Auction property prices
The biggest reason property buyers enter the auction room is price. On average, auction homes in Britain sell for -41% less than those on the open market. With the national average house price currently £278,120, this represents an average saving of almost £115,000.
While this saving varies from region to region, it climbs as high as 48% in Scotland while London is home to the biggest monetary saving with a £87,000 saving.
Speed and certainty of purchase
After price, the greatest advantage of buying a home at auction is speed. Unlike buying on the open market, sales are not subject to typical delaying factors such as chains. So, when the hammer falls on an auction property, it takes very little time for the buyer to receive the keys. Typically, around a month compared to around six months on the open market.
Another advantage is that purchases are certain - there is no way the seller or buyer can decide to back out at the last minute because the fall of the hammer, is itself, a legally binding moment. This brings an additional sense of certainty to the process, allowing all parties to complete their processes without fear of fall through.
Another advantage of property auctions is the overall transparency of the bidding process. Bidders have full knowledge of the price as it rises, and full control over whether to raise the bid or drop out.
This prevents buyers from falling foul of the common open market practice of gazumping, in which one buyer has their offer accepted before it is suddenly revoked because another buyer has swept in with a better offer at the last minute.
What to watch out for
There are usually a good variety of homes available at auction, some in good condition, but many with perceived baggage; baggage that might deter buyers on the open market. This is why auctions are popular with professional buyers, but if regular buyers are looking for a ‘fixer-upper’, for example, auctions are a great place to start.
Because auction properties often require some work, the bidding tends to start well-below market value, and, as already discussed, the sale prices are often well-below average, too. For many people, this provides an opportunity to buy a larger home than they could afford on the open market, or in a location that is otherwise out of their price range. However, despite the significant upfront savings, to suggest that auctions offer better value for money than the open market is misleading.
Yes, auction buyers regularly secure great deals for themselves, both professionals and amateurs. But, more often than not, they are buyers who are able to renovate the property, at least partially, themselves. Otherwise, the money required to renovate can quickly negate the auction savings.
There are a couple of extra things to be aware of at property auctions. The shorter buying timeframes mean less time for surveyors and solicitors to do their jobs, thus reducing levels of due diligence. Buyers must also be ready, right then and there, with the finances in place to meet the required agreement with the seller’s solicitor and, as such, there is a real risk of buyers going over budget, perhaps carried away in the heat of the moment, and placing themselves in financial difficulty.
Finally, anyone who is interested in selling a property at auction should know that the auction house will take a commission of around 2.5% of the final sale price. There is also an entry fee, usually around £300 for each property, and sellers must also provide an auction legal pack which costs at least £200 to produce.
James Forrester, managing director of Barrows and Forrester, comments: “Buying at auction is more popular now than ever before. It’s fair to say that the rise of online auctions is responsible for this, not least because it helps everyday buyers avoid the intimidating environment of the traditional auction room, surrounded by competitors who are bidding every day.”
“However, it’s important to note that it requires more thought than your usual late-night eBay splurge and while greater accessibility is a positive, it has also increased the number of buyers getting in over their heads.”
He concludes: “Just like the open market, the financial agreements you’re making at auction are very real and deal with very large sums of money. It’s vital to be prepared, have your finances in place, do your homework on the properties you’re planning to bid on, and ensure all of the important surveys and checks are completed before the hammer falls.”
Bricks and Mortar offers best investment, says Auction House
Auction House believes activity within the property market will remain strong in the coming months, despite the global uncertainty caused by Russia’s invasion of Ukraine.
The UK auctioneer says that traditionally, in times of world upheaval, people invest in property rather than in the stock market.
Managing director Jeremy Prior explains: “Of course, the first thing to say is that our hearts go out to the Ukrainians and the horrific suffering they are currently going through. All of us want to see a speedy and safe resolution to the conflict, and an opportunity for those individuals to be able to return home.”
“However, for the rest of us, in times of global volatility, it is important to keep calm and make measured decisions, as opposed to knee jerk ones which often come back to haunt us. And it’s true that in moments such as these, investors tend to choose bricks & mortar, rather than stocks and shares.”
He goes on to say: “In difficult times, investments which you can see, touch, and feel tend to be the safest and most popular – which is why property does so well. History shows us that it’s happened before, and we have no reason to believe it won’t happen again.”
Prior’s comments come as Auction House release their results for the first two months of the year, which indicate a rise even in the group’s healthy performance in 2021.
The group offered 576 properties during that time and sold 475 of them – a rise of 4% year on year – with a success rate of 83% (up from 79% last year) and raising a total of £64,753,600.
Commenting on the figures, Prior says: “Our sales continue to be strong, the market remains robust, and demand continues to outstrip supply – as evidenced by our performance this year so far.”
“All of this is set against a challenging background of coming out of Covid, where we continue to offer livestream auctions across the country because the pandemic has proved they are what both buyers and sellers prefer. So, I can safely say that livestream internet bidding is not going away!”
He says even the auctioneers choosing to return to live venues are working on a hybrid basis, with the auction taking place both in-room and online, effectively offering the best of both worlds to clients.
“Right now, we need to understand that the stock market is extremely sensitive to world events – as is evidenced by the FTSE 100 Index falling by over 600 points since the middle of February and the imminent invasion of Ukraine by Russia,” he adds. “But we also know that the property market tends to be less price-sensitive and a safe bet in difficult times.”
“At Auction House we have literally hundreds of experienced and professional experts across the UK, calmly going about their business, taking properties for sale into their auctions, and servicing the ever-increasing demand from investors seeking sanctuary in bricks and mortar.”