Vendors advised to be thorough and consider all sale methods in a market with fewer cash buyers.
A changing market dynamic may lead to more farmhouses and residential smallholdings being sold privately. Jack Mitchell, an associate in Carter Jonas’ Taunton office, says the auction room still offers the best method of sale for certain properties. But, with fewer cash buyers in the market and a polarisation of prices being achieved, vendors who have traditionally preferred the auction room should not close their minds to alternative routes to market.
Jack says there have been a number of examples over the past year where sales have been agreed by private treaty after the properties failed to sell at the fall of the hammer. He said: “Last year we offered two county council farms for sale. The first was lotted into bare blocks of farmland, and a house with eight acres. At auction, everything sold except the house with the land. Afterwards, a sale was agreed by private treaty to the first person who had viewed the property. It transpired that the investment required in carrying out surveys and mortgage valuations initially put off the eventual buyer as they couldn’t be sure they would be the successful bidder in the room.”
Jack had a similar experience with a 60-acre farm which included a house for modernisation and a range of buildings. The buyer was deterred from bidding because of the lack of flexibility offered – buying at auction means there is no scope to negotiate any of the terms.
“In both cases, the method of sale was the reason a buyer wasn’t found at the first attempt,” Jack said. “They didn’t have the confidence to bid and exchange contracts on the fall of the hammer.”
Jack says sales of farmland seem unaffected by the trend and continue to sell well to keen bidders. But, when a house is involved, institutions, local authorities and executors are increasingly favouring private treaty or private tender. “It’s probably a reaction to the economy, with fewer cash buyers about,” he added. "I can continue to see private treaty being the favoured option going forward. I’m always surprised by the number of people who won’t buy or haven’t bought at auction and, if we ignore those people, we are potentially cutting out a number of buyers.”
HORSES FOR COURSES
Despite Jack’s view that private treaty and tender will continue to be the more favoured method of sale, he is quick to point out some of the many benefits of selling by auction. Certainty is a word which will appeal to many buyers and sellers. “On the fall of the hammer, the seller knows they’ve sold it and the buyer knows they’ve bought it. That’s a big draw for a lot of people,” Jack said. “Both parties know there won’t be any renegotiations because they’re legally bound, and the deal typically completes in four weeks.”
The quick, transparent sale removes the risk of the complications which sometimes occur while a private sale is being completed. “It’s a fact of life that sometimes buyers will change their mind between offer and completion,” Jack explained. “The economy can make people jittery, another property might come along, or personal circumstances may change. Or, from the buyer’s perspective, someone else might come along with a better offer. Despite the many benefits of a private deal, there is more room for uncertainty than the auction method.”
Clients with ‘unique or unusual’ properties to market may also find the auction route is favourable. Strawbridge House, which sold at a Carter Jonas auction in late July, is a perfect example. The seven-bedroom country house with outbuildings and 16 acres, near Okehampton in Devon, required complete restoration.
“Strawbridge has the potential to be extraordinary, but requires a huge investment to become so”, Jack said. “Valuing properties like this is difficult, because of the extent of work required and the subsequent uncertainty over the cost of carrying it out. It is often best to follow the auction route for such properties. A clean sale, where buyer and seller both know the terms of the contract, is a far more efficient way of getting a deal done.” Strawbridge had a £550,000 guide price and sold for £610,000.
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We have a lot of great stories to tell in this Autumn/Winter 2019 issue. But in a time of such political uncertainty, all we can do is concentrate on what we know. Articles featured in this issue include the true value of estate management, how a mixed farm in Yorkshire is making best use of renewable energy, the impact of biodiversity for landowners, the cloud of Brexit and its impact on auctions, information about compulsory purchase, and much more.