'Modern auction method'

lessonlearned

There's a house I would like to buy. It is being marked as a Modern Auction. I am a cash buyer but I'm still not prepared to take the risk.

This house has been on the market for months at a very attractive price, several reductions in fact. If the vendor had gone down the traditional EA route I would have snapped it up.

It seems the dice is loaded against the purchaser but TBH I can't see that it does vendors any favours either. It just seems to scare purchasers away - quite rightly too.

AnotherJoe

Lessonlearned have you made an offer directly to the vendors or is that ruled out because they are locked in to the auction ?

lessonlearned

I think it might be a repossession, a BTL that went wrong.

It might be worth digging a bit.

eddddy

lessonlearned wrote: »

I think it might be a repossession, a BTL that went wrong.

It might be worth digging a bit.

I think it's unlikely to be a repo because I don't think a bank would sell using this method.

AnotherJoe wrote: »

Lessonlearned have you made an offer directly to the vendors or is that ruled out because they are locked in to the auction ?

See post #22. Typically, you can make a direct offer, but then the seller has to pay the EA's fees (which might suit you better).

daveypoos

I have started to do some research for a move that is well into the future and saw some properties with this 'modern method' tosh. I thought it sounded dodgy.

So now I see 2 big flaws for the buyer, firstly the house might look cheap but the total cost will be higher, so properties pop into the search when the price is below the search criteria, but the true cost could put the property above the criteria.

Secondly I can see that it is in the interests of the person pocketing the fees to find a method to keep the fees without the sale completing.

As my sale is some way off I can honestly say that it is unlikely I will enter into a contract, especially as the people setting the terms are not the people selling the house.

eddddy

The Modern Method of Auction has some big flaws, but I'm not sure they're the ones you've mention.

daveypoos wrote: »

So now I see 2 big flaws for the buyer, firstly the house might look cheap but the total cost will be higher, so properties pop into the search when the price is below the search criteria, but the true cost could put the property above the criteria.

With any auction (not just the 'Modern Method') the price you see on Rightmove will be a guide price. The reserve price is likely to be 10% higher than that, and bidding may take the price even higher.

And with any auction, you need to be aware of buyer's fees before bidding. With the 'Modern Method' the buyer's fee is very steep - a minimum of £6k.

daveypoos wrote: »

Secondly I can see that it is in the interests of the person pocketing the fees to find a method to keep the fees without the sale completing.

The auctioneer gets the buyer's fee. To be fair, once somebody has won at auction, it's difficult to see how an auctioneer can interfere with the sale process to stop it completing.

daveypoos wrote: »

...the people setting the terms are not the people selling the house.

I'm not sure what you mean. The seller sets the reserve price. What terms are you referring to?


TBH, the 2 main flaws I see with the modern method are:

• The auctioneer's fees are very high (minimum £6k)
• Buyers and sellers don't understand the process before they launch into it - and so they don't make informed decisions.

spiritus

Fast forward 12 months and these type of auctions are still going on.

I saw a cheap flat we were thinking of buying valued around £ 42k but the auction company revealed that there is a £ 5000 fee (PLUS VAT !!) payable to the auction house in addition to the final sales price.

The legal pack also explains that the buyer must pay all legal fees which would add approximately £ 7k onto the price.

I've put an offer in with the local estate agent who were originally advertising the property on RightMove but the auction company have advised me that any offer I put in will still be subject to the reservation fee of £ 6k.

When I spoke with the estate agent for advice they told me their hands are tied and even once the auction had ended without any accepted bids and the seller at some point in the futurer chooses to put the house on the open market and I then put an offer in I would still be liable to pay the reservation fee as it was the auction house who originally arranged for me to view the property.

Does anyone know how this works ? Am I now locked in forever to this ridiculous reservation fee if I ever place an offer on the property ?

Is there a time limit ?

What happens if a member of my family puts an offer in instead of myself ?

AnotherJoe

IANAL but you haven't entered into a contract with the auction company (have you? Unless there's something you didn't mention?) so i dont see how they can charge you a penny.
And of course someone else can buy it and then sell it to you for far less than £6k anyway. (£5k+VAT) or !!! £12k ? (an extra £7k for legal fees on top ? Did i misread?)

davidmcn

I presume the point is that if the vendor sold to anyone introduced by the original agent, the agent could recover their original commission from the vendor. Which might at least mean you could buy in the conventional manner, but with the vendor having to pay the absurdly high commission. Probably amounts to much the same thing (assuming that originally you would only have offered open market value minus the absurd commission).

AnotherJoe

davidmcn wrote: »

I presume the point is that if the vendor sold to anyone introduced by the original agent, the agent could recover their original commission from the vendor. Which might at least mean you could buy in the conventional manner, but with the vendor having to pay the absurdly high commission. Probably amounts to much the same thing (assuming that originally you would only have offered open market value minus the absurd commission).

I'd say its very different if the OP doesn't have to stump up the money. The ways he's written it makes it sound as if they can come after him for directly somewhere between £7k-£12k.