No longer just a domain for investors, developers and property dealers, the auction room is now the preferred option of buying and selling property for a wide range of people seeking a fast and secure method of sale.
With no chain, a fixed timescale and a reservation fee at the fall of the gavel, the process brings greater confidence for all parties and promotes smoother transactions, without fear of the deal falling through at the eleventh hour. Phil Arnold, Director at Brendons Auctioneers, says, “We have noticed a big increase in buyers from all over the UK buying at auctions.”
Consumer confidence remains high, buoyed by a continuation of low rates and the speed and certainty of sales in the auction room. David Sandeman, EIG
There was also a notable increase in the number of lots offered and a record number of lots sold at auctions in the UK last year. The volume of lots offered for sale rose by 3.8 per cent to 28,526, while 21,838 lots were sold – up 2.1 per cent on 2013 and surpassing the previous record set in 2007, as figures from the Essential Information Group (EIG) show.
David Sandeman, Managing Director at EIG, said, “The indication is that consumer confidence in the auction market remains high, buoyed by a continuation of record low interest rates and the speed and certainty of sale that auctions can offer.”
A rising market
With more buyers armed with their cheque book, competition among bidders is growing, driving up sale prices, with many lots selling for well in excess of their guide prices.
EIG data reveals that revenues of over £3 billion worth of property sold under the hammer in 2014 for the first time in seven years – up 14 per cent on 2013 and a fourth consecutive year-on-year rise, with auction receipts in London and the Home Counties accounting for over 50 per cent of the UK total.
“Continuing low returns on cash, improved economic sentiment and continued long term appeal of property have all helped to create some of the best market conditions we have seen in recent years,” said Robin Cripp, Chairman at Andrew Scott Robinson.
Greater demand for property at auction has been fuelled by the growing availability of bridging finance in the residential property sector. Unlike mainstream mortgage lenders, a bridging lender can come up with funding for a purchaser to buy property in a very short space of time, ensuring that investors have the necessary finance in as little as 24 hours, which is ideal for auction purchases as transactions normally need to be completed within 21-28 days.
Time is of the essence for auction sales so we endeavour to complete deals as quickly and simply as possible, often within hours. Scott Hendry, Auction Finance
“We know time is of the essence for auction sales so we endeavour to complete deals as quickly and simply as possible, often within a matter of hours,” said Scott Hendry, Director at Auction Finance. “We’re seeing a significant increase in the appetite for property purchases at auction.”
He added, “We appreciate that up until a few years back buying property at auction was rare and people had a number of misconceptions about the process. Now the industry is gaining traction as people are becoming more open to buying at auction.”
Room for growth
The popularity of property auctions in the UK has increased enormously in recent years, supported by popular TV shows such as Homes Under the Hammer and a sharp rise in the number of national and regional property auction firms popping up across the country, and this trend looks set to continue, according to Gary Murphy of Allsop.
“For those who have cash, or can raise adequate funding, auction will continue to be an increasingly popular way of buying a home,” he said. “The auction room has become demystified over recent years thanks to TV shows such as Homes under the Hammer. Educated bidders are now willing to embrace the process and will continue to compete enthusiastically.”
Crucially, the property auction provides sellers with an alternative means of disposing of property, and offers estate agents another service to offer their clients, to achieve the best price possible for homeowners. With so many active buyers, auctions can provide agents with an opportunity to add an extra string to their bow, in terms of their services that they provide to their clients, creating an additional revenue stream.
And sellers love the growing combination of online bidding and live location auctions. One seller at the recent North West Property Auction, presented by iam-sold, sold her inherited three bedroom, semi for 30 per cent above its starting bid. The property listed by Jordan Fishwick, one of iam-sold’s partner estate agents, had a guide price of £119,950. iam-sold’s modern method for its North West Property Auction generated fantastic levels of interest for the seller’s property, including 37 viewings in the lead up to the auction event. The property sold for £156,000 and the seller said, “Many thanks for all your efforts. I can safely say that Mum would have approved.”
‘Mum’ would also approved of the results generated by Pattinsons, who are both estate agents and auctioneers. They run regular auctions in the North East, North West, Yorkshire and The Midlands as well as offering online auctions, which have proved very successful. They even offer to sell at auction ‘free of charge’ which must attract more sellers than any other marketing initiative – combining estate agency with an auction offering is a really string USP.
While there is nothing to stop an estate agency setting up their own auctions department, Philip Waterfield, Strettons’ Auction Director, points out that agents could, “more simply and with less investment, establish links with one or more auctioneers.”
