Agents, auctioneers battle for property turf

Posted On Tuesday, 15 June 2004 02:00 Published by eProp Commercial Property News
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A battle of words is raging between estate agents and auctioneers aboutthe relative merits of auctioning property versus conventional sales methods.

 

Andrew GoldingWhile auctions are gaining popularity as a method of selling property,estate agents and auctioneers appear to be uncomfortable bedfellows.

Rael Levitt, CEO of Auction Alliance, one of South Africa's biggestauctioneers, says the property boom has resulted in auctioneers enteringthe domain of estate agents, taking some of their business in the process.

"The public has been taking to it as a first-choice method of sale.Far more so than two, three or five years ago.

"Residential property auctions are catching on in the Western Cape,while in Gauteng auctions of commercial property have become more popular,"says Levitt.

"Three years ago 80% of our business was in forced sales. Today 25%is forced sales. And we've grown our business 100% a year in the past threeyears while forced sales and bankruptcies have dropped dramatically," saysLevitt.

Levitt says auctions don't suit every sales environment and that South Africans often have inflated ideas about value. "Auctions don't producemiracles."

In Australia, auctions account for 85% of sales in the second-hand market.

They are also a growing vehicle in the UK and the US.

One of the most vocal critics of residential property auctions is IanSlot, chairman of Seeff Licensees.

Slot says although auctioneers are quick to point to their successesin Australia, the use of auctions "in more sophisticated markets such asthe US and UK is insignificant".

"It's an attempt to fit a square peg into a round hole. It doesn't necessarilywork in the residential market."

He says that in conventional sales, variables such as the date of occupation,occupational rent and dates of transfer are often negotiated.

"Auctions limit your potential pool of buyers.

"You create a glass ceiling by making known the price that is paid.

"You effectively remove the property from the market - it's a dangerousand risky strategy."

Slot says where the urgency of the sale is more important than the pricereceived, auctions do have a place, but that "it's certainly not the bestmethod of maximising an investment".

Andrew Golding, chief executive of the Pam Golding Property Group, saysproperty auctions have a role to play but the perception is that salesin this market are characterised by distress.

"A conventional method is better than an auction primarily because ofthe stigma associated with auctions," says Golding.

He says there are situations in the UK where auctions and conventionalselling methods coexist, "but the conventional selling modus operandi isthe preferred route.

"Auctions have their place, but it's a secondary modus operandi," saysGolding.

In Australia, auctions are the preferred route.

Golding says this is a function of Australia's history, in which "propertieshave been sold on auction from the year dot".

He says it is important to consider the way property has historicallybeen bought and sold in a country.

Michael Pashut of Auction Place says "auctions take all the positivesof a conventional sale and add in a few other benefits to both buyers andsellers.

"Sellers will get a true reflection of what their property is worth,as all potential buyers and interested parties are present on the day ofauction.

"The purchaser is also getting a true reflection of what the propertyis worth, as the people bidding, and what they are offering, is a perfectbarometer of the desirability, as well as the value of the property."

Tony Vaughan, publisher of The Property Magazine, says educating consumersis a crucial part of the sales process.

"There is more than enough business to go around, so both estate agentsand auctioneers must agree to coexist and work together to contribute fairlytowards the education of consumers.

"This will allow consumers to make informed decisions based on theircircumstances and to choose the method that is best suited to their needs."

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