I’m a property auctioneer – here is the REAL reason why homes are cheaper and how to secure the best deal

“There’s this negative impression that auctions are for properties you can’t sell on the open market and there must be something wrong. Auction is a specialist marketplace, for selling certain types of properties and they sell better than they would do on the open market, because of the types of people that we deal with from a buyer side.”

Our founder and director, Stuart Collar-Brown was featured in The Sun this week talking about why property auctions are a great way to purchase property.

See the article here

Property Auctions on the Rise – 5 Common Property Auction Misconceptions

With so many benefits including lower fall-through rates and quicker sales, it is no surprise that selling a property via auction continues to rise in popularity. Recent research highlights that as 2022 progresses, the number of properties sold month to month continues to increase, with an impressive £480m raised via auction in May 2022. This is an increase of 24% when compared to May 2021’s total amount raised.

During May, residential sales via auction were up by 17%, highlighting that more people are choosing to buy and sell via auction. Despite this significant uptake, there are still many common misconceptions people have when it comes to buying and selling via auction.  My Auction, the online property auction house, sets the record straight with their top five auction myth busters:

1. Properties sell for less at auction

Perhaps one of the biggest misconceptions is that a property sold via auction goes for less than one sold via a private treaty sale. More often it is the opposite, with many properties selling for more at auction than they would have done if sold privately. Thanks to the transparency of the sale and the ability to see where the bidding is at in real-time, the competitive nature of an auction often drives the sale price up. This year at My Auction, on average properties have sold for 21% above asking price with the best performing lot selling for 19% above the highest estate agents’ valuation.

2. Property auctions are for problem properties that can’t sell in the normal way

Many people are under the impression that property auctions are only for properties that come with problems or need major renovation works. This outdated misconception is far from the truth with many stunning homes being listed that are in perfect condition and ready to move straight into. And it’s not just properties being sold at auction, land that is suitable for development is sold too.

3. Property auctions are only for those who are desperate to sell

Many owners choose to sell via auction to reap the benefits including certainty of sale, faster turnaround times and transparency. Auction sales exchange contract the moment the gavel falls,

completing within four weeks, compared to 18 weeks through private treaty sales. Another advantage of auctions is the ability to generate a sale well above asking price. In a similar vein to auctions for luxury goods such as art, jewellery and cars, property auctions can often generate the best results financially because the market decides what each property is worth to them, not the auctioneer or estate agent.

4. Property auctions are for cash buyers only

Many people are under the impression that unless they are a cash buyer, they are unable to purchase a property via auction. This is incorrect. If the property you are purchasing is mortgageable then buying via auction with a mortgage is possible, including for first-time buyers which is another misconception. Over the past 12 months, My Auction has seen a 50% increase in the number of first-time buyers purchasing via auction.

5. Property auctions are risky as you can’t view the property

Before a property goes to auction, there is a marketing period that will give interested parties the opportunity to view the property to determine whether it is something they would like to bid on. My Auction partners with local estate agents to provide potential bidders the opportunity to view the property and ask questions. With auction purchases, you also have the added level of security that comes with the legal pack that is viewable before the auction. This means full transparency of what you are buying before you make a bid, a benefit you don’t get with private treaty sales.

Our Co-Founder and Director of My Auction, Stuart says: “Over the past 12 months, we have seen a significant rise in lots offered as well as potential buyers interested in auctions, with this rising each month. Buying and selling at auction offers both parties much more security and certainty that a sale will go through, which is invaluable in the current market where stock is low and demand is high. Property auctions are a really viable way of buying and selling all types of property and land. Over the last few years, we have seen a noticeable shift of our buyer demographic.

Auctions aren’t just for investment buyers, we’re seeing an unprecedented interest from first-time buyers, second-time buyers, those looking for a forever home as well as those looking for something with development potential, who are all starting to the see the benefits of auction.”

Perception precedes reality (Andy Warhol)

Never has a phrase been more true, or more relevant, than when applied to the world of property auctions.

Having worked in this profession for over 15 years, we know that the general public’s (and many fellow property professionals) perception of what an auction is, is often very different to the reality.

I’m a big supporter of the Homes Under the Hammer television show, and they were regulars at an auction house I used to work for. But – and this is just in my humble opinion – it is the best and worst thing to happen to our profession in the past 10-15 years.

On the one hand, it has helped raise awareness of property auctions and shone light on the process making it more accessible to those watching on their TV screens and confirming that it is in fact, less scary and not as high risk as most first think.

