New entrants are disrupting the traditional estate agency model, there’s a wealth of different online offers and platforms and an explosion in proptech solutions.
Competition among high street agents is fiercer than ever, and against this backdrop more agents are adopting a hybrid solution to stay ahead of the pack. For many, this includes being able to offer clients the option of selling at auction, an option which is increasingly appealing to the mainstream market.
At IAM Sold, we provide outsourced white-label auction services throughout the UK, and we have seen a fundamental attitude change, with agents choosing auction as the first route to market. This is borne out by our figures – two years ago just 10%-15% of our instructions were new-to-market properties direct from our network of agents, but today it is more like 70%.
There are several reasons for this. Historically, auctions in the residential sector were the preserve of “dud” properties that wouldn’t sell, with agents using an auction as a last resort. But the reality is, in every other classification, such as art and antiquities and, closer to home, the commercial property sector, auctions are used to maximise exposure and value. We have spent a great deal of time educating and training valuers on this method of sale and, as a result, many are turning to auction first.
Our year-on-year data shows a 55% uplift in capital value on a 33% rise in sales (2016 financial figures show 2,302 sales totalling £226.3m versus 1,728 sales at £146m in 2015), and in the six months to 31 October 2016 we realised more than £163m in capital value, 11% above the listed reserve price, on average. This demonstrates the value that can be achieved and shows the rise in higher-value properties using auction as a method of sale. A recent example of this is a five-bedroom family home near Wakefield in Yorkshire selling for £605,000 after attracting 13 bids on a starting price of £450,000.
The “modern method of auction”, where buyers have four weeks to exchange, has also enabled a greater range of buyers to purchase in this way. Indeed, as agents continue to build auction into their marketing packages, we are also starting to see a major shift in public perception. Our statistics from last year show a significant proportion of consumers turning to auction to buy property for their own use, with almost a direct split between cash and mortgaged purchases – 43% of buyers bought for owner occupation while 47% purchased for buy-to-let purposes, and 10% bought to re-sell. Of the owner-occupation purchasers, 48% used traditional mortgage-funded finance and 52% used cash. This is very different to a few years ago, when auctions were almost solely the preserve of cash buyers; typically larger investors and portfolio landlords. The fact that the modern method of auction enables buyers to purchase with mortgage finance, and offers security and speed, means that it is increasingly seen as a perfectly viable option for owner-occupiers.
Many people suggest the sales market overall will contract in the first half of 2017, providing further incentive for agents to offer a full range of options to clients to win new business.
The beauty of auction is that in a market downturn, vendors turn to it for speed and security, and if the market is strong and prices are rising, auction offers vendors a way to maximise value. With owner-occupiers increasingly turning to auction, offering this as an additional service will be critical for those agents who hope to not just survive but prosper if the market reduces in terms of transactional volume.
