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?

@DepartureLounge yes you are right. The House is mine now. Only slight positive is that I bought it undervalue even with the 13k. Would have been even better without the needless expense though.

Glad you had a good ending @Fourcandleforkhandle

@DepartureLounge I've just been through my list of 9 properties bookmarked. One remains unsold (last reduced in August), 6 are sold with the advert removed by the agent, two sold STC with the advert still live.

I'm quite surprised.

Unfortunately no matter how good the house or need is avoid I am sold at all costs, it is a elephant trap business model designed to incentivise local agents to list (they get around half the fee) and generate fall throughs on the basis that once the fee is paid obstacles are put in place to hinder the sale and legal packs get changed and all pre paying assurances are withdrawn or denied

Address to verify please 😂

I don’t get why any seller would go for this method of sale.

If they are willing to have £13k knocked off the value of their home. Why wouldn’t they just calculate their selling fees and knock the difference off the asking price and get it sold.

It isn’t as though the method is quick. Even if the property has bids, when the hammer falls there is a 56 days wait to see if the property actually sold.
If it doesn’t, it’s back to square 1 and only the auctioneer gets any compensation for the wasted time.

*Fourcandleforkhandle · 24/08/2023 22:52

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*

That isn’t quite right. Once the hammer falls in a MMA type auction the contract is that you have to pay the fees. All it gives you is 56 days to complete
Then you can walk away without any further issues if you don’t proceed.
It doesn’t mean the property is sold to you

@KievLoverTwo just wondering if you kept tracking the houses? Did the sales all go through?

No, it was short lived. I did create a document at some point but I had a massive Mac clear out last week and idk if it survived. I will have a look. Will update if I find anything.

I did notice the other day that they have given themselves a 10% pay rise this year. Last year the minimum fee was 6k and now it’s 6.6k.

We've just bought a house through MMA with no problems. The mortgage came through in 5 days (we already had an agreement in principle), we exchanged and completed on the same day, within the 56 day limit. DH is in the building trade so buying "sold as seen" wasn't as daunting as it would be for most people.

Turns out that I sent myself emails. So, I'd say it's about an even split: sold, removed by agent (one even had the advert removed) and no longer on the market.

Land registry are so far behind that I can't yet say what they sold for versus the auction starting price. If you remind me in six month's time we might get a clearer picture. I have the sold prices for a couple of them but it's probably better off doing the whole dozen or so all at once.

Very interesting, thanks so much for coming back and updating!

Hard not to catch people out though, because the auction properties always seem to be the ones with large room sizes and have perfect locations.

I realise this is just my sample of one but I had a very positive experience with buying via the modern method of auction. I was a bit naive/uneducated about the whole thing and didnt quite realise that if I won that was it, I had to exchange there and then! But I did want the place and 2 years later am still happy with the deal. It was a motivated seller and even with the fee attached to it I got it at a good price. It was also nice to have a purchase go through quickly. I would do your sums - if the price PLUS fee is commensurate to the real value of the house then I personally think that is fine.

You mention all the houses you like in your low budget are MM but thats WHY they are in your budget?

You get cheaper properties at auction, if it wasn't being thrown to auction for a fast sale it would be out of your budget.

MM was designed for people getting mortgages, its not 'rare' to mortgage a MM house thats the whole purpose of it invention over traditional auctions.

Not true.

You pay the deposit of 10% or £3000 (which ever is highest) and the auction fee on exchange which is same day. If you fail to complete you lose your deposit and the seller keeps that. You could also be sued for breach of contract as you HAVE bought the house you just have those days to pay the full balance.

It is faster as there are set time frames and safe for the seller.

They could put their house on cheap via EA but then deal with ridiculously low offers (seems everyone thinks they should offer 10% under even if a house is priced cheap), 6 months of back and forth, arguing over surveys, guzundering and people pulling out before exchange with no recourse.

Thought you might like to know my son's recent experience of trying to buy a house being sold by MMoA. Grab a coffee. It's a long one...

I tried to buy this house 1-2 yrs ago. It was not on MMoA. It was a basic sale with the worst EA in the UK, Purple Bricks, just about the time they sold to Strike for £1. The house had been on the market, empty, for about 2 yrs. Asking price £300k. We liked it, negotiated to £280k and put our solicitor on the case. Our solicitor warned us to expect the worst.

From there it just went dead. PB solicitors were silent. No amount of pestering got us anywhere. Through PB online portal we managed to get a single response from one of the 'trustees' selling the house. It simply told us that as we were not actively moving forward the house was being put back on the market.

We did move forward... we bought another house 1/2 mile away.

Move forward again, about 1 1/2 yrs... my son was looking to buy a house. That house was still for sale, but now on MMoA, with PB, and I AM SOLD autioneers.

Starting bid £250k. Min bid add 10%, so £275k. Auction fee £11,800, payable as soon as the offer is accepted. So, minimum purchase price £286,800

He had to create a login for PB in order to arrange a veiwing. Had the veiwing and wanted to buy it. But not through MMoA.

Made an offer for £280k through PB, via email, making it clear that he would NOT go through MMoA. PB were not interested. Would not pass the offer to the vender.

