The Modern Method of Auction
the-modern-method-of-auction

The Modern Method of Auction

The number of failing house sales is on the rise, with 30.6% of sales falling through in 2018. This has led to people seeking an alternative to being caught in a property chain: a new type of online auction, known in the property world as the Modern Method of Auction.

The modern method of auction allows buyers to bid on a property online, as in a normal auction. However, there will be a longer timescale to complete, making it easier for the buyers who need a mortgage to organise suitable finances. The buyer must usually pay a large reservation fee which will be non-refundable once the figurative ‘hammer’ falls. This method of auction is also known as a ‘conditional auction’, and is becoming increasingly popular, particularly in areas where properties are failing to sell, such as the North East, the West Midlands and parts of inner London.

Differences Between Traditional Auctions And The Modern Method of Auction?

Traditional Auctions generally take place at a physical location at a specified time. The length of the auction will depend on how long buyers bid for. Exchange of contract usually happens immediately after the buyer has won the bid and completion will be within 28 days.

With the Modern Method of Auction, buyers can bid from anywhere in the world online, 24/7 for the duration of the open auction, which will usually be for 14-21 days. Exchange of contract happens within 28 days of the lawyers’ receipt of contracts and completion within 56 days.

Why Sell Using The Modern Method Of Auction?

  • Speed. If you are looking to sell your property fast this method could be ideal. Exchange and completion take an average of 47 days after the auction has ended. This is much quicker than the estimated 79 days for a property transaction taking place through an estate agent.
  • You Get More Security. If you know you need to move properties, you get more security through the Modern Method of Auction as there is a much lower abortive rate post auction compared to the open market. The buyer pays a non-refundable reservation fee as a sign of their which is non-refundable. Statistically, only around 5% of property sales fall through at auction compared to the previously mentioned 30.6% of sales through estate agents falling through in 2018.
  • You Maximise Interest. You can set the starting price at a rate that will attract most attention from potential buyers, but also set a reserve to stop it from selling too low! Competitive bidding can drive the sale price up.
  • You Save Money On Fees. Generally, sellers will have a lot less costs, as the buyer pays the auction reservation fee. The, the seller usually only pay for conveyancing fees.

The pitfalls

Many critics comment that the modern method of auction is sometimes difficult to understand. Auction gives estate agents and auction platforms free rein to set the reservation fee and some high-street agents are still getting to grips with how this works. The reservation fee can be anything upwards of 2.5% + VAT with usually a minimum of £5,000 + VAT. The reservation fee must be paid upfront by the winning bidder when the auction finishes.

Buyers are obliged to have this reservation fee ready and waiting, as it can’t be part of any mortgage funds because of the timescale. Further, the fee is non-refundable if the buyer decides to withdraw. Finally, it doesn’t usually form part of the overall price paid as it is an add-on which goes straight to the auctioneers and the estate agent. Additionally, there can sometimes be other costs, such as an extra £180-200 for a Buyers Information Pack.

A further, bigger issue is the split between the auction houses and estate agents. Even if it’s shared equally, agents stand to make more of a profit, particularly on lower-price properties, than they would by selling on a traditional commission basis. Also, there is potentially less work for an estate agent as there is no chain involved.

If you aren’t 100% sure if you will sell and would only sell for a certain price you might be better considering a more traditional sales route. With the Modern Method of Auction, once a successful auction transaction has been concluded and you have a ready willing and able buyer above the reserve, you will be liable for the reservation fee paid if you change your mind about proceeding with the agreement last minute.

If your primary factor for selling your home is price, above speed and security then the Modern Method of Auction is probably not for you. Whilst bidding can drive the sale price up and some auction sales are very profitable for the seller, this is not guaranteed. Buyers may factor in the reservation fee payment into the total purchase price which may result in a lower bid price. You can however set a reserve fee within 10% of your asking price, so your property will never be sold for less than the reserve.

