Mon 21 Dec 2020
Auction has the reputation of being the sales process that sells property fast but does this obvious benefit come at the cost of compromising getting the best price? In my experience the ‘discount down’ sales process, that is a private treaty, against the ‘bid up’ process that is auction meets more often than not in the ‘sweet spot’ representing what could be considered to be a fair open market price.
Auction is also widely believed to be the go-to place for unmortgageable, legally challenged property assets, be they residential, commercial, land or investments. This is a misconception as over the last 10 years or so there has been an evolution quietly occurring in the UK auction space. The once dominant metropolitan trade auctioneers have lost ground to regional property auctioneers who not only have won a decent share of trade auction business but also grown auctions by auctioning property lots that attract retail buyers (buying for owner occupation).
It is a fact that retail buyers will always pay more than trade buyers, what's more interesting is that there is now a mass of circumstantial evidence that local buyers pay more for property than remote trade buyers purchasing blind (without on-site viewing). So the learning here is that local buyers, buying for owner occupation, for buy-to-let investment or to flip (sell on for profit) make for a steady and reliable stream of ready willing and able purchasers and this demographic of buyers closely follow the retail property auction space.
A particular growth area of note has been divesting landlords selling with tenants in situ choosing auction as the method to sell. Divesting BTL’s using auction allows the outgoing landlord to maintain rental income until contract completion, when compared to private treaty whereby the selling agent will normally be requesting notice is served on the tenant and the property marketed as vacant. As private treaty provides zero transactional certainty this leaves the landlord vendor exposed to a potential open ended void period. At Living Property we provide our auction services on a Buyers Premium model, with no seller auction entry fee and auction information packs are provided at no cost. The seller therefore only has their lawyers conveyancing fee to pay.
Evolution of the property auction space has also been around auction methods and auction delivery. By far the most common method of auction is Unconditional sale, sometimes called traditional auction. The process for Unconditional auction is whereby when the hammer (be it physical gavel or virtual) comes down or clock stops, the highest bidder wins and an immediate binding contract is formed. The buyer immediately pays over 10% of the purchase price plus any other disclosed costs and lawyers for seller and buyer are instructed with the purchaser on the hook to complete the sale in 28 days or sooner if stated in the Special Conditions of Sale. There is no opportunity for buyer remorse with Unconditional auction and in the unlikely event the buyer does not complete the sale they are liable for costs, losses and responsible for the property until it is sold on.
Then we have the relative new auction process, Conditional auction, sometimes referred to as the Modern Method of Auction. Conditional Auction is very much aligned to the private treaty sales process, with the exceptions of using the auction bidding process to determine the sales price and buyer, the winning bidding buyer paying over a non-refundable Reservation Fee; and the buyer under a specified period of time to exchange binding contract and complete the sale. Typically buyers are required to exchange contacts in 20 business working days and complete the sale within 10 business working days, so the whole deal can be concluded within 6 weeks, which is pretty much aligned with the timeline for Unconditional auction. It is useful to understand that average UK private treaty sales take 18 weeks from day one marketing to completion, so whatever method of auction private treaty is benchmarked against auction wins hands down.
Perhaps, the biggest and most seismic change has been around auction delivery. To be fair, auction methods of delivery were already on an evolutionary path but with Covid-19 and the pandemic we have seen such evolution replaced with revolution. Gone are the ballroom hall auctions, replaced with either auctioneers holding live virtual auctions or ‘eBay’ styled timed auctions. To be clear lots are still available to be shown on-site but it's the auction delivery that has changed and it is likely that this change to online auction delivery will continue even when the country gets past Covid. The reason why it's set to be a permanent change is because it save buyers time to travel and attend in-room auctions and for the auctioneers it provides the ability to deliver auction with lower cost, greater efficiency and break the legacy mold of auctioning groups of lots making way to providing bespoke auctions for individual properties.
In summary, if you are thinking of selling your home or any property asset, I recommend not discounting auction as a viable solution to achieve your sale, as it can and most certainly does work efficiently and effectively.
Martin Cunningham MNAEA
Living Property Sales & Auctions
firstname.lastname@example.org | 01502 558538
Living Property provides online timed Unconditional & Conditional property auction services.
Living Property does not charge sellers auction entry fees.
Living Property is able to provide sellers Auction Legal Packs without charge.
Living Property provides FREE auction valuations, call 01502 558538.
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