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Original poster

Estate agent pushing auction service- too good to be true

31 replies

Cathpot · 01/03/2021 08:06

Hi- just looking for advice on what the catch is here. We had 2 sales fall through just before covid ( without warning or explanation) which was both stressful and expensive . We are tentatively thinking about having another go - estate agent is pushing us towards their new auction service. The idea seems to be you put the property on at slightly below what you would take and have a reserve on it and hope that bidding takes you at least to the reserve. Then the buyer has to pay a % or £6000 to secure the sale. They are arguing that this deposit means buyers are less likely to pull out and that none of the cost is on us. I said what’s the catch. He said - there is no catch . I said why doesn’t everyone sell this way? He says because it’s a new system.
I’ve asked him to email the paperwork so I can have a look at it but I am presuming there is an angle. He hasn’t emailed yet which is also not unexpected - they are a bit crap to be honest but for various reasons it’s a hassle to move agents. I just wondered if any one has experience of selling this way and of it is really win win?

OP posts:
PickAChew · 01/03/2021 08:09

The catch us that people buy houses at auction looking for a bargain.

Onjnmoeiejducwoapy · 01/03/2021 08:13

Isn’t the catch that it will go for way less, to a cash buyer who is getting it so cheap they’re not bothered about surveys and due diligence?

Original poster
Cathpot · 01/03/2021 08:16

This is what I thought but he is saying let’s say you put the property on for £120,000, there is a reserve of £130,000 which is secret and if it doesn’t that go for that it won’t sell. As opposed to putting it on the market for £135,000 knowing you would drop to £130,000 if pushed.

OP posts:
SlipperyLizard · 01/03/2021 08:20

The catch is that unless it is a really in demand property a lot of buyers will be put off, so it might make it less likely to sell.

I wouldn’t buy a property this way because if the survey or something else arose then I’ve lost 6k.

If it is a really in demand property, it will sell the normal way.

senua · 01/03/2021 08:26

Auctions smell of desperation. I'd sack the EA and find one that can do the job - although I'd first wait and see what the Budget (day after tomorrow) brings and market the property accordingly.

Onjnmoeiejducwoapy · 01/03/2021 08:35

I think the estate agent is talking bollocks—why would someone buy a property at auction for x when it’s also on the market at x and they’re not interested? Plus auction cuts out like 80% of buyers, as very few people using mortgages or in chains would go that way. And reduces opportunities for buyers to actually check it out.

ItsSnowJokes · 01/03/2021 08:35

I won't touch this "modern method of auction" (which is what most EAs call it) with a bargepole. Why would a regular buyer want to pay minimum of 6k in fees? EAs love it as they get way more in fees than they would through a normal sale. You are seriously limiting your market if you go down this route. Bin them off and go to a better agent.

Onjnmoeiejducwoapy · 01/03/2021 08:36

Plus if he puts it to auction with a reserve that is basically the same as your asking price—it’s unlikely to get met at auction. So now you’ve not only had the house on the market for months, you have also had it unsold at auction. REALLY won’t help to convince new buyers that it’s a good purchase

ItsSnowJokes · 01/03/2021 08:39

And also his bullshit that it is new...... find below a thread from MSE from 2011 about this method. Steer well clear.

forums.moneysavingexpert.com/discussion/3090250/modern-auction-method

Persipan · 01/03/2021 08:45

The catch is that the vast majority of buyers will be put off. There was a thread on this the other day. Cash buyers - so, investors - won't have a problem with it necessarily, but for everyone else it asks them to pay a chunk of money for the privilege of being able to buy your house, and throws in a fixed, fast timescale which may be hard to meet (especially if also selling). There are a couple of properties round here that I'd probably be quite interested in had they not switched to this method of selling; now they have I just discount them completely. I also assume there's something wrong with them, frankly.

Maxellious · 01/03/2021 08:46

Doesn't it also pretty much limit you to cash buyers? Because there is such a short completion time that there isn't much time to get a mortgage?

Original poster
Cathpot · 01/03/2021 08:49

These are all good points. I wouldn’t want to buy a property this way so I couldn’t see why other people would. Thank you for comments, I think I need to find another agent.

OP posts:
Bluntness100 · 01/03/2021 08:54

Generally auctions are for very poor properties, often in a state of disrepair, that can’t be sold the normal way. This doesn’t seem to be the case for yours. Most folks don’t want to buy this way, so you do right to say no.

