Over the years that I have been in the auction business, I have embraced many changes, the most notable being the arrival of the digital age.
These days it is possible to buy almost anything at auction, from a house to advertising space and everything in between. Recently we have seen a new kid on the block, the conditional auction, with auctioneers who take part calling it the “modern auction”.
For me, it bears little resemblance to the “traditional auction”, and the question I ask myself is: “When is an auction not an auction?” And are auction houses, such as us, which are not participating in this new practice, failing to keep pace with the times?
Throughout history, auctions have been a relatively common way to negotiate the exchange of goods and services. Their definition as “the process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder”, has stood the test of time from as early as 500 BC when, according to Herodotus, in Babylon, auctions of women for marriage were held annually.
One of the most significant historical auctions occurred in the year 193 AD, when the entire Roman empire was put on the auction block by the Praetorian Guard. Didius Julianus outbid everyone else to secure the empire but, sadly for him, it didn’t end well as he was beheaded two months later when Septimius Severus conquered Rome. Fortunately, no such misfortunes have befallen vendors of Andrews & Robertson.
The development of the internet has played a huge part in the rise in the use of auctions, being used both as a means of disseminating information about auctions, and as a vehicle for hosting auctions themselves. With it has come the conditional auction.
So what is a conditional auction? Well, the process is similar in many ways to the more common non-conditional property auction process. However, the buyer is bidding for an exclusive option to buy, then, within a specific period of time – typically 28 days – to exchange contracts, and to complete 28 days after that.
The winning bidder pays over a reservation fee to secure the property. This is a non-refundable deposit held by the auctioneer as stakeholder until the contracts are exchanged.
Certainly, the conditional auction shares some benefits with the traditional auction in its transactional transparency. Also, buyers who require traditional mortgages rarely buy at non-conditional auctions and it is plausible that the conditional route may become a compelling option, opening up the market to more potential buyers and widening the buyer pool.
But is a conditional auction really an auction? In my opinion, no. Call me old- fashioned, but, despite the name, legally it is no different from a private treaty sale.
Significantly, these differ from traditional auctions in that the offer requires you to pay the buyer’s premium on the spot as a non-returnable deposit.
This is typically a minimum of £5,000 or about 5% of the selling price paid at the fall of the hammer to the auctioneer, not the seller, and does not count towards the purchase price. The seller does not pay anything to the auctioneer, so you can see why the idea might be appealing to them.
Yet it does not give them any more certainty that the sale will proceed, since the agent has already received their fee up front. In fact, cynics might argue that it is in the agent’s interests for the deal to fall through and to seek another buyer to pay a further fee on the same property.
For our vendors, it is the speed and certainty of the non-conditional auction that appeals. They know their property is put in front of serious buyers who are in a position to complete within a set timescale and, when the gavel falls, the deal is done.
For me personally, I do not think you can replace the buzz and excitement of a live auction room and the whole environment it creates. Fear of missing out on the lot you came to bid on, fear of losing out to another party, the adrenalin and the competitiveness – the atmosphere can be truly electric.
With that in mind, there is time to fit in an auction amid the seasonal festivities, with our final auction of the year taking place on Tuesday 15 December.
Robin Cripp is chairman and senior auctioneer at Andrews & Robertson
