What's with all the 'Modern Auction' properties?

[startingoveragainagain]

I've lived in over 20 properties most of which i've owned. I got my first house in 99. The last time I got something was three years ago.

Admittedly, i'm looking at a completely different price point, but I seem to see so many properties that are 'Modern Auction' properties. Is this a new thing? And why is it so popular (it's annoying!).

Yes, it's getting to be more of a thing. Firstly because of the general transition to online for most things these days. But I think another factor boosting its attractiveness to sellers is that the conventional method of selling seems to be taking ever longer in the current market, and a high proportion of sales fall through due to chains collapsing and so on.

The advantages are:

1. Less intimidating for most buyers than a traditional auction.
2. Longer timeframes than a traditional auction means it's possible for buyers needing a mortgage to bid.
3. Fixed timelines mean the sale can be a lot quicker.

Disadvantages are:

1. Higher fees
2. Reserve price might not be achieved, or you might not get as much as from a conventional sale.
3. More expensive for buyers (I think the fee structure works in the seller's favour)
4. You don't get the chance of the competitive bidding that you might see at a traditional auction.
5. Many buyers may be put off.

I think if you are selling, then it's probably worth trying to sell in the normal way first.

I thought it largely been discredited as a method of sale and not recommended. Maybe area / market dependent?

Whenever I see a property for sale by auction, I wonder what’s wrong with it. Structural issues with the property or an adjoining property, perhaps?

Maybe this assumption is unfair, but as a buyer it would definitely put me off.

I just swerve these listings and don’t look any further at the property. For us, too many potential pitfalls plus they all seem to need at least £6,600 added to the purchase price! I can’t see any advantages to me to pay that, I would automatically discount the property by at at least £10k to compensate. So a non starter. They do seem to hang around a lot longer than a traditionally sold property though. But that might just be a local thing or our price point.

This is becoming popular with estate agents, simply because it earns them a lot more money for less work than a traditonal
sale. However for both buyers and sellers, it’s an absolutely terrible idea.

The winner of the auction has to pay a ‘reservation fee’ normally of 4% ish subject to a minimum of £6k ish. For a £500k house this would be around £20k. This is a fee in addition to the actual purchase price. You have 56 days to complete, and if for any reason you don’t then you lose the fee. Crazy.

Estate agents try to pitch it as a good idea to sellers, because they don’t have to pay any fees, and completion will be quick. However the reality is:

1 - Most buyers are rightly dubious of modern auctions, and as soon as they see the words ‘modern auction’ on rightmove will scroll on to the next listing. So selling by modern auction vastly reduces your pool of potential buyers.

2 - If anyone does actually bid, they will simply reduce their bid by the amount of the reservation fee. So if they were willing to pay £500k, they will bid £480k to compensate for the £20k fee. So the seller would be £15k worse off than if they had sold for £500k in the normal way, and paid the £5k or so in estate agent fees.

I fully expect this to be the next financial scandal in the news.

I bought a house this way. So far so good

I’ve not noticed this. How is it different from a regular auction?

I just ignore properties that have this method. And most of the people I know do as well. So sellers are losing out on a massive chunk of buyers.

It's a rip off and all set on the agents favour. Whoever goes for them are a mug. Why would I pay like £6k plus vat for fees to buy a house. Madness.

Theoretically you have 56 days to complete so can apply for a mortgage.

In practice completion happens whenever the hell the sellers feel like it but if you are the buyer, woe behold if you don’t keep to their deadlines.

They also keep all your money if the seller pulls out.

It's great for buyers as your competition for a given property is smaller.

Not great that you have to pay a load of fees to get the house. Locally they are about 6k + VAT and then a percentage of the sale price as well. The sellers have to pay a similar lot of fees so the EA is laughing all the way to the bank.

I get regular alerts from Rightmove when suitable properties come on the market and normally I am very wary of those where they state this method of sale. And yes, I do wonder what's wrong with the house.

From reading this it seems I was absolutely right to be wary. Huge fees payable up front that you lose if you don't/can't complete within 56 days for ANY reason? Including if the SELLER pulls out? That's ridiculous.

What if something nasty comes up in survey (eg, damp, new roof needed)? Sounds like there is no renegotiating allowed. Or are you supposed to get a survey done before making an offer?

Sounds like a terrible idea all round.

They also keep all your money if the seller pulls out.

😱 They’re really not for me then. House buying is stressful enough without that worry.

There have been one or two people on here over the last twelve months who have bumped old threads, desperate to warn other mumsnetters. People who have had their lives ruined.

If that sounds dubious have a look at the one star reviews on Trustpilot for iamsold. Preferably with a stiff drink in your hand.

I wouldnt touch it with a bargepole, which is a shame because when Im doing my imaginary house search there are so many that are really nice properties that with my imaginary money I would have probably gone for, but not if they are auction properties. Wouldnt touch it

I saw a great house when I was looking to buy that was modern auction but once I researched what it meant I decided not to touch it with a barge pole. Stupid thing is it was obviously a probate sale (in a right state) and so the sellers could have taken their time to sell in the normal way as no onward chain etc. unless they had a desperate need for money at short notice I can't understand why they would have chosen that route.

I always scroll straight past too. Locally there are a couple of estate agents who only sell via modern auction, and I assume seller feel obliged to go with them as they are big agents with a lot of coverage. Ridiculous though, total scam on the part of the estate agent. You literally couldn’t pay me to buy or sell via modern auction.

Even if they need money at short notice, a traditional sale would probably be much quicker.

There are a few modern auction house near me that keep doing the rounds. They have disappeared and then reappeared on rightmove 3,4 even 5 times. So buyers are obviously not touching with a barge pole and they aren’t selling.

If they had been advertised at a sensible price in the normal way, they would have sold months ago.