are extremely pleased with the growth of the business and, more importantly, the feedback we get from our agents.”
With the internet continuing to revolutionise the way we buy and sell property, the virtual auction is gaining ground. Network Auctions has just launched Network E, a new online auction service.
Network E is an exciting hybrid – the speed and certainty of auction with the best of private treaty. It’s a game-changer! ” Toby Limbrick, Network Auctions
Toby Limbrick said, “We are excited about the potential for Network E; it’s a hybrid combining the speed and certainty of a traditional auction with the best elements of a private treaty sale. It’s a game changer for our partner agents and a valuable instruction gaining tool.”
This radical new method of sale provides greater commitment than private treaty transactions. Properties are marketed with a legal pack, an auction closing date and time. When the auction closes, an Exclusivity Agreement grants the winning bidder time to undertake surveys and secure a mortgage prior to exchanging contracts and during this period the seller undertakes not to sell to anyone else. The buyer pays a deposit of 1 per cent of the purchase price (minimum £3500) in part payment for the property. The seller has a serious buyer committed to the transaction and the buyer knows their purchase is secure. Failure to exchange contracts results in a forfeited deposit to be shared by the seller and agent.
“Network E is aimed squarely at the residential sales market and the advantages are clear. Buyers with related transactions or mortgages can take part, the sales process is expedited with gazumping and gazundering eliminated and for the first time agents know their efforts will be rewarded whether or not a sale completes.”
iam-sold also recently launched a new virtual auction product, Horizon, which allows partner agents to conduct a live auction online.
Ben Ridgway says that it allows a real auctioneer, on behalf of an agent, to conduct a live auction online with telephone and online bids. The auctioneer conducts the auction as if in a traditional auction room, but, using green screen technology in their new studio each auction can be specifically branded to an area or specific agent.
Another innovative firm trying to help more agents sell more properties via the internet is Bamboo Auctions, which launched earlier this year.
Led by corporate lawyer, Robin Rathore and Chris Brown, a past President of both the National Association of Valuers (NAVA) and Auctioneers and The National Association of Estate Agents (NAEA), the business enables sellers (via their estate agent) to set a reserve price and choose the length of the auction period for each property listed on the website.
Prospective purchasers are pre-approved for identity and anti-money laundering purposes and can search, download legal documents, arrange site viewings and place bids on properties.
Exchange occurs instantly at the end of the auction period, meaning estate agents earn their commission faster and the risks of gazumping and gazundering are eliminated.
“It’s currently a very exciting time for the property sector”, said Rathore. “A lot of property-tech businesses are either looking to bypass estate agents or are going into direct competition with estate agents. We’re different. We want to work with estate agents; we want to see properties exchange, so our interests are completely aligned.”
Allsop join online revolution
Another auctioneer to go down the online route is Allosp, which recently held the UK’s first ever online-only auction for new build homes and it proved to be highly successful.
Purchases were offered the chance to bid on flats in a brand new canal-side development, which has been constricted Clearview Homes, in the London borough of Hillingdon, near Heathrow airport and the M4 motorway.
Bidders competed for the second phase of the development, a range of one- two and three-bedroom flats with a reserve price starting at £249,000, with more than 40 per cent of lots sold after the auction and developer websites received over 28,000 visitors in the run up to the sale, providing a further insight into how more agents may be selling homes in the future.
Auctioneer Gary Murphy described the decision to offer the properties online as “a revolutionary way of selling new build homes in the UK”, adding that it “follows a different trajectory to traditional in-room auctions.”
Franchise route to success
Estate agents aiming to enter the auctions sector may also care to consider doing so through a recognised and reputable franchise provided by Auction House, the only national chain of regional auctioneers with offices across the UK, set-up under a franchise arrangement, enabling agents to network with other franchise owners within the group.
“The Auction House network now operates through 40 regional auction rooms, we cover all parts of England, Scotland and Wales and are eager to extend our partner agent numbers in all geographic areas,” said Auction House’s Founding Director Roger Lake. “Many Auction House sale rooms offer suitable auction lots working jointly with local estate agents – in some cases over one-third of their catalogue is made up of such entries.”
“We provide literature, sales material, web pages that are branded to sit well on estate agents own websites and there is the possibility of reciprocation too,” he added.
With property auctions growing in popularly and many estate agents currently earning tens of thousands of pounds annually from auction referrals, now may be a good time for your agency to consider stealing a march on your competitors and set up a relationship with an established auctioneer, with a view to securing a significant share of the potential auction sales income achievable in your local area. Alternatively, you run the risk of losing potential business to competitor agents or simply by the vendor going direct to the auctioneer.
Auction House www.auctionhouse.uk.net
Andrews & Robertson www.as-r.co.uk
Essential Information Group www.eigroup.co.uk
Network Auctions www.networkauctions.co.uk
Graham Penny Auctions www.grahampennyauctions.com
Bamboo Auctions www.bambooauctions.com