Auction versus Marketing via EA?

not_loaded

Can anyone give me a brief breakdown of the costs associated with selling at auction versus using an agent?

My sister has faffed around for the best part of a year now NOT selling my mum’s ground floor Torbay flat. We’ve offered assistance many times and been turned down, on the basis that ‘she’s handling it’.

It turns out that she thought that entertaining a ‘private buyer’ and saving the HIP and EA fees was the route to go, and now after many months the so-called buyer has walked away.

In doing that, she’s entirely missed the summer buying season down there, and she now thinks dumping it in auction is the easy solution.

She has Power of Attorney under an EPA. However my brother and I feel we have some say in how things should go. POA responsibilities mean she should (to crudely summarise) ‘do her best financially’ for my mum and currently she appears to just want the easy route for herself.

We feel it should go to the market to get the best price. I’m concerned at the possible losses from auction, as my mum may need special care soon.

The market value of similar freehold flats on Rightmove is around £80k to £110k.

princessamy86

For an auction, you will most likely need to pay a "catalogue fee" upfront, to cover the auction company's costs for advertising the property. These vary with each company so it would be wise to check out a few before you make a decision. With regards to what it will sell at, calculate that it will be advertised at at least 20% below market value. (Just to explain, the company I work for does auctions and this is roughly what we advertise properties at.) You will then pay a percentage of the selling price to the auction company when the sale completes, I'm not familiar with southern prices but this can be from 2% to 5% where I am (north west).

Agency costs: usually you pay nothing up front apart from your HIP fees, although some companies let you defer this until you complete. Typical costs (again for my area) for an agency is up to 2% of selling price-remember this is negotiable!

If you want to sell, I would recommend that you price the flat correctly and choose your agent carefully. Don't automatically pick the cheapest, they may not be the best. Lots of threads on here about choosing an agent so have a search. It all depends how quickly you need to sell, and whether or not the property is suitable for auction. Any questions feel free to ask.

Richard_Webster

Does the flat have any legal problems? A nasty freeholder or a missing freeholder? A short lease? Why did the "buyer" walk away?

Auctions generally only attract cash buyers so the prices tend to be lower than what might be achieved otherwise. However, people buying at auctions don't always look at the legal details so if there are legal problems an auction is sometimes a way of unloading a property that is otherwise difficult to sell. If the paperwork is up together and there are no legal horrors lurking then a sale using an estate agent in the ordinary way is likely to produce a better price.

Assessment of these issues is difficult and only a solicitor with access to the file would be able to give you a reasonable view on this, but it would be interesting for more detail form the sister as to hwy the sale failed.

Selling privately and avoiding the cost of a HIP and agents' fees is generally a false economy. Good estate agents check things like the buyer's ability to proceed in terms of chains and marriageability and the sister may not have the experience to know what questions to ask a private buyer.

not_loaded

princessamy86 wrote: »

For an auction, you will most likely need to pay a "catalogue fee" upfront, to cover the auction company's costs for advertising the property. These vary with each company so it would be wise to check out a few before you make a decision. With regards to what it will sell at, calculate that it will be advertised at at least 20% below market value. (Just to explain, the company I work for does auctions and this is roughly what we advertise properties at.) You will then pay a percentage of the selling price to the auction company when the sale completes, I'm not familiar with southern prices but this can be from 2% to 5% where I am (north west).
Agency costs: usually you pay nothing up front apart from your HIP fees, although some companies let you defer this until you complete. Typical costs (again for my area) for an agency is up to 2% of selling price-remember this is negotiable!
If you want to sell, I would recommend that you price the flat correctly and choose your agent carefully. Don't automatically pick the cheapest, they may not be the best. Lots of threads on here about choosing an agent so have a search. It all depends how quickly you need to sell, and whether or not the property is suitable for auction. Any questions feel free to ask.

Thanks for the detailed info. Can you say what a typical catalogue fee is likely to be?

I feel a loss of possibly 20% is unacceptable when it’s really just for her convenience. As the EPA attorney she shouldn’t be even thinking of that. Can you explain what you mean by ‘suitable for auction’?

Overall is it likely to be economical to put it in at a certain (fairly high) reserve, and then go back again (and maybe again) for another auction, lowering the reserve?

I have a nasty feeling that with zero experience, she will be talked into a low reserve to attract attention, but then it will go for a very low price when in fact it’s never gone to the market to be tested. Unfortunately we’re now up against the winter downturn which isn’t going to help.

Incidentally is a HIP needed for auction?

