Estate agent pushing auction service- too good to be true

[Cathpot]

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?

Oh boy, what a stressful ordeal @Salome61. That sucks.

I was under the impression that the buyer pays the auction fee? (In your case, the £6,600.) That was how it was being sold to us — "you pay no fees, and could get more money!"

@Honeyroar — I assume the £45k deposit was then deducted from the final farm price?

My issue is that the £6k that buyers have to front to "secure the sale" doesn't go towards the sale of the house. It's just a fee.

If it did get deducted from the final house price, I'd be all for the modern auction method!

@spagettiwest that is true, in a traditional auction you can get the buyer to pay the auction fee, but I thought it would put people off. I didn't receive bids anywhere near my reserve on the day, it was guide price £315K, reserve of £350K. I got bids of £200K and £235K on the day. Covid lockdown happened two days before, the auction was on line, I do feel I missed out on the 'live' competition within an auction room which you also have to consider. The next day the auction house approached everyone that had viewed to try and get a better bid. One offered £240K, the other £275K, which I accepted.
I could have gone into two more auctions but was scared with lockdown and the news foreseeing financial difficulties in the future.
The only advantage for me was that I got rid of a house that was in dire need of renovation, especially the roof which I had been quoted at £30K. I was scared to spend another winter there in bad storms.

The modern auction you are considering is mentioned several times on the House Buying, Renting and Selling Forum. No-one thinks well of it. The non refundable 'deposit' is split between the auctioneer and the estate agent.

If you do go to auction now, anyone that returns from viewing with the original estate agent will have to pay auction fees, and it will put them off.

forums.moneysavingexpert.com/search?Search=modern+auction

[quote spaghettiwest]@Honeyroar — I assume the £45k deposit was then deducted from the final farm price?

My issue is that the £6k that buyers have to front to "secure the sale" doesn't go towards the sale of the house. It's just a fee.

If it did get deducted from the final house price, I'd be all for the modern auction method![/quote]
Yes it got deducted from the sale price. It was just a way of guaranteeing that bidders were serious- if they couldn’t come up with the money or decided to pull out afterwards they would lose their deposit. All non winning bidders had their deposits returned immediately after the auction. The farm was still marketed like a normal house sale in the lead up to the auction and people could view.

Honeyroar Selling by a normal auction is fine, and as you say, for out-of-the ordinary properties, it can be great, and even lead to a bidding war. I guess the large deposit ensures that you don't get fake bidders ramping up the price, then dropping out when the gavel falls, which would be so easy to happen on the internet.

This is the "modern method of auction", though, in which the only person who wins is the estate agent/"auctioneer", as they actually keep the deposit of the winning bidder.