A new eBay-style rental property auction service allows landlords and letting agents to upload their properties so that potential tenants can bid on them.
ThePropertyBid.com has been launched by building surveyor Jonathan Ambrose, who said: “Our system will make the whole rental process completely transparent, so that prospective tenants can bid on a rental property in an open auction format that is managed by the landlord or letting agent.
“The site is all about making the process fairer, and while critics may suggest rental auctions will drive up rents in an already overheated market and be slanted towards landlords, the reality is that tenants will only bid what they can afford in their budget.
“What we’re doing is providing choice. With high demand for residential lettings, there will be resulting price increases anyway. It’s the market that determines the prices because ultimately rental prices are a reflection of supply and demand.
“It’s a matter of people determining what they can afford. If the asked rent moves beyond their expectations they will simply move on to another property that is within their budget. This won’t change, even if an auction system is in place.
“By having the rental process done online, everyone can monitor the process and make sure it’s done ethically. This way it’s all out in the open on the website.”
The site also ensures that applicants are reference checked before they are allowed to make a bid.
Letting agents and landlords create their own auction online, listing the property according to search categories such as type (ranging from parking bays and mansions), price and description.
There are no upfront or joining fees. Once the auction has finished, the landlord or agent is then required to pay a 20% commission fee on the achieved monthly rent amount and the tenant pays 5%, charged to cover their reference check and to ensure they are committed.
So, if for example, bidding for a property starts at £950 pcm by Tenant A and ends after Tenant B bids £1,000 pcm, the landlord or agent pays £200 and Tenant B pays £50, while Tenant A pays nothing.
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Comments
In response to Ray Comer:
I completely agree with the majority of what you have said:
referencing is important and needs to be beyond reproach
This system (thepropertybid) will not work as there has to be an end-to-end change in behaviour throughout the process.
Human nature does prefer familiar over new (regardless whether it is better or worse), so yes, there is zero chance of such a platform getting volume/interest
There are landlords who suffer/prefer let only to reduce their costs, but landlords who use agents will often be looking for management - there seems to be a large chunk of landlords who have become 'professional landlords' - would be interesting to see numbers, but doubt they will ever exist.
Where I disagree:
Rightmove is enabling poor agents to compete (at least on let only) with good high street agents
There are many, many rogue agents who post up instructions they have not explicitly been given
With the current market and landlords giving instructions to multiple agents, MANY agents will not inform the other agents resulting in agents and tenants having their time wasted for a few days after (maybe it is the responsibility of the landlord... but still... the tenants who have their time wasted do not ever get compensated)
The fact that there are still so many disparate letting agencies demonstrates that they are all individually using unconnected technology, rather than modern marketplaces (still too many moving parts in the process, too much wastage in cost). With the supermarket example, look at the advances they have made from the corner shop days to large local supermarkets with parking to these days where they have medium size supermarkets with the majority of things people use everyday... there is innovation throughout - they deliver now, within one hour slots, without needing to speak to anybody - that in itself gives choice, flexibility, saves time and cost (if you buy 70% of the same things, you don't need to walk around that same 70% of the supermarket to pick up those bits... you just press a button to replicate your last order and cancel off that 30% you don't want).
Coming back to my stockbroker example - there are still plenty of very profitable stockbrokers for those that need a high level of hand-holding. For EVERYONE else, web-based systems could provide fast, accurate information and scheduling to make the lettings process less costly (why are letting agents calendars not synced to the web so an applicant can book in a viewing immediately rather than calling... there are two reasons I can think of: agents often have stock posted that is not available AND THEN they want to have that personal contact with the tenant to show them stock that they have that may not be right for them...)
CFP have only recently moved to a SQL database, which actually makes little difference. The key is the interface, reducing the amount of human interaction and increasing the amount of human control (with less effort). CFP were in my office just a few months ago and had so many 'features in development' which I felt was just a way of saying they could not do certain things yet.
If you've booked travel recently, check out the difference between using an agent like Flight Centre (reputable, regulated) vs Hipmunk (web-based) and the experience shows what could be achieved.
Who thinks about the tenant experience?
If you are interested, I am working on something to try and bring better coordination to the market so that costs are reduced by service levels to landlords and tenants increase markedly.
@Rayhan
First, I don't think the referencing issue was clearly addressed in the website, it was only very briefly mentioned. To attract landlords it need to be a lot more specific; referencing of tenants is critical to getting the right person, or more importantly avoiding the wrong person, so to ignore that or to brush over it won't instill confidence in the system.
I don't know where your experience of agents has come from but I suspect you have been dealing with the wrong ones. Most agents I know use the internet and computers almost religously, very few processes are done manually.
Costs differ as they do in most industries, just look at the supermarkets, the defining factor is the service that is delivered. Poor agents come and go, the good ones are usually still there 20 years later, so the market has a way of weeding them out.