However, a scripted TV show which follows the journey of buyers from making the bid through to navigating a renovation project which will hopefully reap profit when they sell the property is not the reality of what many will experience. While buying perceived ‘cheap’, or ‘fixer-upper’ properties for profit is a great message for buyers (and TV figures), it’s not so helpful when you are considering selling by auction.  

Because the reality is that while these so-called investment properties are a great buy, they are not the only homes available at auction. Auctions are a great way to sell any property for a number of reasons. The speed of the transaction is appealing to many with the buyers entering into contract the moment the gavel falls. With this comes the certainty that the property transaction will go through as the deposit is paid at this point. Most properties we sell at auction complete withing 4-6 weeks of the auction date. Finally, auctions come with a level of transparency that often drive a property price higher than it might achieve through final offers as buyers can see where the offer is at in real time.

The outdated and inaccurate perception that auctions are only for fixer-uppers is one that auctioneers fight to overcome on a regular basis. Where non-auctioneers, when asked, “have you dealt with auctions in the past?” simply reply “no, but I’ve watched Homes Under the Hammer” – this may be true, but I’m confident you would decline my help if you needed an operation because I watched Casualty when I was growing up!

In a recent LinkedIn poll, we asked respondents what percentage of all UK properties they believe are sold via auction. The results were not surprising.

  1. 32% said that sales through auction accounted for 10% of all property sales
  2. 25% said that sales through auction accounted for 15% of all property sales
  3. 25% said that sales through auction accounted for 3% of all property sales
  4. 18% said that sales through auction accounted for 5% of all property sales

The correct answer is 3%. And surprisingly, even though there has been an increase in sales by auction over the past 12-18 months, it has rarely been higher than 3% of all property transactions in the UK for over 20 years.

So why is it that 75% of people asked believe auctions represent 5-15% of the property market by way of sales. This is because of the perception of auctions and likely this has been helped by the TV shows like, Homes Under the Hammer.

We had a saying when I worked in the auction department of a multi-disciplined estate agency in Wiltshire that “auctions are 10% income and 90% profile” and I think this is an accurate portrayal of the auction world.

The larger question at hand is do we really believe that 97% of all properties sold in the UK should be sold in the same, traditional open market way via estate agents where it can take almost three times as long from the first day of marketing to legal completion than selling by auction and has an average fall-through rate of around 35% compared with less than 1% via auction? 

At My Auction, we’re working really hard to improve the perception of property auctions, championing the positives and guiding our clients through the process every step of the way. As the popularity of auctions starts to increase, I believe we are entering into one of the largest shake ups of the property buying and selling process in the UK in my generation. We won’t change the perception over night, but one lot at a time we hope to highlight the many benefits property auctions come with. And if you still don’t believe us, check out our latest listing. This beautiful Lodge House located just outside of Bath speaks for itself.

Price on Application Listings Deemed Unlawful; What does this mean for the industry?

In May, the National Trading Standards Estate and Letting Agency Team (NTSELAT) deemed that the use of POA or “price on application” on listings is unlawful. This ruling is news that is welcomed by property buyers nationwide and is certainly a step in the right direction.

For years, there has been an element of ‘smoke and mirrors’ when marketing certain types of properties. On many occasions, this term is used when a property is difficult to value or is on the market for £1m+. However, for buyers this change will give some much-needed clarity on what the seller’s expectations are. This should reduce any risk of consumers wasting time or money expressing interest in a property which is not in their price range in the first instance. Not only does this have a positive impact on the buyer, but it also benefits the estate agents who will save time dealing with enquiries from buyers who aren’t looking within the property’s price range.

As auctioneers, we have adopted similar clarity with the aid of the ASA surrounding definitions and parameters of ‘guide price’ and ‘reserve price’. As a business, we are firm believers that more could be done with this in the future where consumers are under no illusion what the seller would accept by way of an offer and if this figure is submitted, the property is sold to that buyer. This would have a better outcome than the current uncertainty that comes along with buying or selling a property.

With the proposal of soon introducing Property Information Forms for all residential properties and the need to advertise lease details and council tax bands for new listings, this recent ruling is another step forward to creating a much more transparent property market which will be welcomed by everyone involved in the profession.

Why it’s time to end exclusive partner agreements with auction houses

As an online auction company, we are passionate about providing a fresh approach to one of the oldest professions in the world. We take pride in exceeding expectations and going above and beyond to get the best results for our clients. To achieve this, we work with trusted estate agents to maximise the marketing of our lots to generate as much interest as possible and to drive the highest sale price.

