Search the site
Network Auctions first sale imminent
publication date: Sep 10, 2009
In the year from July 2007 – June 2008 nearly £5 billion was raised at property auctions in the UK. Although this dropped for the same period in 2008/2009 – £3.26 billion – it’s still a very attractive figure. While the latter part of 2008 and early 2009 dipped as recession hit, monthly figures are now on the increase, in the month of June 2008 total sales raised £241 million, in June 2009 it was almost as good at £232 million. With the sales market still depressed estate agents across the country are looking for new ways to increase turnover; should they/could they turn to selling at auction?
As responses to PROPERTYdrum features by David Sandeman show, there is great interest in ‘getting into’ auctions, but it is not an hospitable arena for the inexperienced. Auctions are expensive to set up; sourcing suitable properties, valuing them, planning and producing a catalogue, marketing the sale – it all takes time and money. Some agents, recognising that certain properties may achieve a sale at auction, hand them over to an auction house, but then, even if they get a commission, they can feel as if they have lost out. Others try partnering with an established firm of auctioneers, but again, it isn’t ‘their’ sale.
Until now, there has not been another option, but we recently met the directors of a new venture that could change the landscape of auctioneering in the UK.
Toby Limbrick is a driver of change. After beginning his career in 1987 with Bairstow Eves and then Aitchisons, Toby joined Stuart Elliott in 1994 to launch Elliotts, an estate agency in Watford, Hertfordshire. In September 2005, having established a successful sales and letting operation, they took the plunge and launched an auction department. Now the firm holds six auctions every year.
So what next? Toby was very aware of the rising interest in the swift and positive fall of the gavel. The certainty of a sale, once the bidding has reached its conclusion, is proving ever more popular to sellers in this difficult market and the requirement of an estate agent to advise his client of all options to sell a property was highlighted by a recent case where the Property Ombudsman, Christopher Hamer, fined an estate agent £23,880 for failing to advise a client about the option to sell property at auction. In that case, the homeowner had sold his house through the agent but later discovered that the buyer had auctioned the property soon after – and achieved a sale at £40,000 more than he had paid. The original seller’s beef was that the agent had never suggested auction as a viable method.
The case sent ripples through the already choppy seas of estate agency. The arrival of REDC, the huge US auction house, marketing hundreds of UK repossessed homes has made waves in established auction houses here.
Meanwhile, Toby Limbrick had been planning a new venture. With fellow directors, Stuart Elliott and Guy Charrison, the groundwork for Network Auctions had been laid. Network Auctions will provide extra business for estate agents who become members of the group, or network, under an annual licence. “The opportunities are real and substantial,” says Toby. “We have proved that our formula is one that brings successful results for buyers and sellers – and it is one where the estate agent who initiates the instruction benefits from excellent commission on the sale.” In fact the commission can be greater than the fee that he would have earned from a private treaty sale. More on that later.
“Going it alone in the auction world is difficult,” says Guy Charrison – and he should know. These days everyone in property auctioneering knows Guy; bright, noisy, engaging and persuasive, he was born for the job; but he is clear about the pitfalls. “Regional auctioneers who work hard to develop their business tend to achieve around 25-30 lots per auction,” says Guy. “Once their local market is established it is difficult to build on that. They won’t get the big chain dispersals of pubs, let properties, ground rents etc – they go to the national ‘big boys’ like Allsops. Neither will they get the repossessions – even those in their own area – because they too are sold through the big houses.”
Network Auctions will compete with these big firms. The national network provides the backup, the local agent reaps the benefits and offers a better outcome for the lender in possession (and the original owner) or the pub chain or the large social landlord needing to offload properties.
So who will these auctioneers be?
Toby says that the new Network Auction member will be an established estate agent who has built a strong business and operates to high professional standards. “He or she will be looking for an exceptional fee-based profit stream, full training, support and marketing and a regular event to which they can bring their auction properties.”
It won’t suit anyone wanting a part time easy option. They will be prepared to introduce a proper auction section of their business, which will include a dedicated auction valuer who will be trained by Network Auctions in every aspect of auctioneering, from initial valuation, through managing the client’s expectations on price, to marketing the firm so that it gets a flow of properties in their exclusive area. To establish this will take a commitment in terms of time and also in terms of funding – although Network Auctions emphasise that the initial licence fee will be paid from the resulting commissions of properties sold by members at auction; so no cheques need be drawn in advance of such sales.
Network Auctions will provide all the training – Guy and Toby are both members of NAVA, the National Association of Valuers and Auctioneers and, in fact, Guy handles much of the NAVA training. They will also provide the main website with links to members’ sites, a national referral network of buyers, national e-marketing to potential buyers, marketing materials that can be personalised and a ‘helpline’.
Once trained and confident, the new member will gather properties, agree terms with the seller, submit the catalogue details, carry out local marketing and arrange block viewings for potential buyers.
Network Auctions create a full colour catalogue (available printed or online) and the properties are put into the next central auction, creating a broader market for the agent than he would have in a sale of his own, but along with a greater number of local properties to boost interest.
When it comes to the actual sale, the auctioneer normally has a whole raft of responsibilities – legal packs (including HIPs), insurances, event marketing and, of course, the event itself. And then there are the financials, recording the bids and the eventual sale, collecting deposits and contractual documentation and ensuring that the deal is finalised. All these tasks are managed by the national Network Auctions team, leaving the auctioneering member free to do what he is best at.
When the sales are completed the Network Auctions member receives the sale commission. With agent’s fees for sales by private treaty generally around 1-1.5 per cent, the first pleasant surprise is that auction sale fees are usually around 2.5 per cent, sometimes higher. Network Auctions retain some of the commission to cover costs and pass the substantial remainder on to the member – often, as mentioned earlier, resulting in a higher fee than the agent would have earned with a private treaty sale because not only is the percentage higher but the sale price is frequently (not always!) higher too.
So it’s a win-win-win situation. The seller is happy, having had the best price achieved. The buyer is happy, having bought a property he wanted at a good price. The Network Auctions member is happy because he has achieved the best possible prices for his properties without the associated costs of running an auction house. Oh, and Network Auctions are happy because success breeds success and the national network is strengthened by each sale.
The next Network Auctions sale is on 16th September at Hatfield House in Hertfordshire.
For further information please look at www.networkauctions.co.uk or call 020 7871 0420.
In the October issue of PROPERTYdrum we will be meeting agents who have already joined Network Auctions – don’t miss it.