Agents can only advertise those properties that they are instructed on; there are stiff penalties for agents who ignore that. A landlord would have to instruct all agents for everyone to be able to advertise in a central market. This would inevitably lead to dutch autions between tenants, rental prices going up and some agents slashing their prices to get the business. Rents would rise out of reach of most tenants, the cheap agents would crash losing everyones money and only the better agents would survive - and they would promptly be blamed for the whole fiasco in the first place.
I hear what you're saying but this sort of system just won't work; there would have to be fundamental changes in the way that every side of the market thinks; landlords, tenants and agents and there would never be enough of one mind set to sway the rest.
Its not greedy landlords or throw back agents or even tenants, god bless them, but human nature that will not allow it to work.
This isn't a new concept at all, I'm not the only agent who has been in the business for years who looks for new ways of winning,promoting and distributing my services. Most of these 'unique' ideas have been tried at one time or another by other people and shelved for the reasons already given.
I'm all for trying something new but it has to be working to convince me, and anything that relies on all landlords having the same mind set about rentals is doomed to failure imo.
Landlords can always go let only if they want to save some money; there are agents around here who will find them a tenant for £100-200 but very few ever do. Out of the 500+ properties that we manage only 12 are let only.
I've used CFP software since it was a DOS based system, their latest version is a SQL based system - if you can run that under win3.1 I'll eat my hat :-)
To the Illerate Dinosaur:
Why would a person using the Internet to bid (hopefully on a platform that instills more confidence than the propertybid) without viewing the place in person (as they do currently).
The efficiencies come with shortlisting (Rightmove ads are mostly misleading, inaccurate, incomplete - making it impossible to know which places they should rule out and which match), coordinated viewings (why view at the convenience of the agent), and the process of taking an offer (a letting agent is incentivised to get close to asking price and not to wait for the very best price to come in the door).
It will be interesting when some serious, helpful technology hits the market. The current efforts are frankly embarrassing, especially the propertybid website.
Ray Comer:
The propertybid website seems to have attracted some PR that is undeserving. The site/platform is poor/incomplete.
My (overly harsh) slur about illiteracy was for those attacking the referencing aspect, when it was clearly addressed in the article. If I caused offence, I am sorry.
You are entirely right about a landlord's motivation for using an agent. However, why is the letting process still so costly, so manual? Why do agents only have a fraction of local stock each to offer prospective tenants, rather than being experts with access to stock in a central market?
There are legacy problems: Rightmove dominates online listings, but have not innovated for over a decade. Property management software is a joke. Even the market leaders like CFP Winman produce software that is stuck in the world of Windows 3.1 (1990).
The key is landlords have no choice. They can either go it alone with the aid of a service like upad and suffer the moving parts, or they use an agent and pay what is still an extortionate fee. There is no middle ground, no efficiency, no intelligent use of technology or coordinated market effort.
For those who remember trading stocks and shares when you had to use a stockbroker, think now how the transaction sits on an electronic platform. The platform links you to ALL the other market participants and instantly delivers transparent pricing and the ability to execute at low cost.
Neil - a service, regardless of its format or cost, has to be professional and offer a basic standard of due diligence that clients would find beyond reproach. You simply would not use ANY service if they placed your asset/property in a position of undue/unseen risk.
Computer programmes work to generally simple logic. For example there would be inputs for the referencing like bank details/statements, confirmations of employment, ID, previous addresses and credit history. Then there would be a processing step where checks were made to verify the accuracy/validity of the inputs. This would end up with an indication of whether the tenant is sufficiently risk-free and a determination of what they can afford. It would then be very simple for that determination to be a strict limit in an electronic bid process.
I would be surprised to see many landlords currently go to such lengths to double-check the referencing work of current agents. Furthermore, I can show you examples of the inadequate referencing many agents employ.
As a landlord, correct me if you will, there are three main concerns: quality of tenant, getting the best price, avoiding void periods. Agents preside over a fragmented market that certainly allows all these worries to currently persist.
With supply outstripping demand in many areas, tenants incomes either static or reduced and utility and other costs increasing by more than inflation our experience is that rents will be bid down rather than up - not what landlords would want I shouldn't think! People may mock the traditional way of dealing with lettings but, if properly done, does ensure that landlords and tenants interests are protected. I am all for new ideas and have embraced the internet as a good marketing tool but I do not think this type of scheme has much of a future.
PS does anyone get any enquiries via PropertyLive - we certainly don't!
@Rayhan
As an illiterate Dinosaur and a letting agent, as well as being a landlord, I would not be interested in this type of scheme particularly in the current economic climate.
I prefer to trust our instincts when meeting prospective tenants rather than have them bid for a property and potentially over-stretch their finances.
By the way - I am an online letting agent/dinosaur so not against the new fangled internet.
@Rayhan
Most of us here are thick skinned enough not to get offended by childish insults like being labelled 'illiterate dinosaurs' but I am interested to hear why you think traditional landlords are suddenly going to split from their chosen agents and use this sort of 'hit or miss' service to find a tenant when they still have the management side to consider?
