Selling homes via modern method of auction is on the rise
Recessions have proved devastating for the property industry but adversity can sometimes spur on entrepreneurship.For Jamie Cooke and Ben Ridgeway the result was a great idea that has revolutionised the way some properties are sold. The friends, who both studied surveying at Northumbria University, graduated just as the economic downturn hit in 2008.Unable to find jobs in their chosen profession, they worked for estate agencies, which sparked a lightbulb moment. They spotted potential in using new technology to reinvent the old conditional auction process, where a property is offered via best bids.In 2009 they launched the modern method of auction via an online platform, which is proving perfect for those who want or need a quick sale with little risk of fall through.Their business iamsold.co.uk, which is part of their iamproperty group, is now the UK’s largest independent residential auctioneer and has seen double digit growth for the last decade.It works with over 2,500 estate agency branches to manage their modern method of auction sales from launch through to completion.The MMA involves setting a realistic and usually enticing starting price along with a reserve. The vendor pays for an auction legal pack costing between £395 to £445, which details everything from the property’s legal title to rights of way. Buyers are then invited to bid online and, when the auction ends, the highest bid wins. The buyer must then pay a non-refundable reservation fee of between two and 3.5 per cent of the bid price and agree to complete within 56 days.“Selling by private treaty is perfect for a lot of people but for others, modern method of auction is better. It’s generally aimed at those who are affected by life events which mean they need to sell a property quickly. That could be a bereavement or a divorce or someone who has had two or three deals fall through and wants more certainty,” says Jamie, who adds that modern method of auction offers speed and security. With MMA the sale has to be completed in less than 56 days while the average private treaty sale takes an average of 16 to 18 weeks.“There is also less chance of the deal falling down. The average fall through rate on a private treaty sale is 30 per cent but with modern method of auction it’s less than five per cent,” says Jamie.The flip side is that sellers must be prepared to move out of their home within eight weeks of the auction ending.Half of those who bid and purchase via MMA or owner-occupiers and half are buy-to-let investors. The pool of buyers is bigger than for a conventional “Homes Under the Hammer” style auction, where cash is king. That’s because the MMA completion deadline is much longer, which allows buyers time to get a mortgage approved. They also have the benefit of the legal pack.“The MMA also brings transparency for buyers as there is no negotiating only a highest bid and there’s also the benefit of the information in the auction legal pack. The benefit for the estate agents we work with is that we act as their auction department and offer an end to end service, including conveyancing,” says Jamie whose Newcastle-based business employs over 200 staff.He adds that potential for growth is still huge.“In Britain only two per cent of property is sold this way but in Australia and New Zealand it is 50 to 60 per cent. We think one in three vendors here could benefit from modern method of auction. It’s much more straightforward .”