26 Mar 2019 By WengYee Loke
Just because a property goes up for auction, doesn’t make it a guaranteed sale.
There may be multiple bids on the lot but if the reserve isn’t met, the seller is under no obligation to sell. Whether it is a traditional (immediate exchange) auction or a conditional (modern method) auction, the conclusion is the same.
Reserve not met = no obligation to exchange/enter into a reservation contact.
It all boils down to what the seller is after. If they want to sell the property, there will be scope for negotiation in price. They might be willing to take a lower figure to close the sale. But if they have a minimum price in mind that they want for the property, then it will be harder to get them to change their minds.
With the property being income-producing, the seller might be happy to hold onto it for a while longer. They could wait until the market has moved in their favour to put the property up for sale again. But of course Section 24 is phasing in which will trigger landlords to reconsider what they hold in their portfolio. Although the property is income producing, the inability to claim finance relief will make it less appealing (depending on the landlord’s individual tax situation).
Properties that are vacant may lead to a more motivated seller. There are costs to owning a vacant property. For example: mortgage, bills, insurance, council tax etc. Empty properties also run the risk of being broken into - which could lead to losses/damages.
If it is a development opportunity (as many auction lots are), the seller may decide to do the works themselves and sell on at a later date.
Rarely have we seen land going unsold at auction. But if it does, ask yourself this question. Has it been on the market for a long time? The seller might be happy to drop the price. If it has recently come onto the market, the seller might take a different route. They could decide to keep it and find another purpose for it (get planning and then later sell it with planning consent).
Many people who look to sell at auction are looking for an efficient sale. So while the reserve isn’t met, that doesn’t mean there isn’t a deal to be done.
A property that is unsold at auction doesn’t mean there are no interested parties. They may decide not to bid during the auction in hopes of putting in a cheeky! after auction offer. Everybody loves to feel like they’ve got a bargain.
When there are multiple after auction offers, the agent/auctioneer may decide to hold a mini-auction. This is much easier to do with an online auction as they just have to relist the property. Read this story of how a property went from unsold - relisted - sold; all in the same day
Auctions are generally considered a good indicator of the true market value of a property. So when a lot goes unsold, the price could be the issue. With clear evidence of bids made/not made, the agent or auctioneer can go back to the seller and persuade them to reconsider the reserve.
Often wiggle room to lower the reserve will help attract more interest. With ballroom auctions, the property with a now lowered reserve can go into the next catalogue (whether that’s a month or two away). Or in the case of our platform, pressing the ‘Relist’ button.
The seller might decide to put the property back on the market via private treaty. This is the most common method that is familiar to everyone. The buyer and seller negotiate the price privately. There is no enforceable deadline for an exchange/completion date.
Ultimately every property, seller and auctioneer are different. But we hope that this post has cleared up a little as to what happens with unsold lots. The end of an auction is not the end of the line!
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