It has been possible to buy and sell at an Online Property Auction for a number of years but is it an established way to buy and sell property in the UK?
First, by Online Property Auction we don’t just mean an Auction House with a website, even if it does offer interactive services such as a catalogue listing and download facility or any of the other useful tools that may be offered by traditional auction houses via their websites.
Rather we mean a Property Auction with end to end online fulfilment i.e. no face to face meetings, no physical sale rooms – basically no need to leave your armchair to list, browse, bid and complete on the sale or purchase of a property in the UK.
The nation has certainly embraced online auctions with, most notably, eBay well established as a major market to buy and sell just about everything from cars to clothes.
In fact, eBay does indeed offer the facility to buy and sell property at auction. However when we searched we found only 15 properties for sale through auction globally and none in the UK. As a concept then, one can hardly say it has taken off in the properly sector them.
Perhaps property it is just too niche to fit the Ebay model. In which case specialist platforms geared solely to property must surely by now have emerged?
Well, now that 2012 is upon us we thought we would take a fresh look at how the Online Property Auction world has evolved since its initial emergence a few years ago.
Significant growth in the Property Auction sector
The Property Auction Sector has been enjoying year on year growth with some auction houses reporting 30% year on year growth for the past 3 years. We fully expect to see continued growth of Property Auctions in 2012.
This being the case, it would make sense for Online Property Auctions to see similar growth. Furthermore, as the nation tightens its belt and looks for better value for money, perhaps the arguably lower cost of delivery of the online auction model could bring about accelerated relative growth?
In theory, online has significant advantages over traditional property auctions:
Advantages of an online property auction
- Reduced overheads should reduce the cost of buying and selling
- No need to attend in person
- Bid from anywhere in the world
- Bidding window can be much longer during the run up to the auction (i.e. doesn't all have to happen on the day)
- Electronic email updates about progress of auction/bid
- Bidders can use automated bidding tools
The Online Property Auction Landscape
The following is a list of Online Property Auctions (as at December 2011) we found through major search engines:
Auction Your Property
The site offers a simple model whereby Sellers pay a one off fee of £250 to auction their property and Buyers pay a further £250 if their bid is successful. The site also lists all property being auctioned on major portals such as Rightmove or Findaproperfty. However at the time of searching we were only able to find 1 current active auction with 1 lot for an overseas property.
OPA365 promises an opportunity to buy property at substantial discounts on the basis that you have funds and legal arrangements in place before you bid. Buyers pay 1. 5% +VAT on completion and must exchange within 5 days and complete within 28 days. Sellers pay nothing at all. The site is currently in Beta so watch this space
This Online Property Auction is open to individuals and agents alike. We were a little confused by the individual offering however but it appears that a seller can opt to pay no commission leaving the buyer to pay a "reservation fee" within 48 hours of successful bid. This could range from 1-5% and is stated on the individual lot. There appeared to be approx 300 live lots.
Net House Auctions
Update: 06/06/13 Site now appears dead
Part of the NetHouse Prices brand, Nethouseauctions claims to be the "the UK's first and only genuine online property auction service". However it is not open to direct sellers but agents can list their existing properties on the auction site to compliment their marketing efforts. The successful bidder pays £250 on completion. There were no live auctions or forthcoming auctions listed on the website.
Discount Property Auctions
Update: 06/06/13 Site now appears dead
We were a little confused by what was on offer here also. Direct sellers can obtain a free valuation and then list their property for a fixed fee of £50. However no advertising is taken out on any property portals and buyers must pay a monthly subscription to be members of the site. Furthermore buyers will have to pay 2% of the purchase price on successful bid. It would also appear that both buyers and sellers would be tied to using the sites preferred solicitors at an undisclosed cost
It seems that Online Property Auctions have not really taken off and we were surprised by how few online offerings there were, the lack of interest from existing property players (portals, estate agents etc) and the lack of stock in the few online auctions we did find.
We were generally confused by the different flavours and didn't really find one straightforward proposition.
With one obvious exception, there was no major brand adoption of the concept and in the case of eBay, little consumer engagement.
We would certainly have expected to see some evidence of big brand action but the closest we found was Zoopla who January 2010 made a big splash of auctioning 150 properties in a pilot with partners REDC. However the initiative was targeted more at member agents in a probable move to differentiate Zoopla from competitor portals.
The pilot seems to have been the beginning and end of the Zoopla Online Property Auction as all evidence of the service appears to have vanished from their website.
We contacted Zoopla who told us that “Following a review of the online auction business we are currently reviewing our plans for further auctions via our website. We may or may not decide to hold further online auctions later in the year".
Why have Online Property Auctions failed to get any traction?
As of yet there just doesn't seem to be the demand. If there was then rest assured the market would have flourished like any other market.
There will be many theories as to the underlying reasons for lack of interest but we suspect the major reason is actually the habitual nature of the British home buyer and seller.
The British home buying and selling public are a contradictory bunch. We tend to complain (sorry but we do) about the shortcomings of the home buying process in England and Wales and with good reason. Gazumping, Gazundering, lack of transparency, unpopularity of certain agency practices, ponderous Conveyancing Solicitors - take your pick - most agree there is need for change.
Yet when alternatives are presented we refuse to adopt them - even when they are a no brainer. Attempts to tackle the issues with legislative change were attempted in the form of HIPs which prompted the certain newspapers to rally the country into unified chants of "Nanny State".
If you ask Conveyancing Solicitors whether HIPs shortened transaction times and reduced abortive sales and with it the real costs of moving and you and you will be met with a resounding yes.
Some have suggested that the process is just too complicated to be carried out online, but this is clearly not the case. There is no reason why physically attending an auction is necessary and even traditional auctions have allowed phone, proxy and sometimes even online bidding for years.
Rightly or wrongly most sellers have something to say about estate agent commissions, typically 1-2% (or £4, 000 +VAT for the average sale). But when it comes to selling few (apparently) are prepared to try other methods such as Online Property Auctions.
However, we remain optimistic about the Online Property Auction. Often it just takes a bit of initial impetus (such as a recession) to re-focus consumer behaviour and if a tipping point is reached, the marginal can quickly establish itself as normal.
Who knows, maybe next year will be the year of the Online Property Auction.