Our monthly auction corner column consists of two separate sections: A specific case study from Piotr and a more general market update from Jay.

Case study
Hope value vs scarcity value (and how to make the most out of it!)  
Last week we helped one of our clients in the disposal of a property in the auction and to say she was delighted with the result is an understatement. The property broke the best sale of a fairly uniform house on the street by approximately 13.5%! We were surprised by the result. As much as we always want our clients' properties to sell for a lot and position them to have the best shot at achieving that, this sale exceeded any reasonable estimates, especially given that sales under auction terms require a discount to usual values.

Characteristics of the lot
The property in question was an end of terrace house purchased initially for £145,000 in 2017 and converted into a 5-bedroom HMO in Birmingham. The property featured two very valuable additions…firstly, it had an internal garage that could be converted into an additional room making it a 6-bedroom HMO and increasing the income. Secondly, being an end-of-terrace property, it had a piece of land to the side that could potentially fit another house subject to planning permission. Seeing that, we advised the client to offer the property in two lots: the first one being the HMO and the second one being the newly created title for the piece of land to the side.

Making the lot special
We also thought that people would be much more comfortable if two, seemingly intangible things would be done. Firstly, a planning application was submitted for converting the internal garage into an additional room. Even though that could be done under permitted development in most cases, in this situation it was seen as being helpful to make a planning application anyway. This house used to be held as a leasehold property and freehold was purchased from the council in 2017. But it came with restrictive covenants and the council was given an opportunity to give a rubber stamp for the conversion.

Secondly, the land represented a significant hope value. It was priced to reflect that with a guide price of £5,000. But what made the potential a little more tangible was the computer generated images of what might be possible (CGIs). We put our client in touch with a very good CGI designer and she got a very nice CGI of an additional house created and we marketed the property to reflect the development potential subject to planning. Getting the planning is always a tricky process and our client felt like it’s not worth their time to deal with a lengthy planning application and they would rather sell the site as a blank canvas.