Midlifephoenix · 01/03/2021 19:01

As someone who has bought a few times at auction: I do it looking for a bargain, and no way sm I going to pay £6000 in fees! Most houses are either probate sales or there's an issue and you can't get a mortgage on it. Sure some 'normal' houses sell at auction, but unlikely anyone will pay market price for it.

spaghettiwest · 01/03/2021 23:26

A potential estate agent was pushing the same service to me. (If you're interested, I posted a similar question on Mumsnet here.)

InescapableDeath · 02/03/2021 01:22

Don’t do it. We walked away from a property using it. Buyers have to pay 6k even if they later do a survey and pull out - there’s so much risk, why would they bother? They also have to promise to complete in a very short timescale. No one would touch it for a normal home - maybe a cheap bargain for a developer.

WinterIsGone · 02/03/2021 09:27

What I don't understand is, where does the word "auction" fit in? You don't seem to bid against anyone.

If the house is listed for eg £100k, but they reserve is £110k, does the buyer offer £100k, is turned down, then offers a higher price, in effect bidding against themselves?

And what if the seller pulls out? Does the buyer still forfeit the "deposit"?

spaghettiwest · 02/03/2021 10:36

@WinterIsGone — My understanding (from what a potential estate agent told us) is that there is an auction period, where potential buyers call up and place their bids. However, based on some of the Trustpilot reviews, it sounds like some dodgy behaviour can happen during this time.

And in your example, I suppose the buyer would be bidding against themselves...

WinterIsGone · 03/03/2021 22:09

Yes, terrible reviews Shock
And lots of positive ones, which I have to wonder about Smile
I'm surprised there's not been an expose on them... or maybe there has.

I would imagine the company would be keen to encourage the seller to accept any bid, even if low, to get their fixed "deposit"!

CoffeeRunner · 03/03/2021 22:19

SIL sold her house at an actual online auction.

It needed a lot of work (she hadn’t had running hot water for 5 years) and she would have been repossessed had she not sold quickly.

Her reserve was set not much above the cost to redeem her mortgage plus fees. She walked away with £100k in the bank.

For her auction was a good option. I don’t see how it is for most sales however.

Londongent · 04/03/2021 11:19

I wouldn't buy a house this way unless I was getting a real bargain. Even if a survey comes back saying there is nothing wrong with the house, what if I have a house to sell and my buyer pulls out just before exchange. So many sales fall through that it just isn't worth paying £6k or a % up front unless everyone did it. Even then I would want a survey completed first

Salome61 · 04/03/2021 23:02

I put my house into 'traditional' auction and it cost £795 to enter it on line and in the catalogue. The auction was at the end of March 2020 and the auctioneer said he was sure I'd sell, so I had to find a rental for the end of April as it was four week's completion.

I hadn't done my sums - it sold for £275K, and at 2% plus VAT, the auction fee was a huge £6,600. I also had to pay my solicitor £1300. Eye wateringly expensive - and the bidder messed me about in the end, he wanted eight weeks for completion so I had double bills for longer than I'd budgeted for.

I'd look at RightMove and choose an agent that writes detailed descriptions, has a good photographer, makes sure the floorplan is clear etc.

MrsBrunch · 04/03/2021 23:17

DH and I are house hunting and we won't view any that are for online auction. It really doesn't work that well for the buyer so we're not interested. Shame as some of the houses look just right for us.

BackforGood · 04/03/2021 23:25

Like MrsBrunch, I found a house recently I was really interested in until I saw it was for sale by on-line auction. We walked away.
No advantage to the buyer, so therefore, as someone selling, you lose most of your potential buyers.

Honeyroar · 04/03/2021 23:25

My friend sold her farm by auction. It did ok. It was an unfinished farmhouse with a few acres of rough land. It’s reserve was £300k and it went for £375. Bidders had to put down £45k as a deposit before the auction, which was non refundable if they won and weren’t able to proceed. It just meant nobody bud that couldn’t afford the house - no messing about.. Another run down farm was broken down into lots an auctioned. Once all the bits were sold and totalled up it made a lot more than it would have if sold conventionally. My house and my dad’s houses are rural with land and need a little finishing. I’d definitely sell via auction if I ever needed to sell. It’s fairly common with farms. Quick and easy. You might get a little more if you sold conventionally, but you might have to wait 12 months too..