'Modern auction method'

Gorgeous_George

Anybody heard of this 'modern auction method'?

ISTM that the buyer is committed early but I cannot see any commitment from the seller. Have i missed something?

GG

googler

Presumably the seller is committed by their agreement with the co., but

"5% paid within 48 hrs of auction completion (this is a reservation fee and does not form part-payment of the final selling price)"

They're charging buyers 5% just to buy from them....!?!?!?

poppysarah

Avoid. Sounds silly.

Gorgeous_George

googler wrote: »

Presumably the seller is committed by their agreement with the co., but

"5% paid within 48 hrs of auction completion (this is a reservation fee and does not form part-payment of the final selling price)"

They're charging buyers 5% just to buy from them....!?!?!?

That is rather incredible. Perhaps a sign of desperation from the Estate Agency?

I wonder if you pay VAT on the 5%.

GG

giddypenguin

Gorgeous_George wrote: »

That is rather incredible. Perhaps a sign of desperation from the Estate Agency?

I wonder if you pay VAT on the 5%.

GG

Yes you do...

At least they aren't entertaining the thought of working for the vendor...

funkyparott

I've just found a property on Right Move that was listed under an online 'modern auction' method.

If your bid gets accepted, you are committed to pay the auction house a 5% booking fee. You then have 28 days to exchange and a further 28 to complete. The booking fee does not go towards the house purchase price at all, it is purely for the auction company.

There are no legal packs on the house at present.

I phoned the auction house to ask them if they seriously expect people to pay a non refundable deposit of 5% with no legal paper work available to inspect.

They conceded they maybe able to accept a term meaning the booking fee was refundable if there was a problem with the legal paper work.

Does anyone have any experience of such online modern auctions?

casper_g

This sounds like the most appalling idea. I wouldn't touch this deal with a barge pole. I imagine very few other people will either -- as so many people are struggling to find a 10-15% deposit to buy in the first place, how many will want to pay an extra 5% (+VAT?) fee up front? Not many, I'll bet. This silly idea will die a death pretty quicly I should think.

funkyparott

I've just spoken to our solicitor about this.

They said they could review the terms and conditions from the auction house and insist a caveat was incorporated into the terms to protect our interests (the booking fee) if we were interested in proceeding.

I won't name the auction house. They appear to have a registered office in a small office block.

It still seems like a large risk. What happens if the auction house company decides to run off / dissolves with the booking fee still outstanding.

maninthestreet

The vendor should be paying the auction house to sell the property.

neverdespairgirl

I wouldn't touch this with someone else's sh1tty stick!

AuctionSmorkshun

Having attended a modern auction last night where not only were we trying to buy but also a friend was selling there are loads of problems with this method.

It is sold as a way of increasing the amount of time for buyers to find finance, the heavily implied bonus to sellers being that people will be able to bid higher.

In practice it only gives buyers 28days more than a regular auction and having watched the house we were bidding on go past for several thousand more than we could afford at modern auction but several thousand less than we could afford outside it (and were willing to pay) does not work this way.

The basic issue is that before a buyer can even apply for a mortgage you have just added a minimum of £5000 extra stress to their finances. £5000 is not a lot in house buying terms admittedly but when you consider there are people out there getting 85% mortgages you are reducing their buying power considerably (£5000 = 15% of £33,333). By insisting on an upfront payment which does not count towards the house and is therefore not mortgageable you just took £33K buying power out of the hands of the people trying to buy your house which is what happened to us. Effectively the house we were buying sold for £12K less than we were willing to pay and would have been able to pay under normal circumstances, 'removing' at least £7K from the sellers pocket.

We had previously discussed putting an offer in with the sellers agent but were told that as there was so much interest (no online bids and only a few watchers but loads of interest) that it was being pulled from the online auction site and put into the room. In the room we were 1 of 3 or 4 bidders so 'loads' may have been an overstatement.

As a seller I would also be extremely dubious of the "we sell >85% of our in room properties" claims made by the agents and auctioneers. While I was there most properties put into the room did sell however a majority (about 3/4) were announced as sold online prior to auction and hammered down in the room so presumably also contribute to this percentage.
Of those left admittedly only a few properties did not sell or failed to meet their reserve but our friends who originally had their property for sale in the room were told they should remove it prior as there "was not much interest". Surely that's what a reserve price is for? As it was removed I assume it probably does not contribute to the stats either.

The whole process seems to be rigged for the benefit of the auctioneers - a minimum £5000 per house (potentially multiple times if sales fall through) being a tidy sum; but honestly the only benefit I can see outside this is a potentially faster sale for the vendor - and given the enforced delay of waiting for an online auction to complete or an auction day to come up perhaps not even that.