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Written by rosalind renshaw

Claims by an auction house that it sold 89% of lots at its last sale have been challenged, on the grounds that the sales were all subject to contract.

The case highlights what could be a seismic change in the world of residential property auctions.

Unlike auction houses which emphasise that the deal is done at the fall of the gavel, the Great North Property Auction offers ‘modern’ methods. Purchasers put down a 5% non-refundable fee and exchange 28 days later. Completion is a further 28 days following.

Essential Information Group, which records all property auctions in the UK, has noted on its website that not one of the properties in the Great North Property Auction held on February 9 at Hadwick Hall Hotel, Stockton-on-Tees, was sold.

It records total lots sold as being nought, raising a sum of nought.

Under the heading of ‘conditional lots’, it lists 53 lots as having been offered conditionally, with 47 were sold conditionally. However, under the heading ‘conditional lots now exchanged’ it records nought.

It says the percentage of lots sold conditionally were 89% – the same as claimed as actual sales by the Great North Property Auction. EIG puts the amount raised conditionally as £3,066,150.

EIG adds: “Conditional sales are where a bid was made for a conditional lot, at or above the reserve. A non-refundable deposit was paid with an exchange of contracts to take place within 28 days.”

Great North Property Auctions says in an advertisement that appeared earlier this week on EAT: “The first Great North Property Auction (GNPA) of 2012 has most certainly set the bar high for other auctions operating in the North-East region. Not only did the auction sell 89% of the lots offered but has now set a new record for the most successful auction in the North-East so far in 2012.”

But auctioneer and industry consultant Guy Charrison, who is also chairman of the National Association of Valuers and Auctioneers, said the claims were misleading.

He said: “To most auctioneers, the fall of the gavel is binding, and it is at that point that contracts are exchanged. However, in this case, contracts are not exchanged. In reality, on the fall of the gavel, what I would describe as an option to purchase is created.

“Whilst it is unfair to quote the sale figures against the traditional auction method, I am not saying this as sour grapes, as I think there is really good potential for this alternative method to grow in popularity. It is just that it is only fair to measure things in an equal context.”

Jamie Cooke, director of Great North Property Auctions, said: “Technically, these are sales subject to contract, but our fall-off rate is very low – less than 5%.

“What we are trying to do is to change the face of auctions for the ordinary residential market. For Mr and Mrs Jo Mortgage, a traditional auction sale can be very pressurised and intimidating, and it may not suit their timescales: this way, if they are selling, they have a month to raise any new funds and two months in which to move out.”

He said that residential purchasers also prefer a more relaxed timescale, and that the payment of a non-refundable holding fee or deposit signalled their commitment to the vendor.

Cooke emphasised that virtually all properties in his sales are put there by ordinary vendors and bought by ordinary residential purchasers, with almost no lots being repossessions.

He said the company, which is three years old and has sales in other regions with overall activities covering the UK as part of Iamsold, has built up a network of 165 estate agents with 250 branches. “We are looking to double that number this year,” he said.

David Sandeman, of Essential Information Group, said: “I suppose it all depends on what you mean by ‘sold’.

“We record these transactions in a two-part way – first as conditional sales, and then when they are actually sold."

Great North Property Auctions is not the first firm to run auctions on a subject to contract basis, he said, adding: "More and more properties are being sold at auction this way, particularly in the North, but it is coming down South too. Last year, £100m worth of stock was offered on this basis, and that is not insubstantial.”

Comments

  • icon

    FBA - I never recall saying i had extensive knowledge of the EA industry...thats one of the reasons why i come here. I'm getting there slowly....but i have said i am a very experienced negotiator...i am.

    But Its funny the word you use is exactly what some of my clients call estate agents.....i try very hard to persuade them otherwise.....agents have a role to play and should be compensated for this but........exactly what that role is and how much to pay is the question.

    A question for you, do you always pay the price on the ticket? If i was on a crusade to reduce the fees that rightmove charge agents and i was succesful would i still be a parasite?

    • 21 February 2012 19:42 PM
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    Happy Chappy,

    Your experience in the property industry is just about zero.

    You have explained you are a paracite.

    Your vocal opinions are based on nothing.

    Go play on a football supporters blog where you can have more fun please. It is now crystal clear you write here with the express intention of debating with people. People who have far more experince and industry knowledge than you.

    If you came here for advice..here it is.

    Stop getting agents to cut their fees so you can take some of the said fee for yourself.

    Saddo

    • 21 February 2012 18:00 PM
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    PROPERTY INVESTMENT SCHEMES EXPOSED ON BBC TV

    Angela Rippon, Gloria Hunniford and Julia Somerville investigate what's being done to tackle the property investment schemes that have cost tens of thousands of people their entire life savings.

