What can be done about the shitshow that is Modern Method of Auction?

[DepartureLounge]

I’m looking to buy a small house having sold a larger one post-divorce earlier this year. So I’ve got cash in the bank but quite a limited budget. I’m in the southeast, lucky me, but prices are starting to come down a bit, which puts a few houses in budget, as opposed to earlier this year when there was nothing.

Increasingly I’m finding that the houses in budget (or that appear to be) are being sold by Modern Method of Auction. Right now, out of 6 houses I like and could theoretically afford, 3 are being sold by this method. It’s put me off up to now because I don’t really understand how it works and don’t want the hassle, but beggars can’t be choosers, so yesterday I did a viewing at one of them and found I really like it. Unlike many MMoA houses, it’s not in a right “cash buyers only” state but the vendor has gone into a home and needs to realise the asset quickly. There’s been very little interest and I could probably get it for below the guide price without it actually going to auction.

I did some reading up overnight about how MMoA works – old threads here and some on MSE – and people are basically saying that it’s a scam, particularly when the EA has thrown in their lot with a specific auctioneer I'd best not name out loud, which this one has. Basically I pay a whopping £6K fee to get 56 days’ grace to complete. If we don’t complete, I forfeit that, even if it’s not my fault (e.g. the buyer changes their mind or the agent obstructs in some way). There’s nothing to stop the agent deliberately throwing the sale by introducing a succession of new buyers with bigger offers, say, and trousering £6K each time. I get no house, the seller gets no money. (Even if we do complete, that £6K is extra, not a deposit.)

I don’t want the risk even though the house itself looks sound, and anyway I don’t want to be a cashpoint for a scammy EA. It doesn’t look to be working for the buyer either, as there’s been no interest and now the market’s falling too. I’m concerned that the EA has talked them in to this because they’re vulnerable and have believed some guff about getting more money quicker. Now I’ve viewed the house, there’s a £6K bill that someone (the seller, if I refuse) will have to pay, so there’s now an overhead for the seller on the one buyer the house has attracted (me) that is far higher than the normal % a seller would pay an EA.

Why is any of this even legal? The terms I would agree to and the terms the seller has already agreed to are completely unreasonable and exploitative. On top of that, as I say, the seller is vulnerable. Could/should I alert trading standards or similar? And what can I do about buying in an area where a single agent has a stranglehold on the market and has basically gone over to the dark side (probably half the property they’re marketing is MMoA, hardly anyone else has any property in that area at all).

Has this worked out well for anyone, whether as a buyer or seller? Are there any estate agents here who have a take on all this? Conveyancers?

We were looking at a flat on this basis. We had made an offer on it that was rejected and the auction starting point was what we offered. It was due to end yesterday and got zero bids and they have extended it.
Can you approach the estate agent directly and make an offer outside of the auction process? They might not accept it but may in time if noone else is interested at the auction price on offer

Apparently they are managing to talk so many people into it because so many sales are falling through right now.

So, hold on, the seller still has to pay 6k regardless? I am confused. I thought the advantage for the sellers is the buyer pays the fees.

I hate them too.

People can choose to sell their place any way they like (I guess if they engineered a situation where it was sold significantly under market value to avoid tax that might cause some issues).

The flip side is buyers can choose not to participate on it if they don't like the selling method.

If enough buyers refuse to partake, the method will go out of fashion.

Yeah, the attraction to sellers is (a) no fees for them and (b) supposedly less falling through (though note the caveat that ther EA is incentivised to let the transaction fall through so they can do it all again and make another £6K).

The moment I signed up for a viewing, my details were passed on to the auctioneer-who-shall-remain-nameless, who keeps them for 18 months. If I make a side offer, they will still want their fee and will come after me for it. If I refuse to participate in this farce and just leave an offer on the table for when everyone's come to their senses, the seller's agreement will say (somewhere in the small print) that they have to pay it instead if they want to sell to me. (I assume they therefore will sell to anyone but me now.)

It's all very well to say just don't do it and it will fall out of fashion, but that doesn't buy me a new home, particularly not in this particular area where the EA has a virtual monopoly.

Leaving me aside for a minute, I'm also genuinely concerned that if the seller is selling because they've gone into a home, they may be seriously vulnerable and not understand what they've signed. It's so exploitative. It makes me really angry.

Honestly, put an offer in direct to the EA and tell them you are not interested in the MMA as the risk is all on you.
Alternately, do your research, is this a bargain at the advertised price? Could be worth a punt, but if it’s similar to standard sales.

I suppose you could go detective and try and track down the owner and make an independent offer or talk to the agent as someone else suggested.

But at the end of the day the only way you can really show your displeasure is to walk away from it.

If it looks like a duck and walks like a duck then ........

Why is any of this even legal?

I came across one that isn't MMA, but is proper dodgy the other day.

