Auction rip off for repossesed home owners

bulkleymouse

If you are one of the unfortunate many who have recently had your property repossessed you might want to check that your property is not about to be sold in the much advertised REDC auction. With over 5oo homes being offered where the purchaser will have to pay a 10% buyers fee. Assuming an average sale price of £150,000 REDC stands to earn 7.5 million pounds. So what you may say. Well 6.5 million of this charge would not be applicable if these properties were being sold through one of the many British auction houses.
After contacting a leading UK auctioneer I believe the following calculation shows why any house owner who’s property is being sold in the REDC auction should consider seeing his solicitor with a view to making a claim against his mortgage company.
A £150,000 repossessed property sold by REDC. Purchasers fee 10% = £15,000 + vat £2,625 Total fees £17,625.
A £150,000 repossessed property sold by a leading UK Auction house. Sellers fee 1%
£1,500 + vat £262.5 + catalogue and purchasers fees approx £800. Total Fees £2,562.5
So if your house is sold by REDC for £150,000 the purchaser is in fact prepared to pay a total of £167625 for it including all charges. Were you to find the same buyer at a UK auction instead of you receiving just £150,000 to offset your debt you would get nearly £160,000.
That means your debt is £10,000 more than it needs to be. This is an outrages and unnecessary additional burden placed on families who are already suffering.
Why are British Banks using a an American Auction house that charges such outrages fees compared to their British Counterparts. Are the Banks being bamboozled by the probable no charges to them for entering lots in the auction? Are they getting a kick back on the commission that does not have to be credited to the mortgage? In any case I am sure they are not doing there best for the debtor and could be laying themselves open to a massive claim. But who cares? It’s us, the good old Taxpayer who will pay in the end.

poppysarah

Have you found the full t&c on their site yet?

Wig

This OP has a very important message which I don't think is getting the "airtime" that it deserves.


Bidders (the ones who are not stupid) are obviously going to adjust their maximum bid to take into account the huge fee that will be payable. So if my max bid on a property in an Allsop sale was to be £150,000 (seller to retain approx 147K less mortgagee costs), my max bid for the same property in a REDC sale would be £134,500 (seller to retain £134,500 less "REDC sellers commision" of unknown value, less mortgagee costs which would be the same for both examples.


Best case scenario where there is no sellers commision from REDC the "seller" (the person who used to "own" the house) will be £12,500 out of pocket, a figure which would increase by whatever amount the "REDC sellers commision" was.

Zelie

bulkleymouse wrote: »

If you are one of the unfortunate many who have recently had your property repossessed you might want to check that your property is not about to be sold in the much advertised REDC auction. With over 5oo homes being offered where the purchaser will have to pay a 10% buyers fee. Assuming an average sale price of £150,000 REDC stands to earn 7.5 million pounds. So what you may say. Well 6.5 million of this charge would not be applicable if these properties were being sold through one of the many British auction houses.
After contacting a leading UK auctioneer I believe the following calculation shows why any house owner who’s property is being sold in the REDC auction should consider seeing his solicitor with a view to making a claim against his mortgage company.
A £150,000 repossessed property sold by REDC. Purchasers fee 10% = £15,000 + vat £2,625 Total fees £17,625.
A £150,000 repossessed property sold by a leading UK Auction house. Sellers fee 1%
£1,500 + vat £262.5 + catalogue and purchasers fees approx £800. Total Fees £2,562.5
So if your house is sold by REDC for £150,000 the purchaser is in fact prepared to pay a total of £167625 for it including all charges. Were you to find the same buyer at a UK auction instead of you receiving just £150,000 to offset your debt you would get nearly £160,000.
That means your debt is £10,000 more than it needs to be. This is an outrages and unnecessary additional burden placed on families who are already suffering.
Why are British Banks using a an American Auction house that charges such outrages fees compared to their British Counterparts. Are the Banks being bamboozled by the probable no charges to them for entering lots in the auction? Are they getting a kick back on the commission that does not have to be credited to the mortgage? In any case I am sure they are not doing there best for the debtor and could be laying themselves open to a massive claim. But who cares? It’s us, the good old Taxpayer who will pay in the end.

Good grief. What is wrong with a person's eyes that they could possibly think tiny, bold print was legible! I'm having to quote it and change the format just to be able to read the damn thing. :mad:

Zelie

And yes, I agree with Wig that it is a very important point and one which needs to be better known. 10% fees in America is fair enough as Estate Agents do far more to sell a house than British ones do. But 10% is inappropriate over here where EAs market properties very differently. Applying American fees to British-style marketing is a total rip-off.

