What is an auction?14.07.2016
In spite of the television programmes and press articles about property auctions, the general process is still not completely understood by the majority of British people. In fact, only 1.9% of all property is sold by auction across Britain which is pitiful when compared to Australia, where in Sydney for example, it is around 35%.
So, what is an auction? If you consult dictionaries for various definitions it can be summarised as a “publically held event for the sale of property or merchandise where the prospective purchasers bid openly against each other until the highest price is reached”.
The ‘event’ is usually held in an accessible venue and everyone is welcome, even if it is just to observe. Auctioneer Nick Muston from Austin Gray (Auction House Sussex) says “Both buyers and sellers like the transparency of the open market bidding arena. Deals are not being done behind closed doors, they can see their bidding competitor and the skill of the auctioneer is to encourage and cajole the bidders with grace and humour to bid to their absolute limit, and sometimes beyond.”
He added “There are a few occasions when you hear of a lot being sold prior to the auction but this should, in my opinion, be only reserved for those lots where there is minimal interest. On a popular lot the whole point of having a public auction is to let everyone have a fair and equal opportunity to bid in a competitive bidding environment.
I have been an auctioneer for 35 years and I could quote you hundreds of examples of where I have received a great offer pre-auction but had the courage to convince my client to take it to the auction and it has sold for considerably more. That is when an auction works at its best.”
Austin Gray recently offered a house in Denmark Road, Portslade that was guided at £240,000 - £250,000, but went on to sell for more. Nick picks up the story “I received an offer pre-auction of £280,000 which my client was happy to accept but I felt, given the interest, might sell for between £290,000 - £300,000. On the day of the auction there were eventually two determined bidders fighting it out to a staggering final bid of £331,000. Proof, if proof was needed, that you should always try and take lots to the room because you never know how far buyers will go beyond their upper limit.”
Aside from achieving an open market price, an auction works effectively on many other levels. Sellers can work to a clear timetable with viewings commencing 3 to 4 weeks in advance of the auction date with completion usually 4 weeks later.
The uncertainty of private treaty transactions is eliminated with a physical exchange of contracts there and then on the day of the auction with the buyer paying a 10% non-refundable deposit. The buyers are in funds and can perform.
Finally, the speed of an auction is a huge attraction with the whole process from entry into the auction catalogue to completion taking as little as 8 weeks compared to a private treaty sale which can take 5 – 6 months.
The vote to leave the European Union has certainly led to uncertainty in the market which along with the other measures introduced by the Government to cool the property market, has definitely had the desired effect.
Nick commented “We could see an increase in the properties coming to auction as the full implications of the recent exit vote start to take effect. Only yesterday I was asked to value an unfinished building project of a dream home because the vendors’ business has been severely jeopardised by the vote.”
Austin Gray (Auction House Sussex) will be holding their next auction on the 8th September and welcome the opportunity to talk to prospective sellers if they are considering auction as a more viable route to selling.