Advert lists:

Upon acceptance of the offer the buyer is then required to pay a non-refundable Reservation Fee of £350 inc VAT which isn't part of the purchase price to secure the property as part of our Terms & Conditions.

Seems simple, right? Cheap, even. So we're scratching our heads trying to figure out how they can possibly even cover their own fees to sell a house at that low price.

Have a look through their website. It's still not entirely clear. Don't seem to be any fees to the seller.

HOWEVER.

Not mentioned in the advert? Buyer pays the seller's conveyancing fees.

ffs

It doesn't really matter whether it's illegal/withholding information anyway. Absolutely nobody is enforcing anything when it comes to house sale adverts.

I heard them discussing Reservation Fees on that Estate Agent Weekly Stats show a few episodes back. I couldn't get our EA Mumsnetter to confirm but I'm sure that I heard that only 40% of listed properties actually go to completion. Given the amount that EA's spend on listing, and get nothing back unless it completes, they are rightfully indignant at their own poor performance. I mean, what clown does all that work with no guarantee of a return.

They feel that getting a buyer to pay a reservation fee "commits" them to the process and makes them less likely to pull out prior to exchange. Apparently, one agent who does that has got their rate down to only 9% not completing.

Thanks for the various ideas, but sadly none of them work.

I can't put in an offer direct via the estate agent, bypassing the MMoA process. The minute I viewed the property, I "agreed to" the terms of the auctioneer. The estate agent is also in a business relationship with the auctioneer. The minute I make an offer and the seller accepts it, I automatically become liable for the £6K.

If I approach the seller direct, all the legalities still apply. My only hope is if they like my offer so much they assume responsibility for the £6K. But since they were seduced into this by the lure of not having to pay EA's fees, I think that's an unlikely outcome, given that it's about 3 times what they would have paid ordinarily.

Anyway, I've just done a second viewing and quizzed the agent closely about the circumstances in which the fee is forfeited or when I might be able to get it back. He told me a pack of lies. All the due diligence I've done on the auctioneer suggests they're a bunch of crooks. None of it bodes well and I'm going to have to walk away.

It's a complete shitter though. The house was perfect for me.

That sucks major arse. I'm so sorry.

Time to start posting leaflets through all the doors of houses you like that are not for sale?

It must be horrible when one EA is prevalent in the area, and that EA is shitty.

Commitment is one thing, but being legally committed without any opportunity to respond appropriately to a poor survey or legal problems thrown up in conveyancing is quite another, and not reasonable.

If it was such a reasonable thing to be doing, why are EAs lying about the facts of it? e.g. telling me that if I have a legitimate reason for pulling out I won't forfeit the fee, when the small print says the precise opposite? I guess he assumed I hadn't read it. That's not maximising your profit margin. That's lying.

I'd have more sympathy if they did a proper job when times weren't grim. Idk how much time I've wasted asking simply questions before a viewing was booked, e.g. what are the dimensions of that room, getting silence, the house is still on the market four months later.

Apparently, one agent who does that has got their rate down to only 9% not completing.

Yeah, but how much money are they actually making? I am deeply skeptical that they're even covering the same amount of profit than if they charge the usual 1% sellers fee amount.

'The non refundable reservation fee paid by the buyer covers the agents fees (unlike the traditional auction or traditional sale where the Seller pays the agents fees). If the property falls through due to the Vendor, the reservation fee will be refunded to the buyer in full. If the sale falls through due to the Buyer, it is non-refundable.'

If you are a cash buyer just pay for the property straight away, like a standard auction. How can the EA stop you buying? And make it your fault? Surely once the sale is agreed and the fee paid the EA is out of the picture.

Where are you getting that quote from?

The deal here is that if the transaction fails to complete, I lose the upfront fee, regardless of why it fails.

Hypothetically, the agent can introduce other buyers making higher offers. If the seller decides to dump me in favour of the higher offer (not impossible, as the guide price is low for the road), then the transaction falls apart, and I'm £6K in the hole. In fact, what's to stop the EA doing that multiple times?

Yes, I'm a cash buyer, but that doesn't mean things won't come up legally. And I'd like to do a survey, and though I'm not likely to start haggling over price afterwards, as it's low anyway, I would want to pull out if anything catastrophic showed up. That's not unreasonable. I shouldn't have to pay a £6K fine for it. But equally, the seller shouldn't have to lose their buyer if there's nothing catastrophic to show up - and in a normal transaction they wouldn't.

I think the EA has sold us both a dummy. The only people who win with this way of buying and selling are the EAs.

I read through a load of threads about this on MoneySaving Expert last night and there are so many horror stories. Some of them date back more than a decade and yet this sharp practice is still going on. Interestingly, this particular EA only started doing so much of it a couple of months ago, as the market in the south east started cooling big time. I guess their profits are dipping and they thought it might be good if the likes of me could bolster them with my diminutive divorce settlement.

