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?

Oh, well, okay! We have a winner!

Keep those positive stories coming, people!

All the ones near us that have been advertised MMA have then gone on to be relisted at reduced prices. You may still get your house yet!

Which auctioneer? Can your solicitor challenge their interpretation? It sounds iniquitous that you can be held responsible for someone else crashing the deal. But still can't you just go in next day with the cash? How can they stop it once you pay?

And ask Fosters to work for you?

I sold my mum's house using this method last year.

My experience/understanding was:
The seller pays for a survey/searches/fixtures and fittings etc, which is available to all potential purchasers. They are at liberty to appoint their own surveyor, but few do.
Potential buyers view the house in person as usual and decide whether they want to bid and how much for.
Sale goes live for I can't remember how long and people bid. If a bid is entered less than five minutes before the end of the auction, it is extended by five minutes (online equivalent of final and best offer, I guess).
Winner of the auction pays a non-returnable deposit, which is taken off the final price (estate agent fees).
They have 56 days to complete. If they don't, the seller can extend the time as much as they want or refuse to proceed and start all over again. Given that most people selling this way will be recently bereaved and wanting to get it over with, or need to liquidate assets quickly, there's no incentive for sellers to piss around.

I found it a very smooth and certain process and our buyer was thrilled (realised during the bidding that I knew him). House was sensibly priced and sold for just over asking price.

Looking around every definition I've found is the same you only lose your money if you change your mind.

Thanks for this. As a future house hunter, you've educated me!

I wonder if there’s insurance available for the fee 🤔

Thank you, that's very interesting. It sounds a bit more like a conventional auction tbh.

With this property, I specifically asked if the seller provides a survey etc and the answer was no. Tbh, it makes more sense as a method if they're going to. It's what holds the Scottish system together (not that that's without its problems ime, but it's light years better than the farce I'm faced with).

If you used MMoA, then it seems like some firms are better than others. I'm glad you had a good experience. It's very heartening given how many bad ones are to be found.

I don't think you are really reading my posts.

The minute I attended the viewing, I "accepted" the auctioneers' terms and conditions - in much the same way as one accepts cookies if one wants to proceed to a certain web page. Hands up, at this point, I didn't bother reading the small print. Would anyone?

My solicitor can't "challenge their interpretation" after the fact. How would they even do that? Who would pay for the fruitless legal work involved in changing the entire modus operandi of a large and influential organisation? Me, are you thinking? I'd be better off paying the £6K and hoping for the best, I think. (I doubt my solicitor would want the work anyway.)

I'm not going to name the auctioneer because I've been slagging them off since the beginning of the thread, but I'm sure you'll figure it out if you're interested. God knows, the web is littered with horror stories about dealing with them.

And if it sounds iniquitous that I can be held responsible for someone else crashing the deal, that's because it is! That's the point of the thread!

Yes, maybe I could just "go in and hand over the cash" but actually I'd rather do a survey (especially now) and have my conveyancing handled professionally, and be able to respond appropriately to any challenges that arise from that. Why should I basically pay a stupidity tax of £6K for the pleasure of behaving like a normal sensible buyer, just because the EA would rather get 4.2% from me than 1-1.5% from the seller, and the seller likes the sound of that without understanding how much less interest their house is now going to attract?

In fact, going over that again reminds me that it would be rather more than £6K for me, because of the likely selling price - more like £10K - on top of the selling price, not coming off it. The relevance of the figure of £6K is that that's the minimum payable. That's £10K the seller will never see. If I was applying for a mortgage, it would substantially lower the amount I could pay them because of the multipliers involved in calculating borrowing power. It's a plan that sucks for me but arguably sucks even worse for the seller. My point is that imo this represents a new low for estate agency's already deranged moral compass.

I'm going to tune out your posts now, because you just seem to want to argue that I don't understand the small print in the particular, widely used contract under consideration, whereas in fact, fortunately, I really do.

DepartureLounge yes it was very much like a traditional auction.

To address one of your concerns, I can't remember the details now, but I know that if I as the seller had pulled out after the action had been agreed but before 56 days, I would have had to pay some money to the buyer.

It sounds like a much more professional outfit all round tbh.

Just to add that the seller literally pulling out is tbh less my concern than the seller/seller's solicitor being inefficient and taking the transaction over the 56-day limit, which happens commonly, it seems, and would result in my losing the fee and the house, or in having to pay a new fee in order to continue. It's really not just a matter of "handing the money over" and the transaction's finished.

