Property auction firms must update their web sites and marketing materials to give potential buyers clearer explanations of reserve and guide prices following a ruling by advertising standards watchdogs.
The Advertising Standards Authority (ASA) made the ruling following a complaint alleging guide prices on the Auction House UK were misleading.
After investigating, the ASA upheld the complaint and ordered Auction House UK to change their marketing materials to show:
- Guide prices are clearly displayed
- To add qualifying information explaining how the guide price was arrived at
- Any distinction between the guide and reserve prices that could affect the sale price of a property at auction
- A note that the guide or reserved price could be subject to change
“We told them to ensure, unless they routinely updated their guide price where a reserve was subsequently set that was higher than the lower bound indicated by the guide price, that the text clearly positioned the guide price as an indication of the range within which, or, in the case of single-figure guide prices, within 10% of which, the minimum acceptable sale price would fall, so as to make clear that the property might not be purchasable at the lowest figure stated,” said the ASA ruling.
Auction House UK told the ASA that their web site was updated by franchisees and followed industry guidelines.
“Guide prices for auctions were set at the beginning of the marketing period, a reserve price, which is the lowest price at which the auctioneer was authorised to sell the property during the auction itself, could be agreed much later,” the firm told the ASA.
“The policy operated by their franchisees was to set reserve prices just before the auction day, which ensured that the reserve could properly reflect levels of buyer interest as well as seller requirements.
“They stated that after the auction, the auctioneer, with the agreement of the seller, was able to sell at a lower figure a property that had not reached its reserve price, which might match or even fall below the quoted guide price.”
The ruling has no force in law and only applies to Auction House UK, but effectively means all auction houses must follow the same rules.
The precedent for applying ASA rulings was set when a lettings agent was judged to be misleading tenants by failing to clearly state additional costs over and above the rent for signing a rental contract.
The ruling was subsequently picked up by the entire lettings industry.