He continued, “In geographical terms a network gives an estate agent a wider coverage but as most residential agency is through personal local service it may not be necessary for that agent to have a wide coverage. In non-geographical terms a wider network casts the net further for potential buyers who might not have looked in the agents patch previously.”
Graham Penny Auctions, based in the Midlands, is one of several firms that offer an agent partner programme. Theirs was launched in response to the growing number of vendors wanting to sell their properties by auction and increasing referral entries from agents.
Andrew Parker, Director, explained, “A number of our agent contacts were losing business because they don’t offer sales by auction. Vendors were asking if an auction sale would be more profitable than a private treaty sale, which in some cases it absolutely is, and some agents had problem properties that they couldn’t sell but would be perfect for investors in the auction room.”
A new online property auction, Bamboo Auctions, has recently launched, led by corporate lawyer, Robin Rathore and Chris Brown, a past President of NAVA and NAEA.
Acting through their estate agent, sellers can set a reserve price and choose the length of the auction period for each property listed on the website. Buyers are pre-approved for identity and anti-money laundering purposes and can search, download legal documents, arrange site viewings and place bids on properties.
“It’s currently a very exciting time for the property sector”, said Rathore. “A lot of property-tech businesses are either wanting 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.”
There are many advantages to selling at auction, and not just for the vendor. The quick process – the whole process takes around six weeks – and the fact that exchange occurs immediately at the end of the auction period, means that estate agents who market property through this method can speed up the process and eliminate the risks of gazumping and gazundering.
Our partners retain 70% of the commission and, in most cases, their share equates to 1.75 per cent, plus VAT, of the selling price. Toby Limbrick, Network Auctions
“Auction fees are higher than sole agency rates because there is less competition and an auctioneer can offer something an estate agent can’t – a binding contract,” said Toby Limbrick of Network Auctions. “Our partners retain 70 per cent of the commission and, in most cases, their share equates to 1.75 per cent, plus VAT, of the selling price.”
Toby says that his firm works with, “forward thinking agents and property professionals,” providing them with a “low cost and low risk” route to market; effectively “a bolt on auction department” that works alongside an agent’s core business, utilising existing staff and marketing budgets.
“Auctions are firmly established as a transparent and fast method of sale and our extensive marketing, national network of partner agents and regular London and Birmingham sales, gives sellers the ideal opportunity to maximise the return on their investment,” he said.
Alternatively, estate agents wishing to go down the property auctions route may consider doing so under a franchise arrangement, enabling the firm to network with other franchise owners within a group.
Auction House, for instance, which covers England, Scotland and Wales, now has 40 auction rooms across the UK each run by regional auctioneers under a franchise arrangement.
“We are the only national chain of regional auctioneers,” said Auction House Founding Director Roger Lake. “Our auction teams are linked to local estate agents – they know the market and can guide sellers as to whether private treaty or auction is best for their property. We also have a strong national brand and are the UK market leader.”
Last year the group secured 3,058 sales from 3,903 lots offered in 2014 – a success rate of 78.3 per cent, raising around £364 million in the process.
“It’s a spectacular achievement and only the fourth time the 3,000 lot figure has been exceeded in UK auctioneering history,” added Lake. “One in every nine auction lots sold across the country is being sold by us.”
He continued, “With over 220 auctions scheduled at our 40 venues, we have every expectation that 2015 will prove to be just as successful.”
IS IT FOR YOU?
Almost any estate agent could sign up to an auctions network or adopt a franchise, with both options enabling an agent to extend their property sales services and generate additional income from this growing sector of the property market.
The property auction market has enjoyed a good solid start to 2015 and with a high level of activity being witnessed in auction rooms up and down the country, this trend looks set to continue moving forward, making now a great time to consider teaming up with an auction company and adding another strand to your estate agency service.
- Allsop www.allsop.co.uk
- Andrew Scott Robinson www.as-r.co.uk
- Auction Finance www.auctionfinance.co.uk
- Auction House www.auctionhouse.uk.net
- Bamboo Auctions www.bambooauctions.com
- Essential Information Group www.eigroup.co.uk
- Brendons Auctioneers www.brendonsauctioneers.co.uk
- Graham Penny Auctions www.grahampennyauctions.com
- iam-sold www.iam-sold.co.u
- Network Auctions www.networkauctions.co.uk
- Pattinsons www.pattinsonsauctions.co.uk