Following the easing of lockdown restrictions on England’s property market in May, NAEA Propertymark reported a sharp increase in business for estate agents. Its research found that there had been a 7% rise in demand for housing when compared with pre-lockdown.
A really positive bounce back for the market, which even the most optimistic would have only half believed was coming.
Since the report was published, Chancellor Rishi Sunak announced a stamp duty holiday in early July, which runs until the end of March next year.
Unsurprisingly, according to Rightmove, this has only driven more activity in the market with buyer enquiries up 75% in July and 44% of homes that have gone up for sale since May 13 are now under offer - a 10% rise on the same period last year.
This is all good news for estate agents, who may not have expected to have been so busy coming out of lockdown.
Yet although this is all positive news, following one of the most difficult periods ever for the property market and society in general, the typically slow journey to completion of private treaty sales, coupled with the potential for fall-throughs as economic woes continue to bite, means the income may not start flowing for estate agents for some time.
For agents looking to boost their income sooner, below are some reasons why they should look to partnering with an auctioneer.
Complete in weeks not months
Typically, after a buyer has had an offer accepted on the property they want, it can take anywhere between 16 and 20 weeks to complete - with the worst case scenario being even longer.
Even though the market is picking up and at some speed, it could be many months before estate agents see a real increase in their income.
As the stats show, it can take months to sell a house on the open market and it will be completion day before everything is truly certain – and before the estate agent gets paid.
NAEA Propertymark’s report also showed 61% of estate agents have seen an increase in fall-throughs since the start of lockdown, while the Mortgage Finance Gazette reported that one in four sales fell through in 2019.
SDL Auctions, in contrast, has a fall-through rate of less than 1%, which means the risk of your auction sale falling through is virtually zero. This is a huge attraction for frustrated house-sellers and cash-strapped estate agents.
Our buyers have to be committed because they pay a non-refundable deposit and either contracts are exchanged or a reservation agreement is signed at the fall of the hammer and the full balance is due on completion, which takes place around 20 working days after exchange.
In short, this means if you sell a property in our August auction, the new owners could take possession at the end of September.
You can complete sales in a few short weeks rather than in months; which is crucial sometimes for vendors and agents.
Money in the bank
Much of this is already widely understood within the property industry – but I don’t think estate agents realise just how quickly they get paid; they will receive their money within seven days of the sale being agreed with SDL Auctions.
And the fact that NAEA Propertymark reports 70% of properties sold for less than their asking prices in the first weeks after estate agents reopened on May 13, only strengthens the case for auction sales.
On the open market, properties are generally priced higher to leave room for negotiation, while at an auction, we take the opposite route. An attractive guide price – which is within 10% of the reserve – will generate interest in the property and can result in competitive bidding.
We saw this time and again in our June national property auction, where well-presented family homes sold for around 25% above their guide prices. Across the whole auction, properties sold for an average of 15% above guide.
Diversify to boost income
Due to the pandemic, every business has had to re-evaluate how they operate. Now is the time for estate agents to capitalise on the positive supply and demand.
The new stamp duty rules have re-energised the market, but you can’t get past the fact that the money will take months to land in estate agents’ bank accounts.
We urge agents to take a look at how they can diversify to boost their income. The simplest way to do this is to incorporate auctions into their business, not just to help their cashflow but to really help their vendors get a secure sale quickly in these challenging times.
*Louise Jefferies is Commercial Director at SDL Auctions