Viewpoint - 25/03/2013

Changing face of the auction room

In the 10 or more years leading up to the failure of Lehman Brothers in September 2008, an auction sale alternative to private treaty became many clients’ preferred route to market.

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This was because everyone involved in the process stood to benefit from the constantly improving and exceptional market conditions. In those days, at the end of a successful auction, clients often celebrated with a cold glass of champagne, having achieved maximum sale prices as confidence in the market blossomed.

But since these jubilant times, the nature of the commercial auction market has significantly changed as have many of the vendors and buyers in the room.

Adapting to current market conditions

These days, those operating in the auction market do so out of need as both sides to a transaction realise that liquidity and commitment to a sale is what is required to trade. Auction firms are also generally more robust. We have less stock and restricted debt has resulted in a thinning of the market place. This means we have had to positively adapt our businesses to the prevailing conditions. Just a few years ago some in the industry were questioning whether conditions were tough enough to spell the end of commercial auctions as we know them. Yet, markets are cyclical and, under the guidance of those who have dedicated their working lives to the sector, the auction has adapted to current conditions.

Transparency of sales makes auction chosen route for many

Many of our sales are now on behalf of LPA receivers or indeed are consensual sales between lender and borrower. Our service provides an environment where a buyer can be found and business can be transacted – at the best possible price – in a straightforward arena where everyone involved in the sale appreciates and benefits from the transparency, open competition and impartiality of the auction room.

And new buyers are coming to auction, but now without the fizz of champagne. At our last sale we sold a portfolio of 19 parcels of land as separate lots for Essex County Council. This was part of a drive to raise funds, although our appointment was predominantly to assist with the sale of historically owned, non-performing assets. These strips of land lured in many novice buyers with a personal interest, as many of their homes’ adjoined these parcels of land.

Variety of vendors and purchasers

For these potential buyers, the auction experience was more about personal lifestyle than financial investment. This type of buyer has reason to be emotional and as auction novices they needed our guidance throughout the process. Ten of the sites included an overage provision which triggered if planning permission for change of use was granted. In the course of monitoring interest in the lots for our client, we quickly realised that this overage provision should be slightly altered to only trigger upon the commencement of building works on the site. This was in recognition that many of the neighbouring home owners did not want to develop these sites and the original overage wording would impact on their decision to bid. This change reflected our client’s requirement to ensure a sale to the widest possible buyer base while protecting their need to (reasonably) benefit from any longer term development. Assisting the potential buyers in this way ensured all of our interests were aligned in advance of the sale which provided the best conditions needed for a successful auction.

Over the past 17 years I have seen a good mix of buyers and sellers. Like all aspects of the property industry, we are a people business and the relationships we harness during the auction process lead to sales. But it’s our adaptability against changing conditions that ensures auctions remain a vital part of the wider property market, with or without the champagne.


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