Auctions

Question 1

What are the primary advantages of using auctions as a method of property sale, and how do they compare to other methods?

Answer 1

Certainty of sale

Once bidding has closed on the fall of the gavel, a binding legal contract is formed between the seller and the successful bidder. This means they can’t change their mind without financial and legal penalties. The buyer has to put down the 10% deposit on auction day and pay the remaining 90% within 20 to 30 days.

Whereas when selling using the private treaty method, there is the risk of the sale falling through due to buyers backing out, communication issues, gazundering or property chain problems.

Access to a wide range of buyers
One of the top benefits of auctioning a property for sellers is immediate access to a wide range of buyers thanks to Allsop’s wide database of cash buyers constantly on the lookout for opportunities. If there’s strong interest in your property, then a ‘bidding war’ may see you get a much higher price than expected.

Speed
A lot of people who decide to sell at auction do so because of how much faster the process is compared to the private treaty route. Once your property has sold at auction, contracts are exchanged immediately, with completion taking place over the following four to eight weeks. This makes auction a great option if you need to sell fast.

Transparency
As much as it is a benefit for potential buyers, having a transparent bidding process is advantageous for the seller too, as the best possible price is achieved in open competition. The seller is also able to see the interest in their property, who is bidding, and how much

Question 2

What RICS documentation is there that is applicable to auctioneering?

Answer 2

RICS Professional Statement on Auctioneers Selling real estate in England and Wales 2018

Question 3

What is a guide price?

Answer 3

A guide price is an indication of the minimum price that a vendor may be willing to sell at.

Question 4

What is a reserve price?

Answer 4

A reserve price is the agreed minimum price that the auctioneer can sell the property on behalf of a vendor for, it needs to fall within 10% upwards of downwards of the guide price.

Question 5

What are the downfalls of auction as a sale method?

Answer 5

Upfront costs can be more

Publicly done – if unsold then no hiding this

Vendor has no choice over the purchaser

Short marketing period

Question 6

Tell me about the Auctioneers Act 1845?

Answer 6

a. Auctioneers must place a board with their full name and residence that is “publicly visible and legible” in the room where the auction takes place before, during and after the auction.

b. Expanded into the Auctions (Bidding Agreements Act) 1969

Question 7

Tell me about the 4. Misrepresentation Act 1967

Answer 7

a. It is an offence to make a false or misleading statement about a specified matter during an estate agency.

b. If found guilty the EA could be found guilty and receive a criminal record. A magistrates hearing can produce a fine of up to £5,000, a crown court has no upper limit. EA could be banned from acting.

Question 8

What is in an Auction contract?

Answer 8

1. Memorandum of sale
2. Addendum
3. General Auction Conditions of Sale
4. Special Conditions of Sale
5. Particulars of Sale

Question 9

Do you charge a buyers fee?

Question 10

Tell me about the Misrepresentation Act 1967?

Answer 10

a. The Misrepresentation Act 1967 makes it an offence to make a false or misleading statement about a specified matter. Penalties can be a fine or being banned from practice.

Question 11

Tells me about the RICS Professional Statement on Auctioneers Selling Real Estate 2018

Answer 11

This Guidance Not provides best practice advice on running an auction covering the legal responsibilities of an auctioneer and compliance with all relevant estate agency and auction law, money laundering checks and health and safety.

Question 12

What is the RICS Professional Statement on Auctioneers Selling Real Estate 2018 advice on pre auction actions?

Answer 12

Agreeing Terms of Engagement
Arranging for all the relevant legal documentation and plans to be available upon inspection
Choosing an auction venue of sufficient size with insurance cover
Not providing misleading guide prices
Advise all applicants if a lot is withdrawn prior to the sale
Confirm VAT / EPC position

Question 13

What is the RICS Professional Statement on Auctioneers Selling Real Estate 2018 advice on setting a reserve price?

Answer 13

The reserve price should be fixed before the auction day and confirmed in writing by the client and the figure should remain strictly confidential and not disclosed.

Question 14

What is the RICS Professional Statement on Auctioneers Selling Real Estate 2018 advice on preparing the auction catalogue?

Answer 14

Particulars should be prepared in accordance with the current consumer protection regulations.

General conditions of sale and Memorandum of sale should be included in the catalogue.

Auctioneer must disclose any significant rent or service charge arrears relating to the lot.