I think it's really wrong.

But, as I said in the OP, I'd love to hear from anyone this has gone well for. Anyone?

https://www.fosters-solicitors.co.uk/insights/modern-method-of-auction/#:~:text=This%20is%20known%20as%20a,agents%20to%20reserve%20the%20property.

Were there ANY positive experiences on MSE?

I have never seen anyone say anything positive about them on here.

It seems there's little advantage as a cash buyer to go MMA. The whole point of it is to allow 56 days to get a mortgage together instead of the circa 1 month on traditional auctions. With those, you can get a survey carried out before bidding, I think. If you are a cash buyer, it seems less risky to go down the traditional route, surely?

Anyway, off the back of this thread I have bookmarked about eight properties that have allegedly recently sold via MMA. In a few months I will bump this thread with findings re: whether they actually hold and what they sold for versus asking price.

One of the bookmarked ones had already been reduced by 29% and it was in fantastic condition.

Solicitors hate it too.

I sold a house this way, it was a difficult house to value, I got more than twice the asking price and was very happy. As was the buyer

When we were trying to sell my partner’s flat the estate agent tried to push us into MMA. They were terrible estate agents and did a shoddy job of selling it for 6 months then strongly encouraged us to use their MMA “partner” to achieve a quick sale. They said lots of landlords use it and his flat was the kind of property they look for (bland 1 bed in a small town).

I can’t remember the detail but it wasn’t a good deal - they wanted a fair chunk of money (no agent fees but an auction fee I think) and the suggested reserve was very low. I assume it’s like solicitor referrals and the EA gets a referral fee from the auctioneers because no one works for free.

We declined and moved to a different agent who actually did their job properly and secured a sale within 6 weeks to a lovely neighbour. Another flat in the building went up shortly after with MMA (same agent) and hung around for sale for ages.

Well, unfortunately Fosters Solicitors, with their quaint notions of fair play, aren't in charge of what's actually being done by this very widely used auctioneer.

Regrettably, it sounds as though walking away is for the best. There will be other properties that are just right for you, I'm sure. It's to your credit that you are concerned for the vendor, but possibly / hopefully there are relatives or other representatives on the scene looking after their interests.

That's not to say that MMA can never work successfully, but clearly experiences will vary based on the integrity of the parties involved. The rules seem quite vague... multiple sources mention that buyers can be refunded the fee if the sale falls through 'due to the vendor', or similar. But what does this mean? I suspect it would only protect buyers in the event that the vendor pulled the property from sale, and not if a major issue arose that led to the buyer arguing that they had been misled.

That will be really interesting, and thanks for taking the time and interest.

For the most part, houses being sold in this way have seemed until now to be 'problem houses', where you can see that the vendor is going to struggle to sell by any method and realistically the only buyers will be cash buyers.

To see it being used for 'normal' houses is new, I think, and seems to come off the back of EAs panicking about the boom being over.

I don't see that the 56 days' grace opening them up to buyers who have to arrange a mortgage being a realistic thing tbh. If I had a mortgage to arrange, I absolutely wouldn't dare risk it. There's a terribly sad post on MSE by someone whose mortgage offer was delayed by 2 days, and they warned all parties and everyone said, don't worry, no penalty, but then they were charged the £6K and the property was offered to someone else, so they lost that as well. The EA in that case had put in writing that they wouldn't be charged, but the auction house said the EA hadn't had the authority to write that as the contract was with themselves, so soz.

To answer your question, I think amid hundreds of horror stories on MSE there was literally one person who said, I bought a cheap flat and it went fine.

I would be happy to buy in a traditional auction, and you get a very comprehensive buyers' pack when you register - almost as good as many surveys tbh - which I've done a few times now, but without success on the day. This house would have done fine being sold in the normal way tbh, but I guess the vendor was spun some horror story by the EA, and believed this was better for them. I expect they're wondering where the hordes of jostling bidders are now. Or not, since I gather now they're in a dementia home, which adds a rich new layer of distastefulness to the whole thing.

Keep us posted about the houses you bookmarked.

Yeah, I think I have to walk away too. I'm pretty sure when I hear back from my solicitor tomorrow they will say run instead!

I always tell myself "there's always another house" but tbh, with a small budget, there really aren't that many. Like everyone, I have my little wishlist as well, and this house sure ticked a lot of boxes, so it's a shame.

I will email the EA and explain exactly why I won't be making an offer, and how much I would have liked to. Also, how unimpressed everyone I've mentioned it to is with the fact they've thrown in their lot (haha) with this sleazy auctioneer. Perhaps if they realise they're shitting on their own doorstep, they'll rethink, not that it'll help me in relation to this particular house.