Modern auction - have you done it?

[indianwoman]

I'm considering selling my rental flat by modern auction.

I'd love to hear your positive and negative stories of buying and selling to help me make up my mind!!!

Good experience as a buyer... Positive is that you screen out potential time wasters... Negative is that the pool of buyers is smaller (usually developers, cash buyers and some adventurous FTBs).

I wouldn't touch anywhere sold by this method because of the additional fees for the buyer. They are not easy to work out .

We are buying at the moment. We saw one that was modern method and wasnt aware of the implications until we viewed it. We were ruled out as you have to complete in a set time, have additional fees and once we viewed it, cant view it again for 12 months ( so the estate agent told us). We have ruled out a couple of very suitable and desirable properties that are being sold that way. Even if you are a cash buyer, I dont see the appeal.

I looked into this a year ago - but while I was getting together the funds, the auction house informed me that even though I was the only serious buyer that I needed to bid substantially over the starting price because they put a reserve on.

With the added fees on top it pushed it out of the realms of what I thought reasonable for the property (it needed a massive amount of work). Then a similar, but already renovated property came up for almost the same price (once fees were accounted for) so the decision was made.

The auction house was re-auctioned a number of times but eventually put up for conventional sale with about 20% discount from the reserve price. It’s only just sold subject to contract, at even less again.

I think they were trying to get a fast sale, and trying to avoid detailed additional surveys that were needed due to the size of land attached and the state of the property (re-building in a green belt meant I really wanted time to talk to the planning office first).

That said, the auction people were really helpful, I think it would have been straightforward if I had gone ahead; and it was great having a big pile of surveys all ready to go through.

So I think it’s probably ok in the right circumstances but I don’t think it’s an automatic cure all for the housing market!

Please read all of the one star reviews of iamsold on Trustpilot.

F

As a potential buyer this was always a red flag. It always seemed to indicate a 'problem' property. Also the additional costs were offputting.

On the other hand, I'm sure some buyers get an absolute bargain - which isn't what you want to hear if you're a potential seller.

I saw the perfect house 10 years ago but couldn't buy it because I was also selling. I told the estate agent what my offer would be and walked away (ended up buying a nice house but the auction house will always be the one that got away). A year later it finally sold for less than I'd been prepared to pay (they'd also have the cost of a house sitting empty for a year). I definitely would not sell through auction as it rules out lots of buyers.

We bought a house via modern auction last year (iamsold). Wasn’t actually an auction in the end as it didn’t sell the first time they put it up so they dropped the price by 10K and then one party were interested but had to sell theirs and we were told to bid £500 more than them and iamsold accepted straight away and the other buyers weren’t then given the opportunity to bid again. All went through ok though their conveyancing solicitors (Medway) were very slow. I had to do a lot of chasing. We also had a lot of fees to pay straight away (over 6K) as a buyer. Literally ismsold were on the phone immediately after the sale was accepted demanding I transfer the fees in full there and then. Not sure what the sellers fees were. We definitely took the fees into account when offering on the house and it definitely resulted in less money to the seller. I wouldn’t use this method to sell a house.

I looked at a few houses (as a buyer) being sold by this method, and it put me right off.
Friends of mine tried to sell an inherited house (ideal but to let or first time buy) by modern auction. Zero interest even with a "low" estimate, vacant possession, house fully cleared up, probate complete. They eventually went via the traditional estate agent route, and it sold quickly for more than the reserve had been in the auction.

We definitely got the house very cheaply though. Another one on the same road has just sold normally for almost twice what we paid and it’s only 6 months since we completed on ours.

It's a viable option if some reason you want to or must sell quickly. However its going to get you a lot less that you get for ot obviously.
It would be more profitable to undercut the cheapest comparable by 10%, and sell the property the usual way, but will take a bit longer.

It’s a viable option if you want to sell quickly, but only if you are also prepared to sell cheaply. The flat I looked at up via this method as a buyer went up for auction twice with no bids either time - even the starting price was high given its condition. It then went on Rightmove at a stupidly inflated price. It still hasn’t sold over a year later.

There was one advertised near me but the £6k non refundable fees put me off.

It's in an area that flats sell well and for good money.

It was on the market for six months. Which is almost unheard of. Everyone, like me, were probably a bit scared of losing money and things cropping up they didn't know about etc.

It's a good enough concept but I imagine the people who will take a risk are perhaps on the rich but stingy as they are doing this as a business type. Not regular joes. So not regular price offered.

We aren't ready for this method of sale!

I wouldn't risk it as a buyer or seller yet. Perhaps in the future once it becomes normalised. But I'd let others take the risk till then and I'd not do that myself.

Thanks for those opinions. I don't know that I want to do it as I don't need a quick sale so it's maybe not the right thing to do.

As a buyer it really put me off. Added complications, extra expense - some of it upfront.

A couple of houses I quite liked the look of were sale through this method but I didn't view them because of the process. What I noticed was that they stayed on the market much longer than they should (despite being reasonably priced in good areas). They all dropped price considerably and one is still on the market £75k cheaper than the original price a year later. The other sold via a traditional auction about a month ago.

I ignored any being sold this way when we bought last year, not something I was prepared to do.

MMA is great - for estate agents. They immediately get a much larger than usual fee. Then if the buyer doesn’t complete within the 56 day deadline they get to keep the fee, and sell it all over again to another buyer and get another fee. That’s why some estate agent are so pushy in trying to get vendors to sell this way.

For buyers it’s a dreadful way to buy. They immediately have to pay a reservation fee of around 4% or £6000 - whichever is greater. If they don’t complete within 56 days, they lose the fee. The rush to complete means it’s more difficult check the property out properly and get surveys done etc. Then even if a major structural problem is found they can’t renegotiate or pull out without losing the fee.

For sellers it’s also a very bad idea to use MMA. For the reasons above, modern auctions aren’t popular with buyers. Most people will just scroll to the next listing as soon as they see the words ‘modern auction’. So you’ll vastly reduce your pool of potential buyers by using MMA.

Also buyers aren’t stupid, if anyone does bid they will simply reduce their offer by the size of the fee they have to pay. So a buyer will offer 4% less , whilst you will save the 1% or so it would have cost you in normal estate agent fees. Overall you’d be 3% worse off than selling it in the normal way.

As far as I've seen, places sold by modern auction seem to be problem properties with desperate sellers. Bear in mind that usually the seller pays the EA from the proceeds of sale so much of the process is about transferring this responsibility to the buyer and right at the start. Where's the incentive to ensure the sale completes for the EA who has already received a chunk of fees upfront?

I’d assume there was something wrong with the property and scroll on by.

I’m pretty sure you would lose 90% of potential buyers.

Can I ask why you are looking at this method?

Edited to say: And I didn’t even know about the £6,000 fee.

I'm only considering it cos the estate agency recommended it. I'd never heard of it!

There is a reason the estate agent has recommended it - see my last post. It’s certainly not for your benefit.