In my 20+ years experience of this industry I have found that the majority of landlords use agents because they don't want to let, or manage, the property themselves. They want a one stop shop where they can leave their rental unit to be let, managed and the rent collected by one person/company. Most won't or don't have the time to start using different companies for different aspects of the same job.
Just having the belief in this concept isn't enough to make it work - if it really is what landlords want then they will be inundated with hundreds of new properties within days, so lets see if the proof is in the pudding.
As for the internet making everything transparent..are we talking about the same internet? Is the agent or landlord able to see exactly who is bidding and how much? are the tenants references made available to the landlord or agent during the bidding process? who carries out the referencing for PropertyBid? how do they know that the references taken out are going to be suitable for the landlord or agent? This is how it happens in the 'traditional, manual, expensive, disjointed and value-less' way we do things at present
This concept is no more likely to be adopted by landlords than the Rent Collection 'system' that went round a few months back.
In response to Rayhan I am a Landlord...you have missed the point..... tenants gets referenced and given a credit rating and maximum rent. Who is monitoring that his bid is over his limit if he starts bidding higher and higher. Does he get reference checked before each bid? Who is checking identity is correct ...or do you just pick up a bill out of a bin and send it in. How is data processed and collated....too many but "what ifs" for my liking.
Lordy! Lordy! In my view yet another 'get rich quick' scheme that will soon bite the dust. Give me strength
In response to StevefromLeicester:
The key is that your Landlord client has few options other than using a traditional agent. It's either that (what is your average fee? upwards of £500 per let?) or using something like uPad to advertise and doing the rest of the work themselves for £100.
A landlord, I assume, would use this instead of paying a traditional agent extortionate fees, IF (and this is a big if...) the auction process works to get the landlord a comparative or better price than the expensive letting agent could.
In response to Ray:
Auctions are seen as a forum to grab a bargain. The HALO items/properties will certainly attract disproportionate attention and achieve a slightly higher price. The rest will achieve a price that the market can bear, which is often ever so slightly lower.
While much of stock is tied up with managing agents, the market for lettings will soon be disrupted causing agents to focus on landlords and management and leave lettings to the internet, market places and more efficient techniques than the current manual, disjointed processes that agents individually employ.
The internet can give transparency and better distribution. An agent coupled with Rightmove just gives lots of bogus adverts, wasted time and "sorry, that property has just gone, but if you register with us..."
So how is this supposed to work? Are tenants expected to bid on a property without seeing it, or are we / our landlord clients supposed to show people round before they bid?
Obviously letting properties without people seeing them is a no-no. Meanwhile, if I spend time (and by extension money) showing someone round a property I'm going to try and close the deal there and then. Why would either me or my landlord client want to pay an extra couple of hundred quid to send them away and hope that they'll bid the price up?
A few years ago a reverse site might have been good though. In the glory days when we'd take simultaneous instructions on 20 identical new-builds landlords could have bidded their prices downwards until a tenant decided to bite. They'd have loved that (he said with his tongue firmly in his cheek).
While I don't think the Property Bid is at all well executed, I think the people/agents commenting are illiterate dinosaurs who don't see the problems they cause tenants and landlords through the "traditional", expensive, value-less lettings model.
The article CLEARLY states: "The site also ensures that applicants are reference checked before they are allowed to make a bid."
The article also makes no mention of the viewing process, which I doubt would be done away with.
It is just incredible how people can post comments about referencing concerns without having read the article.
Concur with comments earlier.
It would make this a more responsible proposition if the bidder was asked what their household income was when they registered and then prevent that person bidding 35% or more of their annual income. This would prevent people getting carried away with bidding fever only to find they have afiled any affordability checks or worse still being stuck in a tenancy they realise they cannot actually afford. On all our ads we politely ask anyone not earning at least 34X the monthly rent each year to not apply for the property.
Same as Ray really. We're a small company and want to make sure those who'll be renting properties have been vetted thoroughly including asking the right questions whilst they view. This method could open a can of worms, the worms being fraudsters and god awful tenants who no one else will take. It'd only benefit the short term greedy.
Not for us. We like to meet our tenants first and I can't think any of our client landlords would thank us for accepting a tenant purely on the amount of rent they are prepared to anonymously bid for and pay £200 for the privilege into the bargain.
The tenant has to wait until the end of the bidding period to find out if they are succesful; if not they have to start all over again on another property.
I think this will drive rents up on the properties advertised; thats what an auction is all about, achieving the highest amount possible.
I just don't see it being the way forward.
Price is not always the determing factor.....are they working...do they have a secure job.....are they on a permanent contract...are they illegal immigrants...how may children pets etc etc etc. How much time will be wasted when highest bidder fails referencing. Who actually meets tenant to check credentials...are bids made after veiwing..by whom. Ideal formula for the many scams going around which Professional Agents are paid to avoid.
They have 4 properties on their website...
I think that says it all!