    BBC ONE RIP OFF BRITAIN : Wednesday 22 February 2012

    19:30 (7.30pm) EVENING

    • 21 February 2012 13:05 PM
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    FBA - What did your comment have to do with this article? I am happy to debate your problem with what i do on a thread that is relevant. I dont care if you like it or not, my clients do.

    Now back to the thread : There is a need for auction houses...otherwise they would not be there but lets look at standard conditions at auctions and some advice for buyers

    Advantages
    1. Getting a bargain
    2. Fast closure
    As soon as the gavel falls the winning bidder is guaranteed to have the property (subject to paying the deposit and final balance) and completion usually happens within 28 days.
    3. No gazumping
    4. No negotiating
    come up with your maximum price and then bid up to that price. If it goes higher then let it be, but if it sells for less you have a bargain. Of course this could be a disadvantage if you are a good negotiator, because you wont get a chance to use your skills (unless you try to put an offer in before the auction, which is allowed and is often accepted).
    5. No chain
    6. As a first time buyer you have no house to sell and no existing mortgage to pay off. Therefore you will be in a better position to buy at auction

    Warning
    The auction catalogue is often available just 3 or 4 weeks before the auction. In that time you will need to view the property, research the property, get any required survey done, arrange finance and a solicitor. Once you have won a property you need to pay the deposit immediately (usually by banker's draft) and pay the balance in a 28 day period. If you can't or don't pay the balance you will lose the property you could be sued for the difference if the property eventually sells for a lesser price.

    source: priced out .org.uk

    • 21 February 2012 09:54 AM
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    Question - When is a sale a sale?

    ANSWER - ONLY When it Exchanges / Completes and nothing before, as thats when agents get paid and a sale cannot go back after that!!

    • 18 February 2012 11:56 AM
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    It has always struck me that auctions, in which an exchange of contracts occoured on the fall of the gavel, was a limited way of attracting buyers. It naturally excludes many buyers requiring mortgages and therefore surveys before lender acceptance meaning that - contrary to what auctioneers would have you believe - the price achieved on any property is bound to be lower than may otherwise be the case.

    It therefore suggests that whilst this "modern" method of auction may indeed cause a greater number of failed transactions, it is likely to attract a wider range of potential buyers, surely pushing up the prices achieved and achieving a better result for vendors.

    As agents we learn to deal with a certain number of failed transactions and respond accordingly. Perhaps this is a necessary evil required to get best price.

    • 18 February 2012 10:27 AM
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    Seems like this lot had an Auction in North Lincolnshire last night. 80% success rate 35 'sales' something seems to be working!

    http://www.iam-sold.co.uk/static/auction-results-feb2012.pdf

    • 17 February 2012 16:20 PM
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    47 properties sold conditionally at a non refundable minimum fee of £5,000 + vat = £235,000 + vat in fees.

    I presume given the disdain being shown for this method of Auction on this forum that every Agent in the North must be easily clearing more than that in fees a quarter.

    Puzzled!?!?!

    • 17 February 2012 15:36 PM
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    Smoke them out, the nutters, the con artists and the idiots. Here is one for you. HAPPY CHAPPY. He reveals his angle. What a sorry excuse of a man he is.

    Added by Fun Boy Agent on 2012-02-17 14:38:30

    So?

    Happy Chappy helps members of the public decide which agent they are going to use, including online agents, and charges the vendor to make this decision?

    If I have got this right I am totally gobsmacked.




    Added by Happy Chappy on 2012-02-17 13:11:43

    I do not have an online business and I am not anti agent. However, I do think there is room and a need for both on line and traditional estate agent.. I have told you before I help vendors choose and instruct a model and agent that suits them not just the agent...Many vendors do not have a clue how to do this or what alternatives are available.
    I have at no point been taking the pee at all....and at no point did I say I would be a competitor to you I said I would have saved your client money and got the same result...I stand by that....my quote was from the film Taken.

    • 17 February 2012 15:22 PM
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    towhomitmayconcern

    I am in total agreement with you but nevertheless I am sure you understand my surprise at the vein of your post. Maybe now you are no longer banging the gavel you are able to walk in the moccasins of others (...as I am, no longer being an Agent...) and see things from another perspective.

    Nice also to be responded to by someone who doesn't kick off their post with "'@PeeBee" - just a personal pet hate (which now opens the floodgates... sigh...)!

    ;o)

    • 17 February 2012 15:08 PM
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    To Peebee,

    I love the art of auction but I don't always believe immediate exchange of contracts is always the best tact for certain properties. I think this "modern method" will open auction to a larger market

    Do you remember a time when we were told we could access our cash from a "hole in the wall"! People believed this to be absurd at first..... now we wouldn't access our cash any other way. Perhaps I am long in the tooth but what is wrong with embracing change

    • 17 February 2012 14:47 PM
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    'towhomitmayconcern'

    Sorry - but although I actually agree with you in part, I find it hard to believe that "a retired auctioneer" would have these views. Those auctioneers I know (and I know quite a few very well...) LOVE the art of the auction.

