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.”