Guide Price Range
Each lot will usually have a guide price or, more likely, a guide price range. For example, '£150,000 - £170,000'. This figure normally refers to what the auctioneer thinks the lot will sell for at the event but can occasionally refer to their perception of the property's current market value.
Fact is, the meaning of the auctioneer's 'guide price' can vary from one auctioneer to another A definition should be provided within the first one or two pages of the catalogue under 'Auction Notes', 'Procedures Explained' or similar. Alternatively, call for clarification.
Values & Prices
With some auctioneers, the guide price is their estimate of the value of the property. For others, it is the expected auction selling price, a minimum to maximum selling range or the lowest expectation of the selling price! All potentially different.
Gauging a probable selling price is tricky as there are very many variables. Looking at the auctioneer's previous guide prices and comparing these to their actual selling prices should reveal the auction house's skills at prediction and may enable you to guesstimate with a broad degree of accuracy.
Over Or Under?
When property prices were rising fast, it was sometimes said that some auctioneers under-valued so that the seller would get more for the lot, be impressed and use the auctioneer's services again! With prices falling, it has been said that some auctioneers now over-value to get more custom. The fact is that some auctioneers value accurately and others less accurately and lots sometimes go higher than expected, whilst others go lower - and many are fairly accurate.
Do The Due
With guide prices, there is sometimes an appearance of a lottery element to it all - until you watch auctions for a while and get a sense of where the market is going and which auctioneers are keeping up and others are lagging behind.
The bottom line is that, whether a property sells above a guide price doesn't mean it's 'expensive' any more than one that sells below a guide price is sure to be a 'bargain'. A 'bargain' should really be judged alongside of the current market value for that property.
The vast majority of lots will go through with what's known as a 'reserve price'; i.e. the bidding must reach this sum for the lot to sell. That's true even with repossessed properties. The lender has a duty to get the best possible price for the property; although some repossessed home-owners would argue that they do not always achieve that.
However, it's clearly not in a lender's interests to see a property selling for less than the total of the outstanding mortgage and the costs of repossession and re-selling. The reserve price is not made known to the public but is often said to be close to the lower figure given in the guide price range.
Iain Maitland www.ukpropertyalerts.co.uk