We have seen first-hand the positive influence a good auction house and estate agent partnership can have on a sale and because of this, strongly believe that it’s time to end exclusive partner agreements between auction houses and estate agents.

These outdated partner agreements are resulting in lost business for estate agents as well as a lack of choice for property sellers.

The agreements restrict estate agencies from working with any auction houses except the one they are in a contract with. This means that if another auction house contacts the estate agent to work together on the sale of a property, they are having to turn down this work and losing out on potentially thousands of pounds in lost fees.

In many cases, estate agents are unaware what the contract means due to not reading the fine print and therefore not fully understanding the ramifications of the contract. Often, these contracts are an initial 12-month period before automatically going onto on a rolling term. These terms mean that several estate agents are in contract without even realising so until an opportunity arises with another auction house. Those who break the contract risk paying a fine that is typically a percentage of the fee they would have earnt from the property sale.

In addition to this, many estate agencies signed this contract many years ago and have never had the opportunity to work with the auction house. On these occasions, estate agents are losing out on a fee and the opportunity to work with a new auction house due to a partnership that does not yet exist and has not been tried or tested.

To ask an estate agent to sign an exclusive agreement with an auction house is comparable to signing one with a solicitor or mortgage broker. This would not happen due to the estate agencies limiting themselves in terms of opportunities and therefore, the same should apply with auction house partner contracts.

The property industry is all about maximising opportunity for the seller who should have a full choice on who their property is sold via. Auction house partner contracts take away this freedom and choice for the seller who may have a particular chosen auction house, and estate agent, whom they want to work together to achieve the desired result.

What can we expect following the ban on charging ground rent?

In April, the Government announced that from the end of June, landlords will be banned from charging ground rents to future leaseholders and those that are caught ignoring these new rules could be fined between £500 and £30,000.

It’s the clarity that the industry has been seeking for a long time and is welcomed news by leaseholders, particularly after a long period of uncertainty.

Whilst this is positive news overall, there are still some factors that leaseholders need to be mindful of. Leaseholders will be saving money, but at what cost? By taking away the ground rent, the guarantee of the building’s upkeep and maintenance is also being take away.

Following on from the tragedy of Grenfell, we all understand the impact and importance of adhering to health and safety policies more than ever before. With the removal of the ground rent, and somebody in the position of ensuring buildings are following the ever-changing health and safety policies, we run the risk of buildings not being maintained to the correct standards, potentially putting lives at risk. The cladding crisis is a prime example of the importance of a knowledge management company.

At present, ground rent owners have an incentive to manage the buildings and with ground rent being banned, responsibilities will fall to the leaseholders. The concern around this is that the correct policies and procedures will not be followed which could lead to a chaotic situation as well as a blame game.

A fair contribution, be that monthly, or yearly of 0.1% charge to guarantee the legal protection, security, and peace of mind that a professional third party is looking after the building is a better option. This is a small price for leaseholders to pay in comparison to the amount of work that goes into managing a building.

I expect that the months, and years, following the ban could be a steep learning curve with a lot of trial and error as leaseholders and experts within the industry all begin to navigate these new rules and iron out any initial hurdles and problems that arise.If you are currently thinking about purchasing a freehold property and have questions about how the ground rent changes will affect you, please do get in touch today and speak to one of our specialist team.

What does the interest rate rise mean?

In April 2022, interest rates rose from 0.75% to 1%. This 0.25% jump has taken interest rates to the highest level seen for 13 years. Whilst the increase is no surprise, it’s certainly a sign of things to come in the coming months. If the economy continues as it is, we expect the base rate could sit at somewhere between 2-2.5% by the end of the year as banks try to balance inflation.

The Bank of England has announced that it hopes to the slow the rate at which prices are increasing however, has warned that this inflation could continue to rise by over 10% at the end of 2022. This rise is something we have not experienced for 40 years, last seen in 1982.

For the property industry, these rates will have a huge impact. Where possible, first-time buyers should be looking to get on the property ladder as soon as they can before mortgage rates start increasing and their hard-earned money doesn’t go quite as far. Although this could mean a first-time buyer may have to move forward more quickly, and potentially compromise in some areas, in the long run the benefits of purchasing before the rates increase further, will far outweigh these small negatives.