Question 15

What is the RICS Professional Statement on Auctioneers Selling Real Estate 2018 advice on running an auction?

Answer 15

Any amendments or variations to the particulars or an addendum should be openly disclosed.

A statement regarding rules for proxy and internet bidding should be available to all bidders.

Question 16

What is the RICS Professional Statement on Auctioneers Selling Real Estate 2018 advice on post auction actions?

Answer 16

Published results must be accurate and only published with the Vendor and buyers consent

The identity of either party should only be disclosed with their consent.

Question 17

What are the key principles of the Estate Agency Act 1979

Answer 17

Honesty & Accuracy;

Clarity as to the terms of agency;

Agreement & liability for costs/fees;

Openness regarding personal interests;

Absence of discrimination;

Legal obligation to report offers to the client;

Keep client money separate;

Question 18

What are the four main methods of Sale?

Answer 18

Informal Tender
Formal tender
Private Treaty
Auction

Question 19

What would you consider when choosing what method of sale to use?

Answer 19

Clients objectives
Public accountability
Current and future market conditions
Demand for the property
Timing requirements

Question 20

What is included in a memorandum of Sale?

Answer 20

• Date
• Property Address
• Vendor
• Vendor’s Solicitor
• Purchaser
• Purchaser’s Solicitors
• Price Agreed

Question 21

How long is a typical auction completion?

Answer 21

Typically 20 working days but may vary – can find this information in the special conditions of sale.

Question 22

What if a buyer went past the set completion time?

Answer 22

Firstly, you would try and discuss with them to see what the situation is and come to an arrangement if there was a hold up.

If something was wrong then you could serve a notice to complete giving them a deadline (10 working days). The costs of this would be paid for by the purchaser. If the buyer does not meet this deadline then the seller can rescind the contract and remarket the property with any deposit being retained.

In extreme circumstances the seller could sue for damages to claim for any loss in value and any associated costs

Question 23

Can the reserve price differ from the guide?

Answer 23

RICS guidelines dictate yes, within 10% above or below of a static guide or within a guide range.

Question 24

What legislation would govern the guide and reserve price setting?

Answer 24

Consumer Protection Regulations

Question 25

7Can you exchange contracts without the seller’s permission?

Answer 25

The Auction Agency Agreement gives the auctioneer authority to exchange on behalf of the seller at auction if the price is at the reserve or higher. Any sale prior to or after auction we would need the seller’s permission in order to exchange on their behalf.

Question 26

Is the deposit always 10%?

Answer 26

It may vary in certain situations, for example it could be lower if a buyer has exchanged on multiple properties from a single seller or if a shortened completion period is agreed. It cannot exceed 10% as it would be punitive to a buyer.

Question 27

What legislation governs the content of particulars of sale and which governing bodies may enforce this?

Answer 27

The Misrepresentation Act 1967 makes it an offence to make a false or misleading statement about a specified matter. Penalties can be a fine or being banned from practice. The RICS may intervene in doing so but the governing bodies are the OFT (Office of Fair Trade) and the ASA (Advertising Standards Agency).

Question 28

What is required in the common auction conditions?

Answer 28

1. A glossary
2. General conditions of sale
3. Action conduct condition
4. Special condition
5. Memorandum of sale

Question 28

What is an addendum?

Answer 28

A document to add additional information or correct information in an original document

Question 28

If the property was leasehold, what things would you need to know which might impact the price?

Answer 28

• Ground rent
• Lease expiry
• Service charge

Question 28

what is the difference between normal and auction particulars?

Answer 28

auction particulars form part of the contract.

Question 28

In the room what happens after purchasing if they decide they don’t want it?

Answer 28

On the fall of the hammer contracts are exchanged which are legally binding

Question 28

If you are bidding at an auction is your bid inclusive of VAT?

Answer 28

No

Question 29

What happens if after publishing particulars you realise there is a mistake?

Answer 29

an addendum would be issued with a note to all interested parties to advise of the addendum. It would be published on the website and made known to the room.

Question 29

Is an auctioneer allowed to refuse a bid?

Answer 29

Yes for any reason that the auctioneer deems appropriate

Question 29

What would you do if someone purchased the property in the room then left the room before you got details?

Answer 29

Try and find them

Notify the client

Make an announcement

If the purchaser does not come forward I would re offer the property.

Question 29

What are special conditions of sale?

Answer 29

Variations or additions to the general conditions specific to the lot / property.