'Modern auction method'

D_M_E

That's a good explanation above by Richard.

The seller and the buyer lose out and the only winners are the agents and the taxman - and the "auction" company lurking behind the agents.

Possibly also gaining would be conveyancers dealing with extra grief caused by using this methodology.

izzie

Oh dear.

I thought Richard's post was most informative and wish I had read it before being persuaded by an estate agent that this was the best way to sell a house. He made it sound as if the non refundable amount paid by buyers was part of the deposit - or certainly didn't explain properly what it was.
I KNOW I should have shown due diligence and researched everything before signing a contract (which I normally do)but being in the middle of a grieving process it is so easy to forget these things.

The process has been a nightmare from the start and I wish I had never gone this route.

There are even more restrictions on who you can sell your house to if it doesn't sell at auction and these terms last for a year!

edlyf

I'm very glad that I read Richard's post. We recently had a house valued by a large estate agent chain, the agent told us that the best way to sell a deceased relatives house was by the 'modern auction method'. He waffled on (seriously it was a good 20 minutes) about no fees for us apart from an auction pack and how the buyer paid the fees. He also said that once an offer was accepted the buyer paid them 10%. As this was non-refundable it was far more likely a sale would go through quickly (they have 28 days to complete). He didn't however specify that that the non-refundable 10% was the fee, he made it sound like that was the deposit and the fee was a paid separately.

I was sceptical about this method because 28 days to complete isn't long enough to arrange a mortgage and so that would restrict us to cash buyers only. We asked about this and he assured us that they know how to fast track mortgages (I really doubt they do, I'm fairly sure that was sales patter).

I asked about using the traditional selling method but he assured us that we would definitely get more money for the house using the auction method, and we'd get a quick sale which he said we'd obviously want as the house is empty (actually we only wanted a valuation at this point and are in no rush). I'm really not sure how we'd get more money for the house. Surely any buyer will just knock 10% off their bid in order to cover the fee.

stator

Most buyer's will just walk away, except the green first time buyers who an estate agent can rip off

SDLT_Geek

Richard_Copus wrote: »

The main problems with the "Modern" method are as follows:
......................................
2. The premium is added to the purchase price for Stamp Duty purposes.
Richard

A helpful piece from Richard.
I have a comment on the stamp duty land tax aspect. The auction terms and conditions I have seen say the reservation fee "may" be subject to SDLT. The issues are complicated, as on the face of it the fee is paid for the reservation agreement, not for the property. Typically the fee would be lost if the purchase does not proceed and if the purchase does proceed the fee is not deductible against the price.
There is some information about it on this blog, https://www.blakemorgan.co.uk/sdlt-case-notes/ see the addition made on 11 October 2019.

jaydoubleyou

Very glad I came across this piece, especially Richard's helpful comment. My house has been on the market for 7 months and hasn't shifted despite two price drops (the second a substantial one) - we had an offer and the buyer started proceeding but pulled out. I'm also buying and had seen a place offered using this method but passed on it as I don't see what's in it for the buyer. My current (conventional) EA contract is ending in just under two weeks and both the current and potential next agent have suggested this method. It sounds very attractive as a seller (we have our eye on a house and have just lost our buyer so perhaps are seen as vulnerable?) but if no-one's buying at the rock-bottom price it's on at the moment who's going to pay that price plus £6K?

spiritus

jaydoubleyou said:

It sounds very attractive as a seller (we have our eye on a house and have just lost our buyer so perhaps are seen as vulnerable?) but if no-one's buying at the rock-bottom price it's on at the moment who's going to pay that price plus £6K?

I can't see how it benefits the seller never mind the buyer. The only people definitely making money from it is the party who charges the auction fee

the_root_of_all_evil

Ive just had the misfortune of being a buyer involved in this very charade in that I had seen a house at a good price.

I phoned what I thought was an estate agent as they made it appear so on right move I had no reason to doubt.

Called the bank for a mortgage interview and secured the funds in principle, spent all day on the phone going between bank and estate agent.

The last call to the estate agent before instructing a surveyor was when things went pair shaped, in the very last breath he uttered the words “ok I just need your deposit once you’ve received the legal pack” and in reply I said “doesn’t my solicitor get the legal pack?”

So the legal pack arrived via email along with a sort code and bank account number with the request for a non refundable £7000 deposit to take property of market and a £800 buyer’s fee.

A quick goggle shows the company is an auction house flogging houses on right move as a standard EA.

The other thing was I had only 28 days to complete at the risk of losing that deposit, Trust me when buying a house anything can happen that leads to a delay so avoid this “modern method” scam like the plague, the house wasn’t even that cheap to be honest more of an ok price.

Avoid avoid avoid!!!!

I nearly got roped into selling one via this modern auction about 10 years ago and you can read that here:

https://forums.moneysavingexpert.com/discussion/3923873/the-conditional-auction-modern-rip-off

the_root_of_all_evil

https://forums.moneysavingexpert.com/discussion/5573510/lost-6500-buying-with-modern-auction-method

NameUnavailable

A friend of mine had his house on the market via Purple Bricks. He wasn't getting much interest and they talked him into going with their 'modern auction' and said he could switch back to going on the market as normal at any time. He later found out he was tied in for 3 months and would have to pay the reservation fee to break the contract!

As someone who had been looking for property I did warn him that it will put buyers off rather than attract them as it seems all very confusing from a traditional buyers point of view. For someone able to buy at a traditional auction it holds no appeal either.

He lost 3 months worth of opportunity to sell his property so it ended up being a very costly mistake.