The Modern Auction Selling Process…

  1. You must first contact an auctioneer or estate agent offering this type of auction sale. They will usually offer a free initial valuation and walk you through the process of setting a reserve price and starting bid.
  2. The agent will then commence the marketing process
  3. Whilst the agent carries out these formalities, you must then instruct a conveyancer who must prepare an auction title information pack, ready for inspection by potential bidders. You can find more details of what an auction information pack usually contain by visiting our Auction pages on this website.
  4. Once the legal pack has been prepared and supplied to the selling agent, they will then agree a date with you for when the auction will go live, together with your instructions on how long you wish for it to run. Typically, this is around 2 to three weeks.
  5. At the end of the auction period, the winning bidder will then proceed to being the purchaser.
  6. Completion will then usually take place in 4 to 8 weeks.

If you are considering to sell your property, our conveyancer’s can help in preparing the buyers information pack and subsequently the conveyancing formalities thereafter. Similarly, if you are  looking to buy a property using this method, our conveyancer’s can also assist you with your pre-auction title checks which is a must before you commit to bidding on the property.

Speak to us on 0800 799 9892 to find out how we can help.

Disclaimer – our articles are designed to give you guidance and information.  There is no substitute for proper direct advice, particularly as everyone’s circumstances are different.  If anything in this article may affect you, please contact us for advice that is specific to your circumstances.

 

What our clients say

Great value for money. Everything went smoothly and I was very pleased with the service provided
Rachel Whitfield
Rachel Whitfield
20:59 12 Oct 18
Excellent! Very responsive, and really helped to push the purchase. There were unexpected delays during the process, but Anthony really helped to reassure me that he was doing everything he could to progress the sale. Ultimately, it all worked out in the end, and I would highly recommend! I would also recommend for auction purposes.
Sean Stevens
Sean Stevens
09:14 21 May 18
Very happy customer. Understanding of our needs and recommended a really fantastic solicitor.
Jack Hearne
Jack Hearne
17:49 12 Oct 18
I have just completed the purchase of my flat with them. They were recommend by the estates agents Phillip Arnold and they were fantastic. My case was handled by Milena who was really helpful and always available on the phone. The online system is also really easy to use. If I buy or sell a property I will definitely be using them again.
Sharon Kelly
Sharon Kelly
18:27 20 Dec 17
I used this service following a recommendation. The online case tracker worked really well. I would recommend this service as it's vital in the coordination between Estate Agencies and between Solicitors. The service proved invaluable in helping progress the conveyancing work efficiently and effectively. Completed the transaction just before Christmas having instructed the Solicitors on the 4th.
Shelly Harrill
Shelly Harrill
16:30 19 Dec 17
Excellent Service. Final Price same as quoted.
A Google User
A Google User
14:26 19 Dec 18
Have used them twice. Both times completion happened in less than 4 weeks, even over Xmas! Totally amazing. They take the stress out of the whole process.
Daniel West
Daniel West
13:04 21 Dec 18
Excellent Service. Final Price same as quoted
Parsa Khamooshi
Parsa Khamooshi
15:54 21 Dec 18
Being a first time buyer they guided me smoothly through the whole process of moving into my first home. Very professional and economical.
Uday Seth
Uday Seth
12:31 24 Dec 18
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
James Ellis
James Ellis
11:43 30 Apr 19
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
Michelle Preston
Michelle Preston
12:20 30 Apr 19
ThanksThanks for handling my sale and purchase. No complaints from me. Rebecca was regularly on hand to help with my queries and deal with issues.
Claire Miles
Claire Miles
17:48 07 May 19
I bought my first home in South London with Express Conveyancing . Great professional service, I was regularly updated and looked after. Top marks, 100% recommendation from me!
Dale Griffiths
Dale Griffiths
15:58 02 May 19
Good service and happy with the conveyancer
Chris Jenkins
Chris Jenkins
22:01 17 May 19
Great service from start to finish. Was great being able to see progress online! Very quick and efficient! All staff were helpful. Highly recommend
Reece Moseley
Reece Moseley
06:20 30 May 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:13 10 Jun 19
Fair prices good efficient service
Sue Batchelor
Sue Batchelor
18:46 01 Jun 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:14 10 Jun 19

Our News