What am I bid?

Following last year’s auction of an open market house at Le Frie Baton in St Saviour’s and the one-day auction of seven fields in the same parish, Cooper Brouard today release details of an upcoming auction of a ramshackle cottage near the Vale Church.

Considering the local market’s current level of activity and staggering prices, it raises the question of why there are not more auctions.

They are certainly an efficient and transparent method of achieving a fair market or possibly even a premium price, all within a set time schedule. Auctions are also a preferred route when numerous parties are involved, such as inheritance. This was the case with a Cooper Brouard auction of a west-coast cottage in 2014, which without a will being found had been inherited by 38 cousins and more remote descendants from near and far.

Television programmes such as Homes Under the Hammer regularly show nationwide auctions of multiple properties. Admittedly, some of these sadly are bank repossessions or what are termed as distressed sales. Nonetheless, of the 652,000 homes sold in England and Wales in 2020, about 15,000 were auction sales.

So why not in Guernsey? Mainly because the size and accessibility of our housing markets better suit the more conventional method of setting an asking price in search of current and imminent buyers within that price range. Another disadvantage for buyers is funding a house purchase. Auctions rely on bidders with ready access to a 10% deposit on the day and the remainder of the money available within a short matter of weeks, when the conveyance is completed in court. There is no provision for further conditions, such as bids being subject to survey or finance, and no subsequent negotiations on price. Neither can an auction form part of a chain of sales.

Guernsey has more than a fair share of independently wealthy buyers but most house hunters need to sell their current property to fund the next, and they are unlikely to do that in the hope of being the successful bidder at an auction.

Bridging loans are a thing of the past and mortgage applications prior to an auction incur the cost of an independent survey and legal searches, without the certainty of ultimately purchasing the property. Neither is there any guarantee of raising a mortgage post-auction and without one the would-be purchaser is likely to forfeit the deposit.

This is the crux of the matter and the auctioneer will always stress that the fall of the gavel strikes a binding agreement with no subsequent negotiation or conditions, whereas buying a house in the more conventional way by private treaty, as it is named in legal terms, can involve protracted negotiations until conditions of sale are finally agreed, usually at the last minute in conveyancing court.

Public auctions in Guernsey are governed by a 1914 law under which auctioneers have to be licensed, except when conducting sales for charity or religious purposes. Further exceptions include selling fresh fish and other perishables, and for the sale of horses at race venues.

Cooper Brouard’s auction of seven fields last June was held at The Farmhouse Hotel, however property auctions in Guernsey are typically held at the premises, not least to focus the minds of bidders if a highly desirable house or location is on offer.

Such is the case with next month’s auction, described here already in almost desultory terms. The truth of the matter is that Leafy Cove is a once-in-a-generation opportunity. Hidden from view for more than a decade, the Victorian double-fronted cottage has recently been cleared of overgrown trees and bushes, although its 200ft-long plot of land still needs to be tamed. Of course, the condition of the cottage and gardens can be changed to suit the buyer, whereas the exceptional value of the property lies in what cannot be changed – its cherished location and seafront setting. Leafy Cove is only 50 yards from high tide.

The attraction of properties like this is enormous, even from people who up until then had no intention of buying a house. Other properties may offer more for the same money but it’s not just about bricks and mortar. Leafy Cove is as much about lifestyle and recognising the market potential is the essence of taking any property to auction. There has to be a certain feature or overriding factor – the X-factor – to ensure widespread interest and competitive bidding.

Not that all auctions are successful. Owners almost certainly set a reserve price beforehand, below which the property will not be sold. This is usually known only to the auctioneer, although guide prices are freely given during marketing. If the bidding fails to reach the reserve, the property is withdrawn from the auction and, in most cases, subsequently put back on the market with a specified asking price, although the auctioneer is occasionally approached in the interim to see if a deal might still be done.

Savvy bidders often look for signs for when the reserve has been reached. Enticingly, auctioneers will often say, ‘I’m going to sell this property today’, and later raise the gavel in extravagant fashion to tempt those last few bids.

Auctions of any kind generate a lot of interest and onlookers are always welcome to share the experience first-hand, without fear of inadvertently buying a house with a friendly wave or wink of the eye.

What they will see, when a property has a real wow-factor, are impassioned bidders and no limit to what they might be prepared to pay.