Since COVID-19 there has been significant growth in online and live-streamed auctions, with a notable increase in the number of properties bought and sold this way.
Online auctions offer greater flexibility in terms of timing and are generally more convenient for buyers. The move online has also opened up the market to new bidders.
Given this increased interest, RICS' Real Estate Auction Group has updated the auctions consumer guide to help parties buying or selling property at auction.
Property auctions: A clear, impartial guide outlines the benefits of buying or selling property this way, the different types of auction – including online and streamed – and the service that consumers should expect from professional auctioneers. The guide also provides specific technical advice for those buying and selling at auction.
Auctioneers subject to legislation and standards
While all property auctioneers must comply with legislation such as the Estate Agents Act 1979 – which sets out that property agents cannot draft purchasing contracts, receive payment from a buyer for a client without authorisation or sign contracts for their clients without authorisation – RICS regulated auctioneers will also have rules of conduct to which they must adhere and must hold professional indemnity insurance.
RICS members who conduct auctions must meet the requirements set out in the current edition of RICS' Auctioneers selling real estate (incorporating Common Auction Conditions).
The professional standard outlines the responsibilities of members working as auctioneering specialists, which include:
- conducting business in a fair, honest, transparent and professional manner
- carrying out work with due skill, care and diligence
- ensuring that all staff have the necessary skills to carry out their tasks
- avoiding conflicts of interest and dealing with them openly, fairly and promptly if they do arise
- ensuring that all advertising and marketing material is honest, decent and truthful.
Non-regulated auctioneers are not obliged to fulfil these requirements, but need to ensure they are meeting their legal requirements.
Sellers and buyers should prepare themselves
Sellers should choose a professional auctioneer who is a member of a professional body such as RICS, and employ an experienced solicitor who understands auction sales and can prepare an appropriate legal pack, which contains the property's title deeds and generally sets out the conditions, general terms and memorandum of sale.
In addition, sellers need to decide the type of auction sale they want – room, live-streamed or online-only auction – and ask the auctioneer to clarify the conditions of sale and the key terms of appointment; for example, any commission or extra fees payable.
Furthermore, sellers should provide auctioneers with sufficient information to ensure that marketing materials are accurate, comprehensive and not misleading.
The guide also outlines the measures that buyers should take to prepare for property auctions, including viewing the property, obtaining the legal pack, understanding the type of auction being conducted, and the pre-registration procedure for bidding if required.
Once the hammer falls, buyers enter a binding legal contract, so before bidding on a property they are advised to seek legal advice from a solicitor and organise a professional valuation.
Route offers attractive alternative to agency sale
As the guide shows, there are a number of advantages to buying and selling property at auction rather than through an agency sale.
- Auctions offer certainty: properties are not sold subject to contract, and successful bidders are legally obliged to complete a sale, subject to checks under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
- Good marketing exposure: auctioneers can advertise online, and generally have an extensive database of prospective buyers from previous sales.
- Speed of transaction: sale by auction is relatively quick compared with an agency sale, and completion usually takes places between four and six weeks after the auction itself.
In order to avail themselves of these advantages, parties looking to buy or sell property at auction are advised to consult Property auctions: A clear, impartial guide and speak with an RICS member before making a sale or a bid.
Patrick McGauley is commercial property editor of Property Journal
Contact Patrick: Email | LinkedIn
Related competencies include: Auctioneering, Property management