COMMENT All of the property auctioneers, both commercial and residential, have continued to press forward valiantly with online auctions throughout June and July. However, with the resurgence of online auctions come possible dangers that could easily catch out an unwary bidder.
It is vital to examine the legal papers prior to bidding and, in particular, the special conditions and addendum which are usually available for prospective purchasers to check in the room on the day of a live ballroom auction, but with online sales must be checked online.
The need to really check the conditions was demonstrated last month when clients of ours were looking to a buy a high street property in one of the June sales. Looking through the records on the Essential Information Group website, it had previously been offered by the same auctioneers in May when it had sold for £396,000. So one was slightly surprised to see it being offered again in their June auction when it was guided at £330,000 but this time sold for £466,000. Even more surprising is that it was offered once again in their July sale with a guide of £450,000.
When our clients looked at it in more detail in June, the special conditions, which were only produced at the very last minute, showed it to be a conditional contract with the unusual proviso of the seller being able to rescind the contract by notice to the buyer at any time until completion.
The deposit, which is normally 10%, in this case was 15%. The buyer was obliged to pay for various searches and £2,000 towards the seller’s costs and, on completion, they would have been committed to paying an additional sum of £6,500 or 5.5% of the purchase price. If one actually worked that out, on £466,000 that would have been an extra £25,630.
They understandably decided not to bid on the day. None of this is against the rules, but it could easily have caught out an unwary buyer.
Read the small print
One cannot stress enough the importance of checking the legal papers before the sale you are interested in, but especially the special conditions, which could have been changed at the eleventh hour, as well as any addendum that might reveal any buyers’ premiums and any other charges that may not have been mentioned in the particulars of sale.
Prospective purchasers should also keep a watchful eye on the guide prices as these could quite easily increase just prior to the sale due to increased interest and offers that may have been made prior.
To the casual observer or new entrant to the market, business is booming, with success rates apparently heading towards 100% in many cases.
But with the rules surrounding online auctions now requiring the auction houses to carry out checks on prospective bidders prior to the auction date and asking them to lodge a deposit before they can bid, auctioneers have greater control over knowing what is likely to sell and what is not.
If a property has registered no potential bidders, then the auction house can advise its vendors to withdraw the property prior, whereas prior to the virus with a live auction, no such test could be made and, if offered, the property may have been unlikely to sell.
Therefore the results of 95% and 100% we are seeing being reported by Essential Information Group, aren’t really telling the full story. The real litmus test is how much has actually been raised from each sale and some of the prices being achieved.
A barometer of health
The Allsop commercial team took advantage of the market demand and of being able to deliver what has now become a very streamlined method of sale, by squeezing in an extra date on 16 June. From an original catalogue of 63 properties, it sold 39 out of the 48 that were offered, with 15 lots withdrawn prior.
A total of £22.6m was raised on the day, although, according to its website, it increased this to £29.5m a few days later with a further 11 lots selling. At its July sale it realised an impressive £48.5m from its online sale, with this also now increasing, according to its website, to £51.9m.
Its residential team recorded sales at the 16 July auction of £44.1m, which has since increased to £44.5m. Its original catalogue offered 248 lots but, on the day, 217 were offered, having withdrawn 31 lots prior and with 184 properties selling.
Quite remarkable results in these uncertain times.
Both sales demonstrate that the amount of money realised is the best barometer of the health of the market at any particular time, rather than percentage success rates, as well as showing the considerable weight of money that continues to chase and find the right investment opportunity to buy.
John Townsend is head of the auction advisory service at Harold Benjamin Solicitors