Richard_Webster wrote: »

Does the flat have any legal problems? A nasty freeholder or a missing freeholder? A short lease? Why did the "buyer" walk away?
Auctions generally only attract cash buyers so the prices tend to be lower than what might be achieved otherwise. However, people buying at auctions don't always look at the legal details so if there are legal problems an auction is sometimes a way of unloading a property that is otherwise difficult to sell. If the paperwork is up together and there are no legal horrors lurking then a sale using an estate agent in the ordinary way is likely to produce a better price.
Assessment of these issues is difficult and only a solicitor with access to the file would be able to give you a reasonable view on this, but it would be interesting for more detail form the sister as to hwy the sale failed.

Thanks for your answer and the information. There’s no lease - it’s freehold. I’m not sure what you mean by ‘nasty freeholder or a missing freeholder’?

The paperwork is ‘up together’ and there are no legal horrors lurking.

I feel the buyer walked away because my sister in no way pursued the sale. They were given all the time in the world to think about it, and they probably moved on to a slightly better property for similar money. There’s nothing intrinsically wrong with the property, but it needs updating.

If it was me down there handling it, there’s no way I’d go to auction unless it had failed miserably on the open market. Flats have been selling there over the summer months.

It’s very frustrating to have only just found out what’s going on. (or rather what’s not going on) My sister has no knowledge or experience of what she is doing, but playing ‘big sister’ means not having the humility to ask her brothers (who HAVE dealt with buying and selling) any advice.

princessamy86

Typical catalogue fee for us is £295 plus VAT. Suitable properties tend to be those that need a bit of doing up, properties which are done up to the nines tend not to be as popular because your target market is investors and they are looking for properties which they can add value to. There's no sense in putting a high reserve on it, it puts people off when the bidding starts and nobody is getting anywhere near it. The same people go to auctions in this area, you see the same faces over and over again so they'll know if you re-enter it later on.

I have to say, I would try it on the open market first-price it right and you should have a good chance of selling it. And yes, you do need a HIP for auction.

Manual_Reversion

not_loaded wrote: »

She has Power of Attorney under an EPA. However my brother and I feel we have some say in how things should go. POA responsibilities mean she should (to crudely summarise) ‘do her best financially’ for my mum and currently she appears to just want the easy route for herself.

Radio 4 had either a Money Box Live or You and Yours feature dealing with Power of Attorney recently (week or so ago), including brief details on what to do if you want to challenge someone else's POA. I'm sure a search of their website will find something. I'd imagine it would be an absolute last resort to go down this route though.

Trollfever

Freehold flats can be difficult to sell.

not_loaded

princessamy86 wrote: »

Typical catalogue fee for us is £295 plus VAT. Suitable properties tend to be those that need a bit of doing up, properties which are done up to the nines tend not to be as popular because your target market is investors and they are looking for properties which they can add value to. There's no sense in putting a high reserve on it, it puts people off when the bidding starts and nobody is getting anywhere near it. The same people go to auctions in this area, you see the same faces over and over again so they'll know if you re-enter it later on.
I have to say, I would try it on the open market first-price it right and you should have a good chance of selling it. And yes, you do need a HIP for auction.

Thanks for your advice. Putting together the costs I’m surprised how much it costs, and certainly the threat of losing 20% or so of its value is very worrying. My personal feeling is that I’d only consider auction if it had failed on the market.

Manual_Reversion wrote: »

Radio 4 had either a Money Box Live or You and Yours feature dealing with Power of Attorney recently (week or so ago), including brief details on what to do if you want to challenge someone else's POA. I'm sure a search of their website will find something. I'd imagine it would be an absolute last resort to go down this route though.

Thanks for that info. There’s a complicated history to this - we have been down that route and had horrendous problems with incompetent staff at Office of the Public Guardian. For the time being though the EPA is registered and we need to deal with the possibility of my sister haphazardly doing the wrong thing.

Trollfever wrote: »

Freehold flats can be difficult to sell.

Why is that?

not_loaded

Trollfever wrote: »

Freehold flats can be difficult to sell.

Why is that?

princessamy86

I think trollfever probably said that as it can be unclear who is responsible for the upkeep of the building, and this may put people off. This isn't really my area of expertise but I believe the normal thing for freehold flat owners to do is get together and form some kind of management company for things like cleaning, and the upkeep of communal areas.

not_loaded

Right. Thanks.

There is an agreement dealing with splitting maintenance costs. As it’s just a Georgian semi split into two flats it’s never been a problem in the past. Upstairs flat and downstairs flat have a 50/50 split on everything.

Thanks for your time on this princessamy.