All access tour of the auction house

All access tour of the auction house




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Last week, Strettons auction house held their first ever sale of the year and B&C was lucky enough to be invited to attend an exclusive all-access tour to get an insider’s look behind the rostrum.

Leading the tour, Director of Strettons, Simon Tilsiter kicked off the morning by talking us through some of the misconceptions about auction sales, dispelling common myths and giving us an insight into the most quirky properties that have cropped up in their catalogues…

What properties are appropriate for auction?

Simon tells us quirks often provide a unique selling point for auction properties: “It is impossible to know why a bidder has a particular interest in a lot which on the surface may seem unappealing. Generally, there is something slightly unusual about most properties, hence why they have been entered into the auction.”

Fortunately, prior to setting the reserves for the upcoming auction, we were able to steal a few moments with Chairman and Auctioneer Benjamin Tobin, and Auction Director Philip Waterford, who told us about some of the most unusual lots, including underground toilets which sold to an estate agent and a fishing lake to a Water Board, along with various castles and estates to name but a few. 

Unforeseen fortunes have also arisen from seemingly bizarre purchases. When one lucky bidder bought a small island off the coast of Scotland he got much more than he bargained for when he later discovered that it encompassed an oil well, landing him a hefty profit when he sold it to an oil company. 

When selling land lots, some bidders have been more interested in what’s under the lot rather than the land itself. A road builder once purchased a plot for the materials in the soil – in this case buying the land at auction provided two lots of income, the materials for the road and the sale of the land once these had been extracted. 

What is a property ‘worth’?

This snapshot of examples alone highlight the difficulties Benjamin and Philip often face when setting a reserve for the lots, as estimating demand from the saleroom is largely unforeseen. Instead, their skill and experience as auctioneers will guide their judgement.

Market conditions cannot always be accurately estimated in advance of the sale and in this auction the guide price on a particular property in East London provided a salient example. It was originally set at £160,000 plus, yet this was later amended to £200,000 by the vendor which may have been a result of high pre-auction interest – the property later sold for £245,000 demonstrating that flexibility is key in an auction sale. 

The reserve is usually set at 10 per cent lower than a valuation to stimulate sufficient interest from the saleroom. As a result, owner-occupied property is typically unsuitable for auction as the vendors are unwilling to take such a hit on their sale price. 

It is very much up to the auctioneer where the bidding starts. Sometimes bidding will begin below the reserve to stimulate wider interest or above if pre-auction interest has been expressed; the tone of the market is very much limited to the sale day, so this can fluctuate.

Simon said: “Prior to the auction, bidders spend time researching the property and already have an emotional attachment which is common in driving up the price on auction day.”

Benefits of an auction sale

Up to a day before the catalogue is produced, lots can be submitted for auction and offered as a loose leaf sheet placed in the catalogue on auction day. LPA receivers see this as a huge benefit,  as properties are presented quick to market with a valuation that is likely to still ring true at the time of auction. 

Completion dates are also firmly placed at auction, with contracts exchanged as soon as the hammer falls. This is typically 28 days after the sale unless otherwise expressed in the ‘special conditions of sale’ document, ensuring all parties are clear about the specific vendor requirements. This document will also outline important information in a clear format about the values of deposits. Some vendors may exchange on 8.5 per cent, rather than the typical 10 per cent which can be of huge benefit.

Simon said, “The completion time-frame may fluctuate at different times of the year, especially over the Christmas period. A vendor may want to complete before solicitors take time off or compensate for this by extending the date.” 

Bidders can also place proxy bids if they cannot be there in person or on the telephone. A Strettons representative will therefore act in your place. Simon told us that this doesn’t mean your maximum bid will be placed immediately; instead the bids go up organically. 

Well-known auction players who believe their bids will demonstrate the lot’s potential may also choose to veil their interest, opting for a proxy bidder to avoid sparking wider interest from the room. 

‘Off the wall’ bids are also of benefit to vendors, as what are essentially fake bids can be taken up to the reserve price to stimulate interest in the sale room. 

Despite a sense of negativity surrounding the property market in recent times, the auction held on February 20 2012 realised over £10 million in purchases. Properties sold for an average of 23 per cent above the guide price, providing a hugely optimistic outlook for auction sales throughout 2012. 

Many thanks to Simon and the team for inviting us along!

 

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