After a comparatively quiet 2009, it was recently reported that many of the UK’s leading auction houses have recently been seeing increases in the amount of buyers attending auctions as well as lots being sold (Savills and Allsop both sold over 90 percent of their registered stock in their most recent auctions). For this reason we are starting a series of articles and interviews on buying at auction and how investors can maximise their day one profit. The first is an interview with Alan Kirkman, Director at Tudor Network Auctions:
1) We came across you and your auction service via the Property Investors / Developers Forum on Linked-in – can you tell our readers a bit about yourself and your background? I have been involved if the property industry for the last 30+ years although my background before that was sales and marketing which is why I have often taken a very different approach to renting and selling property than other agents.
2) The concept of auctioning is perhaps on of the most traditional ways that many investors have bought property – why do you think that it has stood the test of time? Auction is the best way to sell a property if you truly want to test the open market. It also avoids the frustration of gazumping and chains breaking down. It is best suited to properties which are hard to value; have investor / development potential; damaged through fire / flooding, settlement or sales where you need to show the market has been tested such as probates. A more extensive list of suitable properties can be found by clicking here.
3) It is often said that auction houses have the strongest direct ties with the banks / mortgage companies looking to offload their repossessed stock – how much truth do you think there is in this? Historically this has been the case but times are changing and banks often look to other methods of sale. There is still a significant number of repossessed property sold at auction but not the volume as was the case in the early 90s. There again we have not seen that many repossessions coming onto the market; something that may change over the next few months.
4) How different is the auction process since before the onset of the credit crunch and drop in property values? It is true to say auctions suffered for about an 18 month period during the worst of the recession, this was due to both sellers holding onto stock whereever possible and investors waiting for the market to bottom, however even during this time on average 51% of lots sold. Now we are seeing investors coming back into the market strongly either building rental portfolio’s (commercial and residential) refurbishing property to sell on or building land banks. In all markets offering the right properties at the correct guide prices and reserves is key to successful selling at auction.
5) What are the essential steps an investor should take prior to attending an auction? If you are successful in buying at auction when the hammer goes down you have exchanged contracts, so it is important to make sure you have everything in place to be able to complete the sale. View the lots online or obtain a copy of the catalogue, which is available 2/3 weeks before the auction. Visit the properties you are interested in. Obtain advice on the condition of the property. Enquire about any planning or building regulations required. Ask your solicitor about any legal matters and ask them to view the legal pack online. Make sure you have the required finances in place guide prices are a general indication as to the sellers reserve price. Plenty more information about buying at auction is available by clicking here.
6) Can you outline some essential rules of an auctions house? Most auction houses use the RICS terms and conditions and these are always available either in writing or online, some lots will also have special conditions as well. The most important thing to realise is that you exchange contracts on the fall of the gavel as already mentioned and 10% deposit is paid there and then, completion is normally 20 days later when the full amount of the contract is payable. Plenty more information on this is available by clicking here.
7) You regularly mention on our forum about how your lots completely selling out – is this the sign of things to come or are you expecting further drops in prices? No, this is a sign you are dealing with a professional!!! On a serious note the reason we have a high success rate is because we attract the right investors to the room. When we value for auction we know we need the maximum number of interested investors there on the day. This is achieved buy guiding the price correctly, having the right reserves and marketing as widely as possible. As part of Network Auctions (an association of auction house across the UK), we have a large advantage over both the large London auctions and the smaller local auction house. We are based in Southend on sea Essex and are experts in that area and attract the local investors. The national network organise the central sales and the national marketing together we look after the investor clients. This combination gives our clients properties the widest exposure and the best opportunity to sell at the best prices. This was seen at our March auction where all our lots sold on or above open market value. Because of the Network Auction we can also sell properties from anywhere in the country (one of our recent lots was in Redditch, for example).
Regarding the market, prices may peak and trough over the next few months as the economy comes out of recession but most people buying and selling at auction are aware of the financial background and are looking to achieve their long term investment plans. I cannot stress enough selling at auction is very much about reserves and exposure to the market.
8)There are also a number of ‘online property auction’ sites appearing – what are your thoughts on these (compared to ‘live’)? Online auctions will never achieve the same excitement or competition as a live auction. However using the internet to make auctions more accessible has been a great advantage to us as a UK wide network. Clients can register to view the auction bidding live online if they cannot make to the sale room and then bid by telephone. Interestingly though nearly always the successful bidder is in the room. If you have a property to sell I would not advise online auctions as generally the prices achieve are not that impressive because you do not have the competitiveness of the room.
9) How can people contact you and find out more about your services? I can be contacted via my company website which has plenty more information on preparing properties for sale buying, selling, renting out property as well as auctions. There is also a link to my monthly “Southend property market up date” on the site as well. I regularily update my blog once or twice a week with answers to property questions sent in from the public which can be accessed by clicking here.