12 February 2019
Auctions are one of the oldest ways to buy and sell property. Typical attendees are investors, small builders and people looking for housing stock that requires extensive refurbishment works. Others are looking for properties with scope for adding value through extension or other forms of development. Perhaps unsurprisingly for those that work in property, the auction business approach is actually very similar to what’s adopted in the quick house sale industry.
Indeed, Property Solvers, like most NAPB members, are active buyers of the type of homes that would often appear at auction. The only difference is that we buy directly from vendors (cutting out the middlemen). To explore this question in more detail, it’s worth taking a deeper look at how both property sectors compare...
Once the hammer falls on the auction day, contracts are exchanged and it’s very rare for the sale to fall through without the buyer losing a significant sum of money. However, there is a period of uncertainty whilst the property is marketed to potential auction buyers, and it’s not always guaranteed that a property will achieve the reserve price. Professional property buying companies can arguably offer a better level of assurance that the sale will happen.
The legitimate firms buy with cash meaning there is minimum reliance on mortgage or auction lending facilities and things get done much faster. With the seller dealing directly with the buyer, the level of ambiguity that can exist with auctions and other forms of open market sale is eradicated. In short, we have too much to lose by not delivering on our promise to buy homes quickly.
Similar to estate agency sales, the auction process would typically start with a valuation and property listing. Auctioneers then need to ensure that the property gets enough exposure so that people will bid on the day or over the allocated selling period. With most online and offline auctioneers running sessions no more than once a month (sometimes more infrequently), there may also be a further waiting time to get a suitable ‘slot’.
Future Auctions estimate that it can take over 3 months from start to finish to complete a sale. The better fast sale companies should do exactly what they say: guarantee a completion on the transaction in as little as 7 days (although it’s more typically 28 days). Although this has been known to happen with auction sales, in emergency ‘fire sale’ situations for example, it’s rare to get things done within such a short timeframe.
Although many auction houses are attempting to attract a wider audience, the types of properties you’ll find often struggle to sell on the open market. This is not to infer that auction buyers always take on ‘problem’ properties, but most would require improvements of some sort, have tenants in situ or other underlying issues. These would need to be factored into the price.
If the auction house states that a seller can achieve an unrealistically high price in such scenarios, alarm bells should ring. Quick house sale companies may receive criticism for the offers they make – but they are generally based on hard market-based facts using data from the Land Registry and not Zoopla’s Zed-Index, for example. In truth, professional auction buyers work on the same metrics and business modelling as we do.
Related to the above, auction buyers are mostly a savvy bunch – often looking for a financially viable property project to buy, refurbish/extend and then sell. You’ll also find a lot of landlords in attendance. Although the auctioneer’s role is to represent the vendor, if a unit is priced too high it probably won’t sell. They must therefore tread a fine line between getting the best value for their clients whilst moving on as much stock as possible.
Of course, over-priced auction property does get sold and there is a lot to be said about the heightened level of emotion in the auction room – but most rational buyers will cap the level they’re willing to bid up to. Whilst not being able to speak for other firms in our industry, Property Solvers can usually get back to the vendor on the same day of the enquiry with a conditional offer.
A definitive price will then be confirmed shortly after we view the property and check for any potential legal constraints. We will not alter the price prior to exchange of contracts. We base our offers on specific financial metrics and never put any pressure on our clients to accept. In many cases, vendors who are also considering an auction sale choose us as the price we pay (net of all costs) is similar – if not higher.
Auction houses charge higher fees than normal open market sales. This is because there is more work involved including producing marketing brochures, extra advertising costs, room hire, auctioneers’ salaries etc. Auction sellers also must pay their solicitors extra fees to handle pre-auction enquiries. As the sale is direct, generally speaking, quick house sale companies do not charge any commissions nor will there be any legal fees (and associated disbursements) to pay.
Property Solvers are an experienced quick house sale company and express estate agency operating across the UK. Check out their guide to house auction sales which aims to help sellers get the best outcome should they be thinking about this route. Further down the guide, we run through our auction alternative service (where we can match any reserve price made by an auction house).
This content has been provided to us by NAPB member Property Solvers. Whilst believed to be factually correct, we cannot accept responsibility for content contained within it.