    They would not give that up for a King's ransom. May I ask why you seem to have such a different opinion?

    • 17 February 2012 14:30 PM
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    I have a point to add on this topic. In my experience most purchasers at auction happily pay the deposit at the point of exchange ( fall of the hammer) which is typically a cheque. Normal auctions only see a small % of purchasers who change their mind on purchases and they usually bounce the cheque. I think what will happen here is that punters will be prepared to waste peoples time as generally serious investors with cash to spend are not messers and hence most proceed to completion. I think swapping procedures to allow punters to pay a deposit cheque and then mull it over / view it / arrange a mortgage etc will just result in lots of messers and lots of changed minds and bounced deposit cheques. You could of course try and read them the riot act / threaten litigation etc if they dont pay up, but generally you are on a road to no where trying that stance with them, You could also insist on cash / debit card deposits but again most purchasers will just say no unfortunately. Such is life. I think they have created a great system of collecting non refundable deposit cheques, unfortunately they are the bouncy kind.

    • 17 February 2012 14:16 PM
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    online? in room? conditional? ( in car park? up a tree?)etc. etc.
    This is a nonsense!
    This lot are doing the industry no favours and would seem to be causing confusion for the general public.
    The whole point of an auction is that the item is SOLD at the fall of the gavel.

    • 17 February 2012 13:53 PM
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    to Kazzy: I have also looked at the site in question, but it appears to me that they clearly have two methods of auction. Live room auctions & online auctions which appear to be independent of each other!

    I think this method of sale seems fantastic. As a retired estate agent and auctioneer the thought of allowing more time for the buyer and vendor means surely we will see more people turning to auction! this can only be a good thing! Very often in the past, we authorised delayed exchanged after the fall of the hammer, and I am aware of this still happening within institutional auction houses.

    For me an auction is when the highest bid wins, the requirement for immediate exchange can in many cases hinder the price that could be achieved if a longer period would be allowed.

    I will watch this with great interest and wish this "modern method" all the best

    • 17 February 2012 13:45 PM
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    Hmmm... - "SOLD" : 'unsold?

    From the website FAQs:

    "This is the Modern Method of Auction, the bid binds the buyer to pay a reservation fee or deposit and sign the reservation form. It does not bind the buyer to buy the property but instead allows them to reserve the right to exclusively exchange contracts on the property at an agreed price within 28 days of the bid being accepted."

    So - NOT "sold", then...

    New slips required for FS Boards, peeps:

    "Rights Reserved to EEC"...

    • 17 February 2012 12:16 PM
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    Surely everyone is making a big deal over what is in essence a conditional auction!? It’s not a ‘con’ there have been variations of this method of sale in operation for decades but it appears it has only caught the industries attention now it is becoming more successful than the dated methods used by most.

    • 17 February 2012 12:10 PM
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    Kazzy: I take it then, from your posts, that you are in the patch of this auction house, and therefore on the market with one of their agent partners. My patch also. I am not an Agent - but was - and am still in the industry. I am intrigued by your predicament and would like to think that I or others reading and posting here can assist you.

    Here goes a few questions:

    How long have you been on the market in total? How much of that with the same Agent? And how long as part of the Auction?

    Why did you choose this route?

    Why are you unable to have your property featured in a 'live' auction?

    You say that this is tarnishing the reputation of the Agent. How? With who? What is the Agent doing to resolve your issues?

    Your answers are keenly awaited...

    • 17 February 2012 12:10 PM
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    From their website: "The fee is non-refundable if the sale falls through due to the buyer breaching the terms and conditions, but refundable if the sale falls through due to a breach of the terms and conditions by the vendor."

    So the fee of £5,000 + vat is non refundable unless the vendor defaults. A 5% fall through means that they are collecting £5,000 + vat as a minimum from each reservation/sale however you want to word it.

    Fail to see how that is flawed - vendor is happy, they are happy, agent is happy and presumably the buyer is happy otherwise they wouldn't have bid in the first place!

    How is that flawed? Good opportunity more like. If I were an Agent I'd be having a close look at this!

    • 17 February 2012 11:55 AM
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    online?? in room?? sales agreed pre auction event?? sales recorded with NO deposits?? its a joke!
    The properties with offers ARE being cherrypicked to go in the auction catalogue and those with no interest LIKE MINE are being told they can no longer be offered in the auction room as promised!!
    FACT - lots of unhappy sellers
    FACT - this is tarnishing the agents involved reputation
    and expecting unsuspecting buyers to pay £5000+vat NON FEFUNDABLE on top of the sale price WITHOUT seeing any legal documents is just chaos? or illegal?? where is this money being held?? is this a con?