We have already started to see some evidence of down valuations as lenders start to limit and mitigate their risk. This is a clear sign that the banks understand the rapid growth in house prices is not sustainable and are putting in provisions to put the brakes on and actively soften the upwards curve as inflation continues to rise. Down valuing doesn’t have to be a deal breaker when it comes to a property purchase/sale. On these occasions, there are many options including topping up the amount or discussing a compromise on the sale/purchase price to be more in line with the valuation fee.

What this means is that the more inflated prices we have seen so far this year are likely to come down, but it doesn’t address the bigger issue for the market which is the lack of supply. It’s these shortages that normally push prices up with more competition in the market, regardless of the interest rate rise, and a trend that we expect to see continue over the coming months.

What to do when a property has cladding and EWS1 form issues…

Since the devastating tragedy of the Grenfell tower fire five years ago, cladding issues have been highlighted across thousands of properties across the UK. An investigation of the fire highlighted that the materials used for the cladding were the ‘primary cause’ of the rapid fire spread.

Since the awful incident, property owners who are facing cladding issues have been left with no clear guidance from the Government, have been left in limbo and are what some people are describing as ‘mortgage prisoners’. With the rules and regulations around cladding issues changing regularly, property owners are facing conflicting information from all angles and the overwhelming unknowing of what to do.

The latest news (as of January 2022) is that no leaseholder living in their own flat will have to pay a penny to fix the cladding issue and the old, proposed loan scheme for leaseholders in medium-rise flats will be scrapped. A building safety pledge has been launched to pay towards the estimated £4billion cost to fix the dangerous cladding on tower blocks however at present, there is no timeframe on this, meaning it could be anywhere from a couple of months to a few years for the works to be completed.

For property owners wanting to sell, this is causing an overwhelm and a feeling of having no options. However, for those who are looking to sell a property facing EWS1 form issues, it is still possible to safely, and responsibly do this.

The first step is to determine whether there is currently an EWS1 form available and if there is, ask to see a copy. If the rating is A1 or A2 then the likelihood is, a buyer will be able to get a mortgage on the flat. Of course, this will depend on the lender however a mortgage broker should be able to support you to find the most suitable lender.

If the rating is B1 or B2 for the EWS1 form, then unfortunately the chances of an easy sale do drop dramatically, however it is still possible. We recommend looking into the fire risk assessment report to understand the severity of the problem and if the freeholder of the building has obtained quotations for rectifying the works. The quotes should then be reviewed to determine the cost and timeframes of the works required.

If there is no EWS1 form then again, this is not a deal-breaker for leaseholders looking to sell and there are still options depending on the structure and height of the building. The main thing to remember is that there is always a solution to the projected problems they face with no EWS1 form, a B1 or B2 rating.

Before doing anything, it is recommended to get advice from the correct professional and we are available to provide unbiased advice on this sensitive topic. To speak to one of our experts, get in touch today.

Sealed bids or auction; How should I sell my property?

Selling a property is a big decision. Whether it’s your family home or part of an investment portfolio, it can be a daunting process, especially considering the high percentage of property sales that fall through.

Unfortunately, selling a buying a property isn’t always a straight-forward process. The success of a sale depends on several factors, including many that are out of the seller and/or buyer’s control. Because of the high fall-through rate from private treaty sales, property sales via auction are on the rise. In fact, during the past two years, the number of properties sold at auction has increased by a whopping 40%[1].

Everybody hopes for a quick and easy sale/purchase when it comes to property and with the main benefit of selling via auction being the low fall-through rate that is less than 1%, it’s no surprise that more and more people are opting to sell this way.

In Q4 2021, 39%[2] of property sales fell through due to the buyer changing their mind or attempting to renegotiate the offer and 27% because the seller accepted a higher offer from a different buyer or switched buyers due to slow progress[1].  Selling via auction eliminates the risk of this due to contracts being exchanged on the day of auction.

Sales via auction typically complete within 28 days and with the buyer legally bound to pay a 10% non-refundable deposit, the chances of the sale falling through are reduced significantly. The significantly faster turnaround time is also a huge incentive for selling via auction.

Of course, when selling a property, we all want to squeeze as much money out as possible. Another benefit of selling via auction is that properties typically earn a higher sale price due to the fast-paced and competitive nature.

Whilst auctions are historically known for being the ideal selling space for ‘problem properties’, they also provide the perfect opportunity for those who want to meet a sales figure by a certain date, those who don’t want to risk a sale falling through and those who want a hassle-free sale.

[1] https://thenegotiator.co.uk/how-to-sell-a-lot/

[2] Quick Move Now