With private treaty and tender becoming the favoured method for more buyers, Jack Mitchell of Carter Jonas discusses when an auction room might be the right choice.
Fewer cash buyers in the market and a polarisation of the market meant vendors who might have traditionally preferred the auction room should not close their minds to alternative methods.
That was the message from Carter Jonas associate Jack Mitchell, who added vendors needed to consider all avenues and the auction room did still offer the best method for certain properties.
But he said there had been a number of examples over the past year where sales had been agreed by private treaty after the properties failed to sell at the fall of the hammer.
He highlighted two county council farms they had offered for sale last year.
“The first was lotted into bare blocks of farmland and a house with eight acres,” he said.
“At auction, everything sold except the house with the land. Afterwards, a sale was agreed by private treaty to the first person who had viewed the property.
“It transpired the investment required in carrying out surveys and mortgage valuations initially put off the eventual buyer as they could not be sure they would be the successful bidder in the room.”
Mr Mitchell added a buyer had been deterred for bidding for another 24-hectare (60-acre) farm which included a house for modernisation and a range of buildings due to the lack of flexibility offered by the auction method, with no scope to negotiate any of the terms.
“In both cases, the method of sale was the reason a buyer was not found at the first attempt because they did not have the confidence to bid and exchange contracts on the fall of the hammer,” he said.
Sales of farmland seemed unaffected by this trend and continued to ‘sell well to keen bidders’.
“Yet, when a house is involved, local authorities, institutions and probate sales are increasingly favouring private treaty or private tender,” he said.
This was probably a reaction to the economy with fewer cash buyers now in the market, so Mr Mitchell said it was likely private treaty would continue to be the favoured option going forward.
“I am always surprised by the number of people who will not, or have not bought at auction,” he said.
“If we ignore those people, we are potentially cutting out a number of buyers.”
BENEFITS OF THE AUCTION METHOD
ALTHOUGH private treaty and tender would continue to be the more favoured method of sale, it was important to note selling at auction still had many benefits.
“On the fall of the hammer, the seller knows that they have sold it and the buyer knows they have bought it – that is a big draw for a lot of people,” Mr Mitchell said.
“Both parties know there will not be any renegotiations because they are legally bound, and the deal typically completes in four weeks.
“The quick, transparent sale removes the risk of the complications that sometimes occur while a private sale is being completed.”
He highlighted it was a ‘fact of life’ buyers would sometimes change their mind between making an offer and completion.
“The economy can make people jittery, another property might come along, or personal circumstances may change,” he added.
“Or, from the buyer’s perspective, someone else might come along with a better offer.
“Despite the many benefits of a private deal, there is more room for uncertainty than with the auction method.”
Mr Mitchell added those with ‘unique or unusual’ properties to market may also find the auction route was favourable.
“Strawbridge House, which we sold at auction in late July, is a perfect example.
“The seven-bedroom country house with outbuildings and 16 acres, near Okehampton in Devon, required complete restoration.
“It had the potential to be extraordinary, but required a huge investment to transform it.”
He added valuing properties such as that was difficult due to the extent of work required and the uncertainties over the cost of carrying it out.
“It is often best to follow the auction route for such properties and Strawbridge eventually sold for £610,000 – above the guide price. A clean sale, where buyer and seller both know the terms of the contract, is sometimes a far more efficient way of getting a deal done.”