LOT11 is a company threatening to bring the UK property market into the 21st century by disrupting the traditional auction method and persuading the public that online auctions are a better proposition for buyers and sellers.
The British obsession towards buying our own homes and our desire to make money from these assets is only tempered by the inefficiencies in the system of buying and selling a property. In England and Wales, property transactions can take months to complete and the process hasn't changed in decades.
Transactions often fail due to the length of the process, whether through ‘gazumping' (the term used when a seller accepts an offer from one potential buyer but then accepts a higher offer before contracts are exchanged) or other problems.
Image source: LOTT11
A recent report from the Department for Business, Innovation and skills put the cost of failed property transactions at £270m annually and this figure has the Government’s attention. In its budget, earlier this year, it called for a review of the property buying process saying it will look into ways to help curb the huge annual loss on failed transactions. It said 'We will shortly publish a call for evidence on how to make the [buying] process better value for money and more consumer-friendly.'
The whole property industry is ripe for transformation and there are platforms springing up which bring technology and innovation to an industry that is overdue a revamp. LOT11 is the latest platform promising to revolutionize the property industry and it is raising money from the crowd to realise its ambition.
LOT11 is an online auction platform for UK residential and commercial properties. While there are other online auction players emerging this platform differentiates by being a financially efficient, platform. Unlike other auction houses (online or traditional) when a bidder is successful the parties have effectively exchanged contracts and sellers will receive cleared deposit funds in their account within 48 hours of the auction.
The painfully slow business of house buying can be avoided by purchasing a home at an auction and the property auction model is gaining in popularity, with all the traditional auction companies reporting increased revenues.
According to recently published statistics released by Auction Finance, the number of properties sold at auction is increasing at the fastest rate for years, showing a 78 per cent year-on-year increase in sales.
Allsop, Britain's biggest auctioneer, has just reported its highest sales volume in a decade at a sale on 13 October. The company claims to have raised £480m from five sales this year, an almost 25 per cent increase on the same period in 2015. And Reuters says that rival Acuitus has raised more than £310m so far this year and is on course for its second consecutive record-breaking year.
LOT11 is now seeking to raise £750,000 from the crowd for 15 per cent equity. The minimum investment is £10.
The business model
The platform charges no fees for listings only on property sold. It charges 1.75 per cent commission and says the average price of property it has sold is £531,588. Producing an average commission fee of £9,303. Successful bidders pay £500.
The company will also pursue strategic partnerships and is already working with short-term lender Lendinvest.
LendInvest will ‘pre-qualify’ lots at LOT11 auctions which fall within its criteria, meaning bidders and brokers can see which properties LendInvest is prepared to lend against. LOT11 and LendInvest will split the arrangement fee.
The platform says it has sold over £32m worth of transactions since its launch in November 2015 and has achieved this with a very small advertising and marketing budget. This crowdfunding round will enable the company to do much more marketing and targeted advertising.
LOT11 will ramp up its marketing and will increase its exposure on the property portals, Zoopla and Rightmove, industry magazines and will run a radio campaign to complement its existing TV coverage.
Property TV has made a pilot programme about the auctions and is commissioning a series which will run live auctions on the channel.
The platform also wants to add to its team and further develop its website.
There is a clear market opportunity here and when a sector is ripe for disruption, change can come quickly. The cost difference and efficiencies compared to a traditional property transaction should be enough to drive buyers and sellers to try the concept. Many home buyers have experienced the misery of having an offer accepted on a property, paid out for a survey and conveyancing, only for a seller to pull the plug before exchange or complication.
However, as auctions are becoming a popular concept more competitors will enter the sector and LOT11 needs to build scale quickly if it is to stay ahead of new movers in the space. There is no major barrier to entry for this business and behemoths like Zoopla, who already have scale, deep pockets and a track record in investing in proptech start ups, (earlier this year it invested in Trussle, Landbay, PropertyDetective and FixFlo) could easily leapfrog smaller players.