Used the online portal to make the offer direct to the vender and managed to start a phone conversation with the vender.... in Canada!

He explained why we would not go through MMoA...

1. £11,800 fee. This is not a deposit. If the sale does not complete in time allowed he loses his money.
2. If the vender pulls out, he still loses his money and has to sue the vender.
3. IAS give you 28 days to exchange. The 56 days mentioned is to complete. If you haven't exchanged in 28 days the vender can walk away, as he can anyway, but now you cannot sue him.
4. Knowing how shoddy PB were, and the many bad reviews of IAS, there was no way it would work out well.

The vendor sort of understood, and as the auction had rolled over 4 times (30 days each time) without an acceptible bid, he agreed to cancel the auction and sell to my son.

IAS refused to cancel the aution unless the vendor paid them the £11,800. It rolled over 2 more times untill IAS said they would end it for £600, and they produced a clause that sort of suggested the vendor was liable for this. Finally the auction ended and the vender instructed PB to accept my son's offer.

IAS had my son's email address (presumably got it from PB) and then relentlessly pursued him for £11,800. Some of the messages were quite scary. Very threatening. Innitially my son responded politely, explaining he had not entered into any agreement with IAS nor PB, and would never do so. The threats increased untill finally we threatened to go to the police if they made any more contact.

Unfortunately, the vendors contract with PB compelled him to use PB's solicitors.
Immediately there was no communication from them. My son's solicitors had warned him about this, just as mine had previously. After around 6 weeks the vendor forced PB to assign a new solicitor. Although this one did respond to my son's solicitor, the responses, when they eventually came, were less than adequate and always required repeat requests for info. They would not talk to the vendor when he tried to gee them up.

Finally, after around 5 months trying to buy an empty house for cash it finally happened and the sale completed.

Before anybody gets smart and makes comments about £280k cash this was his and my life savings combined. And... it's none of your business anyway.

• The jist of the above is that you need to get through personally to the seller, explain why you want to buy it but NOT through MMoA, or Secure Sale online bidding, or any other names this scam goes by, don't sign anything with and estate agent or auction house, and just keep pushing.

Most of the time the house has been for sale at a stupid price that they will never get, and the EA is playing on the greed, or stupidity of the vendor, and when told the MMoA passes all fees AND risks onto the buyer, and it WILL sell in 56 days, the seller falls for it hook, line and sinker. Once they've signed the EA or the auction people start rubbing their hands together in anticipation of a bumper payday.

A final note... since my son bought the house, we've found out that it sold STC at least 4 times, with many more trying to buy it, and it fell through every time due to PB and their solicitors being so crap.

Avoid PB, IAS, and any mention of MMoA, or Secure Sale online bidding, or any other version of this disgraceful practice.

Very interesting @RopiJo

I knew PB were bad from my limited experience with them, but I didn’t realise they were that bad. It just goes to show that sellers do need to make intelligent choices about which EAs to use, not just blindly pick the one that seems cheapest or makes unrealistic promises. The seller in Canada made a very poor choice.

Re MMoA my sister & BIL bought a flat this way with no horrors so clearly it can all run smoothly. I don’t know all the details but she said they were ok with the fee they paid to the company because the flat was still cheaper than other comparable flats even taking this into account.

If I was buying through MMoA that charged me 6-7k in fees I would knock this off the price I offered. So the Seller would effectively be paying them not me. Would personally rather avoid this method of house buying though.

Hi @Thane - here's the thread with the results:

https://www.mumsnet.com/talk/property/5334721-modern-method-of-auction-the-results-of-monitoring-actual-sale-prices

I'm trying to sell and this is a horror story to me

My flat has been on the market with a high street agent with little interest In desperation I'm looking at auctions which look very attractive with no upfront cost It's hard to know what to do

My flat has been on the market with a high street agent with little interest In desperation I'm looking at auctions which look very attractive with no upfront cost It's hard to know what to do

It’s quick and gives both parties much more certainty. I wouldn’t write it off.

I used the Modern Method of Auction quite happily to sell a property where I wasn't prepared to be messed around by buyers who drop out or can't complete, causing delays and potentially requiring re-advertising.
The legal pack created before the auction can start covers all the usual important areas that would be dealt with in a private treaty sale, but you need to have your legal advisor in place before you look or immediately you start, to review the details in a legal pack before making an offer and help you consider how much risk you can reasonably assume (like a standard auction).

Some properties are simple, others are much more complicated.

It is a perfectly good hybrid method of sale if all the parties understand the differences, its not like eityher a standard auction or private treaty sale.

The non-refundable deposit is an early part payment to commit to completing, but the usual short auction period for completion is extended.

It is designed for financially organised, legally prepared buyers and not those just having a browse and seeing what can be negotiated along the way. Equally the seller should be legally prepared to provide the relevant material for the legal pack for a transparent risk managed process.

It sounds like you may have some preparations to make and homework to do before looking if the MM of A is cropping up with properties you are interested in.

That's just my experience and opinion, good luck get good legal advice and don't be put off.