The whole thing needs better regulation imo, not least as sellers are heavily pushed to get their conveyancing done by a sister firm. It's hard not to be cynical about the fact that they then often breach the time limit, causing the sale to collapse and the fee to be forfeited.

What would be in it for the solicitor to delay? The money our buyers paid upfront were estate agent fees. The solicitor got paid when the sale went through as usual.

I think she’s saying the solicitor, the EA and the auction house would work together to sabotage the sale, resulting in money being forfeited. Presumably they’d all make a cut somehow.

Is this likely? I have no idea.

Guess so, although they all make money when a sale goes through. Maybe the market being slower gives additional motivation to messing sales around?

Who knows? Anyway, hope that you find something OP. The MM is only suitable for houses not in a chain, so most property is still being sold the in the usual shitshow way of the English and Welsh property market.

The recommended solicitor and the auctioneer are sister companies, part of the same corporation. If the solicitor twiddles their thumbs, it all goes tits up and you lose your fee and have to start again (possibly also losing the property in the process - if, say, the market is rising and the seller gets a bit greedy and wants to move the price up - not saying that would happen now). Either you or another buyer then pay a new fee. Everyone's eyes register pound signs. It's a desperately unethical state of affairs.

Just to update this rant, I had a long chat with my solicitor today, who said they're happy to act in respect of a traditional auction property, but their advice is to walk away from this set-up, which I have now done.

Good. I hope the traditional way works out for you.

Things should pick up in September with a few more homes coming to market, hopefully.

I saw an MMA on a house I have a moderate interest in today. Assuming it goes for more than the sale advert (285k), they want 4.6% of the final sale price - 13.1k.

Sure, it might turn out to be a bargain, but who really wants to throw that sort of money at an auctioneer and estate agent instead of the vendor?

Talk about taking the piss.

Idk how they could possibly think people are going to go for this.

(And it's another one to add to the sold price tracker list)

Sure, it might turn out to be a bargain, but who really wants to throw that sort of money at an auctioneer and estate agent instead of the vendor?

And lose it all if the house has problems on survey. And have to complete to a deadline.

Honestly, there's no upside for the buyer.

I emailed the agent to explain why I wouldn't be making an offer, and had, in fairness, a very pleasant email back, saying among other things "From a buyers side, it's better due to seeing the legal pack before you bid so you do know what you are letting yourself in for before spending out on money on surveys etc."

Except you don't, do you, because that's literally what the survey is for.

Plus, even if I 'wasted' money on a survey on a house that turned out to be a turkey, plus any or all of the conveyancing costs, it still wouldn't begin to approach the buyer's fee I'm actually being asked for. So basically the buyer's role is just to be everyone else's cash cow - and be grateful for the opportunity. Whoever came up with this must think we're all stupid.

apart from the EA I can’t see who would go for this method

Certainly not the seller as ultimately the buyer will just knock £6k off their offer price

Certainly not the buyer as they have to part with £6k with no guarantee they will ever get the property

I have bought and sold many times and when I look at rightmove and see MMA I keep on scrolling

Avoid avoid avoid. I read the legal packs of some house for sale this way.

1. you pay all the sellers fees on top.
2. Some you pay over a bidding fee that is none refundable even if the seller pulls out. So before you bid you put up like 5k (sounds like a scam)
3. The seller seems to always win and all the risk is on the you the buyer.

I have bought 2 properties via Modern Auction. One in 2015 and the other just last Month. I actually paid more than 6k, which is the minimum amount.
I knew right from the start that once the hammer went down the contracts are exchanged. It was a very nerve wracking time as I had not got any surveys done and did not know if lender would lend me the amount I'd asked for. I knew my Auction fees would go to waste. I know OP you are a cash buyer but just telling you what I went through.
MMA is definitely not for the faint hearted. One time last month I was calculating I would lose over 13k in Auction fees and deposit if sale didn't go through!
I had to pay £300 for the legal pack and also £800 sellers fees. I think the sellers did not have to pay for anything.

Thank you for the update. I was the same as you thinking this must be some sort of legal scam. Apparently it is 🙁

And tbf even if the sale does go through, you'll still lose over £13K in fees, in the sense that you're not actually getting anything for that money except the dubious privilege of being allowed to buy a house that the seller has already said they'd like to sell. It's not even a finders fee in the Kirstie and Phil sense.