Hot Topic Highlight – RICS Practice Alert for Real Estate Auction Sales
- Jen Lemen
- 1 day ago
- 3 min read
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What is this blog about?
In this week’s blog, we take a look at the RICS Practice Alert for real estate auction sales.
This is relevant to AssocRICS and RICS APC candidates and Chartered Surveyors undertaking auctioneering work, or following the Purchase & Sale competency.
You can read the full Practice Alert here.
What RICS guidance do auctioneers of real estate need to follow?
Auction work is covered by the RICS Professional Standard Auctioneers Selling Real Estate (7th Edition).
Auctioneers also need to follow the guidance of the RICS Professional Standard Property Agency and Management Principles (1st Edition) and Digital Markets, Competition and Consumers Act 2024. RICS also publish a consumer guide for auctions that surveyors should be aware of.
The auctioneering Practice Alert provides important clarification on a number of issues within the Professional Standard, following the publication of the above. The aim is to maintain high standards of transparency and fairness in auction work.
What does the Practice Alert say about guide and reserve prices?
The RICS Professional Standard Auctioneers Selling Real Estate (7th Edition) defines a guide price as ‘the minimum price at which the seller is prepared to sell at the date of publication. If a range of prices is given, the minimum acceptable price should not exceed the lower end of the range’. This definition must be provided alongside any published guide price to ensure that consumers know what the figure means in practice.
The guide price is usually published in the auction catalogue or online listing and must not be misleading at the time of publication. The guide price may be amended before the lot goes to auction and this must also be made clear in the listing.
The reserve price, in comparison, is defined as ‘the minimum price at which the auctioneer is authorised by the seller to sell the lot at auction. The lot may be sold to the highest bidder at or above the reserve price but the auctioneer is not authorised to sell at a figure below the reserve price’.
The reserve price is confidential between the auctioneer and the seller. It must not be disclosed to any third parties without consent and it is generally not disclosed in the catalogue or online listing.
What does the Practice Alert say about 'bait' bidders?
The Practice Alert relates to the scenario where a guide price is set at a price level that the seller will not accept, thus attracting ‘bait’ bidders. This is misleading to potential purchasers and can unfairly manipulate bidder expectations.
In summary, therefore, the guide price must reflect the level of reserve as the time that the guide price is made visible to potential bidders.
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N.b. Nothing in this article constitutes legal, professional or financial advice.