    • 17 February 2012 11:48 AM
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    Good idea, but flawed.

    A conditional contract is one in which the buyer can avoid the sale if some contingency arises, such as the buyer’s inability to get financing. It therefore should not be described as a sale by auction.

    In 'real' auctions, negotiations and contingencies of
    any kind are rare; the contracts are unconditional. An unconditional contract is appealing for a seller, because it provides the buyer with fewer excuses for legally
    backing out of a deal.

    Of course, there is no “free lunch,” contingencies that can
    cause difficulty for buyers and discourage bidding may lead to less bidding and lower prices offered as the hammer goes down.

    What type of bidders are these people trying to attract?

    Since the selling price cannot be determined prior to
    the auction, it could prove difficult for a buyer to arrange financing in advance. The financial implications are that even after a successful bid, a buyer might find that he cannot get financing, or as much financing as he needs.

    No, it is flawed.

    • 17 February 2012 11:26 AM
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    @Kazzy
    Read their website. They offer ‘online’ and ‘room’ auctions. They give you a choice of online or room auction that is why not all the properties on the website go to a room event.

    • 17 February 2012 11:25 AM
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    They're not alone...

    http://www.the-negotiator.co.uk/manning-stainton-reveals-2012-strategy/6519182.article

    • 17 February 2012 11:22 AM
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    I've just sold another one, a viewing counts as sold now surely?

    • 17 February 2012 11:18 AM
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    Its a con!!!!
    they are not auctioneers and are giving auction a bad reputation. They had nearly 200 houses on their website and cherry picked only the ones with offers to put in their catalogue, 150 poor vendors thinking they were going to sell their house left high and dry. that only gives them a 23% conversion rather than 89%!!!!! now thats what i call misleading and manipulating the fiqures

    • 17 February 2012 10:56 AM
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    Setting aside the figures which are impressive, I suspect that it won't be too long before they are prevented from calling it an 'Auction'.

    'For Sale by Auction' is an established legal practice whereby the contract to buy the goods is legally exchanged without any conditions on the fall of the hammer.

    This term is recognised in Common Law and therefore unless the contract is exchanged on the fall of the hammer it can't legally be called a 'Sale by Auction',

    • 17 February 2012 10:42 AM
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    I want to know where all the money is going £5000 fees!?
    The agents up north must be making a killing from all this spin!

    • 17 February 2012 10:23 AM
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    Reading their literature, they operate with a minimum commission at £5,000 + vat which is a non refundable deposit. So are they bothered if it actually completes! I would bet they are but you know what I mean. Average 'sales' of 80% across 40 properties offered = 32 sales at a minimum of £5,000 + vat per property = a total of £160,000 in fees per auction. Rather than knocking them perhaps it's worth giving them a call. Presumably the commission is a 50/50 share between them and the Agents. Think about it when did you last achieve £2,500 commission from a sale? Particularly on properties blow £100k.

    • 17 February 2012 10:21 AM
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    Another case of bad misuse of the English language! Auction is the method by which property (or other items) are SOLD to the highest bidder. Sold is the past tense of SELL - the certain sale has taken place. Job done. Can't therefore be for sale any more. What is being described isn't an auction at all - it is a busy Estate Agency! Nice PR stunt though.

    • 17 February 2012 10:16 AM
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    Now, now, ladies and gentlemen... these sales are ALL going to happen so calling them 'Sold' ain't really a lie.

    After all... the average price paid per property is only about three quid forty - so the buyers would be daft as brushes to pass them over... wouldn't they! ;o)

    • 17 February 2012 10:06 AM
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    In my opinon auctions will regret this so-called 'modernism'

    The whole point of an auction and the reason they are attended is that the gavel is king - when it falls thats it.
    Otherwise what do they offer? It is basically the same as normal private treaty estate agency with a non-returnable deposit and a deadline to meet.

    P.S. Who gets the 'default'' money - because there will be plenty of it?

    • 17 February 2012 09:47 AM
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    Looking at their previous results on EIG it would appear the fall through rate of this method is much the same as a traditional auction house. If the "modern" terms also open the floor to more buyers this will logically become the norm.

    • 17 February 2012 09:29 AM
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    When is a sale not a sale?

    When it's some new fangled auction thingy?

    Is this helping anyone?

    I mean really helping them, as opposed to coating a fiddle in PR gloss.

    • 17 February 2012 09:04 AM
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    Not sold then, just reserved.

    If we calculated lettings on the basis of application forms completed and admin fee paid we'd have 100% lets - why has no-one thought of this before?!!!

    • 17 February 2012 08:44 AM
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    Yet another PR con exposed then?

    • 17 February 2012 08:32 AM
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