Anyone explain conditional auction?

BertrumB

Hi all

Ive seen a house i love, which is for sale by conditional auction. Can anyone explain this please?

This is in the description...

ADDITIONAL NOTES This property is for sale by the modern auction method of sale also known as an conditional auction. This process is similar to a normal property purchase but on acceptance of an offer the purchaser will pay a reservation fee to secure the property. The buyer then has 28 days to exchange contracts and a further 28 days to complete the purchase. Terms and conditions apply to the modern auction method of sale, which is operated by Lancasters Property Auctions.”

So does this mean you just make an offer as normal? Or is there an actual auction?? Any idea what sort of reservation fee? The starting guide is £124,950, what would be an acceptable bid, way below asking price, or around the asking price?

Sorry if these questions seem self explanitory, Ive never heard of this way of house buying before.

Thanks in advance for any help

Derivative

I will be watching this thread - interested also.

swbrua

Some more information here: http://www.infinitepropertyltd.com/property-auction-buyers-guide.html

From what I can see, this site is specific to that company but has some general information too.

DVardysShadow

Just google the term 'conditional auction' and read up from there. A quick trawl of a few links shows that there is some divergence in the way that these operate, so don't walk into any deal with any assumptions about what is meant by conditional auction. Always request the terms and conditions in writing. You probably need a solicitor on board before you offer - and as the offer requires that you pay the buyer's premium [3%] on the spot as a non returnable deposit, you need your mortgage and a surveyor on board too. For this system to work, you also need details from the seller at least equivalent to the HIP and with a Property Information Form and Fixtures and Fittings Form, otherwise the property could be stripped bare and you might have no recourse.

As I see it, it would work for investors but not very well for house movers

antrobus

Sticking 'Lancasters Property Auctions' into Google brings up http://www.lancasters-property.co.uk/auctions which leads to http://lancastersauctions.iam-sold.co.uk/buying .html. Although this page http://lancastersauctions.iam-sold.co.uk/how-we-are-different/how-it-works actually spells out what it involves. I can see the attraction from the point of view of Lancaster Property Services; they charge 5% and make a minimum £5k on each property sold, which is a lot more than traditional estate agents make.

Mike+Kim

Hi everyone, first post here.

We too have seen a property that we'd like to buy but it's for sale by the Conditional Auction method. Having just spoken to the estate agents (30.01.12) these are the facts for our circumstances:

The advertised price that attracted us in the first place is only a minimum guide should the property actually make it to auction AND NOT the selling price the vendor has in mind.

Our buyers premium is 5% subject to a minimum of £5000 PLUS VAT making it a minimum of £6000. That goes to the estate agents auction team, the seller doesn't see a penny of it AND it gets added to final bid price.

Now, there is a 28 day time limit on exchanging contracts.

For us, if we pay for a full building survey after the auction that highlights significant defects that ordinarily would affect a negotiated price (or even deter you from buying at all) then that's tough, you either buy a money pit or you lose your deposit (the £6k minimum) if you pull out.

If you fork out for a survey prior to the auction and it sells above your maximum price, you're left with a nice survey report into a home you don't own.

So a house listed as £200,000 actually means £212,000 and that's only a minimum guide. You then have to run the financial risk of the survey situation, not to mention what the searches might throw up. Imagine buying a nice country home by Cond. Auction only to find out after the event that HS2 was routed at the end of your garden.

Even more sinister is this: we asked the estate agents to pass on to the vendors that we felt uncomfortable buying using the Conditional Auction method as it offers almost no security for buyers (28 days 'no gazumping' period apparently - whoopee!) and we would prefer to buy by private treaty. The estate agent refused to pass onto the vendor our suggestion. I am researching this to see if any code of conduct has been breached.

We will be making contact with the vendors ourselves. Unfortunately they are 150 miles away, but I feel they need to know how their estate agent is conducting business on their behalf, and I would like to give them the chance to sell in a way that suits both of us.

It's clear to me that Conditional Auction house sales may have their place with speculators and risk takers. It's not appropriate for domestic home sales with life changing sums of money being put unnecessarily at risk so the estate agents can make a quick £.

My own opinion is that Conditional Auction property sale methods are directed at vulnerable vendors, that property is advertised with dubious clarity around the pricing to attract buyers with no winners except the greedy estate agents. Why am I surprised......what do they care if the you buy a lemon?

The whole process could be given a degree of legitimacy by having the sellers provide a full home buyers survey for interested parties and the pricing issue being made crystal clear for a start.

Of course, if I'm wrong I shall apologise as profusely as I have shouted from my soapbox.

M+K.

DVardysShadow

Mike+Kim wrote: »

Even more sinister is this: we asked the estate agents to pass on to the vendors that we felt uncomfortable buying using the Conditional Auction method as it offers almost no security for buyers (28 days 'no gazumping' period apparently - whoopee!) and we would prefer to buy by private treaty. The estate agent refused to pass onto the vendor our suggestion. I am researching this to see if any code of conduct has been breached.

Ideally, you should be starting a new thread and linking back to this one.

But for a quick answer, submit your offer in writing to the agent with the stipulation that it is "for a purchase by private treaty" and "subject to contract".

See what happens - and if nothing happens, contact the vendors direct.

dawyldthing

Hall and Benson do the same around here, keep away from it like a bargepole as they do charge 5k on top of the offer

hillendale

Conditional Auction benefits the selling agent/auction site
it gives them a minimum fee of £5000 + vat on a sale. This fee is paid up front by the 'buyer' before any exchange of contracts have taken place. So where an agent would normally have to wait for a sale to fully complete before they receive any payment this 'new' method makes sure they get paid up front and also receive a much higher %
fee than they would via the normal sale route, especially on lower priced properties. Also in my experience the agents I have dealt with
seem to push sellers into the conditional auction sale method after telling them selling its via the 'new' method is the best option due to lack of interest having so called marketing the property via the standard sale method.
I recently tried to make an offer on a local property for sale via the agent but he told me he couldn't take the offer and all offers had to go via the auction website. A week later the same property sold for £2500 less on the auction website than I had offered to the agent direct.
So the seller would have received less for the property but the agent/auction site would have received £5000 + vat fee.
I wrote a letter to the seller direct and informed her of my original offer
she replied and told me she knew nothing of my offer in fact the agent had told her that no offers had been received only bids on the auction website and that she hadn't wanted to use the conditional auction method but agreed following the advise of the estate agent. She is know taking legal action against the agent. To cap it off when I checked the bids that had been made on the auction site ( it allows you to see other bids and the current highest bid ) there was 6 bids in total all made by the same person on the same day ! take from that what you will.
Maybe others have had a good a experience using the conditional auction method, I'd be interested to hear if you have or have not.

DVardysShadow

hillendale wrote: »

...
I wrote a letter to the seller direct and informed her of my original offer. She replied and told me she knew nothing of my offer in fact the agent had told her that no offers had been received only bids on the auction website and that she hadn't wanted to use the conditional auction method but agreed following the advise of the estate agent. She is know taking legal action against the agent.

Good on you and her. Please do keep us updated.

the_root_of_all_evil

theres only one winner at the condtional auction the auction house, buy outside