Wednesday, 11 July 2012

'Auctioning' Our House

With the fact that my benefits have been suspended due to action from my last employer and despite six interviews, I am finding it even harder to carry out the precise interview rituals that each company wants, we are well advanced on the path to having our house respossessed by the building society.  I must say that their attitude has improved from this situation twelve months ago.  Last year the society refused to even discuss the potential of me defaulting on my mortgage payments until I had less money than was needed to pay for a single month.  This year I have been able to discuss with their 'triage' team three months ahead of that date.  Of course, one option is to sell the house, but with the appalling weather and the stagnant housing market this has proven to be futile.  Last week with time really running out we decided to change tactics.  The woman who lives in my house and who shares the mortgage, signed up with a so-called 'express' estate agency which works in a very different way and one that seems to have gone in our favour, though not without some hiccoughs.

The company puts the house on the market well below the going rate for the district/street in which it is located.  It only publicises online and reuses images that you have provided to other estate agents.  Interestingly many letting agents and landlords/ladies apparently now has software which alerts them if a house comes on the market in a particular area or at a specific price.  The company will not take buyers who are in a 'chain', i.e. have to sell property to buy this one or have not already arranged to have funds available before putting in an offer.  Last year when we tried to sell the house, over a twelve month period we had three 'firm' offers but in each case the people could not either raise the money or wanted us to building on their behalf before they would complete the purchase so ultimately it was unsold after a year.

Anyway, this method seemed to work.  In reverse of what usually happens, the owners show people around the house but saying nothing about money, this is handled purely by a negotiator over the telephone.  Now, we had found many estate agents particularly useless at selling houses; they simply stood in the corner of the room waiting for questions.  They had no idea of the background of the viewers, for example, if they were buying to let, buying for themselves or others, had concerns such as local schools or health centres, etc.  So we felt we were much better positioned to do this aspect.  An extra advantage was that all of the viewings were scheduled for the same day, which meant we did not have to keep tidying and cleaning the house so it was in an immaculate state just for one viewer and then again for another a few days later and again a few days after that; it gets exhausting especially with a 10-year old boy living in the house.

An additional benefit is that the viewers can see who they are competing against.  Having all the viewings on the same day and then getting interested ones to telephone in an offer, makes it effectively an auction but one overseen by the company.  As they get 1.9% of the sale price they are keen to drive up the price by going back and forth between 'bidders'.  Anyway, we had 18 viewings with a total of 32 people plus a number of children.  At one stage there were four sets of viewers in the living room, so the competition was clearly visible.  The viewers were a mixture including a letting agent, representatives of landlords from this area and farther afield, people buying for relatives, couples wanting to rent the property out, young families and one retired couple.  To some degree this reflects the sort of people who want a suburban, 3-bedroomed semi-detached house.

The striking thing was how few people understood how the process worked.  Some thought me and the woman in the house were actually the estate agents, despite our casual clothes and were puzzled by the presence of the 10-year old boy once he returned from school.  One set of viewers thought we had driven down from Manchester where the company is based and were surprised about how much we knew about the local area.  Many expected us to be standing outside the house in the rain so did not even bother to knock or ring to come in.  Many did not understand the effective auction process despite details on the company's website.

It is incredible how many people in the UK misuse the phrase 'Dutch auction'.  Having had a tour around Dutch flower auctions I know how this works.  In these auctions, the price starts high and then falls in increments until someone puts in a bid.  This means that for any sale there is only a single bid which speeds up the sales.  Now, if this had been a Dutch auction as one man had somehow come to believe it was, it would not have started at £170,000  (214,000; US$263,500) in a street where no other property has sold below £200,000.  No wonder this man was disappointed as the price went up from there rather than down.  How he had got that idea from the company's website I have no idea. 

Similarly the view that only 'sealed bids' were permitted was something else that viewers had dreamt up.  A sealed bid is usually only for when people are tendering to complete a project and in the past literally involved people putting their highest bid on a piece of paper and sealing it in an envelope and handing it in.  The seller or the one offering the work, opens all the envelopes and goes with the highest.  Again this would be a foolish way to sell a house as everyone knows you get the best price from competition between different bidders even with traditional estate agent methods.  It would be pointless to have a single day's viewing then expect sealed bids, but again, from somewhere, perhaps pure arrogance or experience in other contexts but certainly not from the website, people believed the sealed bid method would be used.

Others missed out on the fact that it was an auction and would only stay open for 24 hours.  When they said they would get back to us next week, I had to tell them forcefully that there was no point as the house would be sold by then.  We had already had two 'book offers' on or just above the reserve price so even if none of the 18 sets of viewers had been interested we could have gone back to them.  Perhaps the company needs to be even more explicit about how it runs these sales, but people also need to wake up and understand what they are getting themselves into.  It was almost like turning up at a car auction and expecting to be able to negotiate a deal as you would at a dealership.  For us, it worked out fine.  By 11.00 the next morning when the bidding closed, we had an offer of £195,000 (245,700; US$302,250), so much better than what we had had by the traditional methods.  Of course, it is far less than the £217,000 we were offered but never received last year let alone the £240,000 (302,400; US$372,000) we paid for it in 2005, but the property market and our own circumstances are far worse then then.  It is better to get anything rather than have the building society take the house from you.  The one drawback from this method is that you get no deposit so we have had to go and borrow more money so that we can each put down a deposit on a flat to rent.  Anyway, my brief and tortuous period as a property owner now finally closes and so means I cannot take out one of these new government loans to pay for my care when I am elderly and I continue my rapid fall out of the middle classes.

P.P. 13/09/2012
The process proved to be even more messy and unpleasant than I might have feared.  It turned out that the highest bidder had actually lied to the estate agents and was actually in a chain so when it came to progress the sale she was not in a position to do so.  We ended up with the third highest bidder, the second having gone on to spend their money elsewhere in the time we were being mucked around by the first bidder.  This third bidder was offering £182,000 compared to the £195,000 of the first bidder.  However, we had no choice but to accept.  Of course within three days of the exchange of contracts he insisted on reducing his offer.  He had seen that a derelict house in the same road had sold for £170,000, though neglecting to point out that three months later, when it was refurbished it sold for £247,000.  He was clearly upset that he had not seen the house at a cheaper price and decided to take it out on us.  Despite the fact that he had already arranged a loan for £182,000 and the documentation was with our solicitors he withdrew this.  The estate agent probably conscious that their commission was dropping like a stone, managed after 3 hours of negotiation to keep him at £172,000, losing us a further £10,000 and meaning we are now worse off than when we were offered £170,000 by a developer without the estate agent fees.  These men are going to turn £70,000 profit in less than 3 months as the house does not need to be refurbished, but as I have noted before: they feel insulted if they have not been able to squeeze out extra money at the last moment.  The auction process looked like it could deliver for us, but in the UK with those with wealth able to dictate in every transaction, taking such a personal attitude to everything and being determined not only to get the best deal, but as much more as they can squeeze, it is no better ultimately than a normal sale. 

I am just denigrated so much by people I am trying to business with as stupid and naive that I have come out of this feeling utterly dirty.  In Britain if you are an ordinary person, you are no longer permitted simply to buy and sell anything, whether a gift on eBay or a house without you being told that you must show such gratitude for being ripped off and accept that any buyer will come back to take more from you before the sale is done.

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