A minor point, would there be VAT added at present?

Wig

Zelie wrote: »

A minor point, would there be VAT added at present?

Yes VAT is payable on the buyers commission it is 10% plus VAT.

£100,000 bid + £10,000 commission + £1,500 VAT

Apparently the buyers commission in USA is 5%

m_13

poppysarah wrote: »

Have you found the full t&c on their site yet?

They have put them up now. Surprise, surprise they've suddenly changed to using the RICS standard auction conditions. These make the sale binding on both sides so none of this 14 days to accept your offer should go on. However, they can put special conditions on any of the properties.

We bought through Harman Healy. Flat rate fee of £325 including VAT for all purchases. 10% plus VAT is terrible. Their auctions have a reputation for being evangelical. There is a mock auction for 30 minutes before the real one starts where all registered bidders are encouraged to practice bidding. I've heard they have staff walking the floor the whole time who latch on to bidders and whisper encouragement and then blow a whistle when a bid is made. Sounds awful.

googler

Zelie wrote: »

10% fees in America is fair enough as Estate Agents do far more to sell a house than British ones do. But 10% is inappropriate over here where EAs market properties very differently.

...but what's EA fees got to do with this situation, where the auction house are merely putting the property up for auction, and not doing an EA's work?

Robert_Sterling_3

Zelie
If you are one of the unfortunate many who have recently had your property repossessed you might want to check that your property is not about to be sold in the much advertised REDC auction. With over 5oo homes being offered where the purchaser will have to pay a 10% buyers fee. Assuming an average sale price of £150,000 REDC stands to earn 7.5 million pounds. So what you may say. Well 6.5 million of this charge would not be applicable if these properties were being sold through one of the many British auction houses.
After contacting a leading UK auctioneer I believe the following calculation shows why any house owner who’s property is being sold in the REDC auction should consider seeing his solicitor with a view to making a claim against his mortgage company.
A £150,000 repossessed property sold by REDC. Purchasers fee 10% = £15,000 + vat £2,625 Total fees £17,625.
A £150,000 repossessed property sold by a leading UK Auction house. Sellers fee 1%
£1,500 + vat £262.5 + catalogue and purchasers fees approx £800. Total Fees £2,562.5
So if your house is sold by REDC for £150,000 the purchaser is in fact prepared to pay a total of £167625 for it including all charges. Were you to find the same buyer at a UK auction instead of you receiving just £150,000 to offset your debt you would get nearly £160,000.
That means your debt is £10,000 more than it needs to be. This is an outrages and unnecessary additional burden placed on families who are already suffering.
Why are British Banks using a an American Auction house that charges such outrages fees compared to their British Counterparts. Are the Banks being bamboozled by the probable no charges to them for entering lots in the auction? Are they getting a kick back on the commission that does not have to be credited to the mortgage? In any case I am sure they are not doing there best for the debtor and could be laying themselves open to a massive claim. But who cares? It’s us, the good old Taxpayer who will pay in the end.

I just wanted to underline what the OP was saying.

Zelie

googler wrote: »

...but what's EA fees got to do with this situation, where the auction house are merely putting the property up for auction, and not doing an EA's work?

Remember that the property still has to be marketed in some way otherwise nobody is going to know it's for sale unless they happen to go to the right auction. It's reasonable that a fee be charged for that by whomever does the marketing. What is unreasonable is to charge a fee based on marketing practices from a different country which would not be used here.


Thanks, Robert_Sterling.

rich-accountant

We are actually planning to go to this auction, and have adjusted our max bid because of the 10% premium and VAT.

We had an offer accepted on one of the houses, and the vendor (bank or whoever) pulled out after we couldnt get our mortgage within 3 days of them asking - they moved the exchange date from three weeks after offer, to one and a bit, so we never had a chance. When we went back to them, they wouldn't sell us the property, and said it was going to auction regardless.

We already spent money on solicitor fees, and a survey, so we feel we may as well go to the auction to see what it goes for.

Its good to see that they are now using the RICS standards, rather than the American ones. Per the draft SPA we will have to pay £399 + VAT of sellers solicitors fees and the cost of the HIP/seraches

Wish us luck!