'Modern auction method'

davidmcn

AnotherJoe wrote: »

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.

I mean modern auction method vs conventional amounts to the same thing if the EA's fees are the same, it's just a different party paying them.

AnotherJoe

davidmcn wrote: »

I mean modern auction method vs conventional amounts to the same thing if the EA's fees are the same, it's just a different party paying them.

True but EAs fees for buying a £42k property arent generally between £7k-£12k :eek:

spiritus

AnotherJoe wrote: »

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?)

Nope. I haven't entered into any contract. The only action I have taken is to request and attend a viewing of a property which was advertised on RightMove by a local estate agent. The advert did clearly state that the property will be going up for auction.

I didn't realise that my initial viewing would effectively tie me into a contract to pay the auctioneer's "reservation fee" even if the property is removed from any future auctions and placed on the open market.

Apologies, as I have re-read my post and it is a little misleading. The "reservation fee" is £ 5000 + VAT. Legal fees also have to be paid by the buyer which would amount to approximately an additional £ 1000 making an additional cost of £ 7000 payable ALL in addition to the actual sold price of the property.

It makes me wince to think that the seller doesn't get any of that £ 6000.

If the property had been advertised at auction around £ 6k under market value then all of this would be academic but unfortunately the property is being marketed around £ 5k above market value so there's practically no wiggle room.

eddddy

spiritus wrote: »

I didn't realise that my initial viewing would effectively tie me into a contract to pay the auctioneer's "reservation fee" even if the property is removed from any future auctions and placed on the open market.

No - as others have said, you are almost certainly not contractually bound to pay the "reservation fee".

So you don't have to pay it. But if you don't pay it, the seller will be contractually required to pay it. (The seller will have already signed a contract agreeing to this.)

spiritus

eddddy wrote: »

No - as others have said, you are almost certainly not contractually bound to pay the "reservation fee".

So you don't have to pay it. But if you don't pay it, the seller will be contractually required to pay it. (The seller will have already signed a contract agreeing to this.)

Right, so if my offer happens to be accepted outside the scope of the auction then there will still be a £ 6k fee to be paid by the seller this time instead of by myself ?

It still means that as a result of my viewing I am now at a disadvantage as there is now a £ 6000 tax on the property sale if the seller decides to sell to me

What would happen if my wife put an offer in ?

AnotherJoe

spiritus wrote: »

Right, so if my offer happens to be accepted outside the scope of the auction then there will still be a £ 6k fee to be paid by the seller this time instead of by myself ?

It still means that as a result of my viewing I am now at a disadvantage as there is now a £ 6000 tax on the property sale if the seller decides to sell to me

What would happen if my wife put an offer in ?

That depends on the contract the seller has. I suspect the fee would still be due because it would be quite clear that your wife was aware of the sale due to you being aware, but the contract might be written so tightly there's a loophole. You'd [STRIKE]probably[/STRIKE] need legal advice

davidmcn

AnotherJoe wrote: »

I suspect the fee would still be due because it would be quite clear that your wife was aware of the sale due to you being aware, but the contract might be written so tightly there's a loophole.

It also depends on who ends up buying it, as opposed to merely making the offer (as the agents will be looking at the registered owner).

[STRIKE]You[/STRIKE]The vendor would need legal advice

Fixed that - and the vendor might decide it's not worth the hassle of the EA trying it on, even if they're not legally entitled to the money.

AnotherJoe

Even if the wife bought it i could see the auction house making a reasonable argument that since OPs wife is clearly a connected party then the seller is still due to pay. Theyd have to do it hands off via a third party with a different surname and then buy it off them some time later. Probably all that would cost a fair percentage of the £6k anyway.


And yes, you are correct seller not buyer needs to take legal advice and given the risks they will have (the legal advice will never say you are 100% in the clear ) it seems unlikely they will proceed, on such a low value property the seller has snookered themselves by signing up for this ridiculous "modern auction method" by ruling out the one buyer they have (got to wonder why spiritus is so set on this property and why no one else is buying? Is it the specific location? )

eddddy

spiritus wrote: »

Right, so if my offer happens to be accepted outside the scope of the auction then there will still be a £ 6k fee to be paid by the seller this time instead of by myself ?

It still means that as a result of my viewing I am now at a disadvantage as there is now a £ 6000 tax on the property sale if the seller decides to sell to me

Yes, that's almost certainly correct.

Here's an extract from the contract used by the company that operates these auctions, that the seller will have signed (this is from a 4 year old contract, but I doubt this aspect has changed) :

SOLE SELLING RIGHTS & CANCELLATION: On signing this contract you [i.e. the vendor] agree for the auction coordinator and partner agents to market your property for sale by auction for a minimum period of 8 weeks.

....

You [i.e. the vendor] will be liable to pay remuneration to us, in addition to any other costs or charges agreed, in each of the following circumstances:

if unconditional contracts for the sale of the property are exchanged in the period during which we have sole selling rights, even if the purchaser was not found by us but by another agent or
by any other person, including yourself if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period or with whom we had negotiations about the property during that period.

spiritus wrote: »

What would happen if my wife put an offer in ?

If you mean your wife buys it rather than you, the seller might have a big argument with the Auctioneer about when your wife was 'introduced'. Was it during the 'sole selling rights' period?

Pc8975

Hi Everyone,
Lot of reading regarding MA with some great info. Thanks to you all.
Briefly, lost my job 26 years ago. Going to foreclose on my property so, sold quickly and undervalued just to keep some profit from my property. Bought a very cheap 2-bed flat for my sons to live in and my wife and I took a job with single bed accom.
OK, my story. We managed to save up enough to purchase a little bungalow ready for our retirement that, in the words of the ES, needed one hell of a lot doing. Paid a surveyor to look when we viewed and he said what it would cost to put right. I would attempt to do as much as poss. which meant we could just, just afford it. I put in an offer £10,000 short of asking price for an immediate sale verbally with the agent. Heard nothing for a week. Re-affirmed via email. Heard nothing, so telephoned to be told that the property was now being sold via Modern Auction (MA) and, even if I offered cash and the vendor accepted, I would be liable to pay same fees as if I had followed auction. Knew nothing about MA so, asked for explanation. To be told I would have to pay 4.5% up front and not refundable (remember, the agent is taking out of auction for me and I had placed offer before being placed in MA) which would be subject to stamp duty as well on top of the MA as part of sale price which would also be included in value of stamp duty. Add on to that other fees and, suddenly, property is way out of our price range.
I asked EA what was the point of MA to be told it meant that, after bidding, I had 56 days to sort out arrangements. If I found somewhere better during the 56 days, I lost my 4.5%, if the vendor changed his mind again, I lost out.
I could not believe this. The property we could just afford was now to include £9,000 MA fee (which I could easily lose), £7,500 stamp and approx. £2.5k professional fees. I said that I could afford without the MA method but just could not with it. "Sorry", he said, that is the way it is being sold. I said that it meant people were less likely to bid and the only winners would be the ES. There was a wry smile and a glint in his eyes: "This is the way the market is going" he said!
Not for me. I asked to be taken off their mailing list and assured the gentleman I would not, nor would any of my friends, purchase anything via them.
Perhaps that is the answer, vote with our feet.
Sorry bit long winded and not much useful information but, for me, MA is going to completely change what I could afford. I simply stated I would only be using a traditional estate agent in future and that definitely did not include his firm. Its taken 50 years for EA to get rid of their "barrow boy" style, seems it is creeping back with some of them!
All the best People. A Very Merry Christmas and Happy, Healthy and Prosperous New Year. Happy property hunting - Martin.