Will I lose £6k?

mikeopvc

So I put an offer in on a property which came back on the market after a sale fell through, It was previously on an auction style listing with a guide price of £90k, now it's back on at offers in excess of£80k as the seller wants rid, Estate agent said she inherited it.
When viewing the property I asked the EA if it was an auction style listing and he said if an offer is made and accepted then no it wouldn't be, I called the EA yesterday morning and made an offer of £81k, he said I'll get back to you.
About an hour later someone rang me from an auction house and said thanks for the offer but I need to make you aware of the process, He then read this to me:

This property is for sale by the Modern Method of Auction which is not to be confused with traditional auction. The Modern Method of Auction is a flexible buyer friendly method of purchase. We do not require the purchaser to exchange contracts immediately, but grant 28 days to achieve exchange of contracts from the date the buyer’s solicitor is in receipt of the draft contracts and a further 28 days thereafter to complete. Allowing the additional time to exchange on the property means interested parties can proceed with traditional residential finance. Upon close of a successful auction or if the vendor accepts an offer during the auction, the buyer will be required to put down a non-refundable Reservation Fee of 3.5% to a minimum of £5,000.00 + VAT (£1,000.00) = (£6,000.00) which secures the transaction and takes the property off the market. Fees paid to the Auctioneer may be considered as part of the chargeable consideration for the property and be included in the calculation for stamp duty liability. Further clarification on this must be sought from your legal representative. The buyer will be required to sign an Acknowledgement of Reservation form to confirm acceptance of terms prior to solicitors being instructed. Copies of the Reservation from and all terms and conditions can be found in the Buyer Information Pack which can be downloaded for free from the auction section of our website or requested from our Auction Department. Please note this property is subject to an undisclosed reserve price which is generally no more than 10% in excess of the Starting Bid, both the Starting Bid and reserve price can be subject to change. Reservation Fee is in addition to the final negotiated selling price.

So basically if my offer is accepted they want £6k upfront and if I don't complete on time I will lose it, Is correct?

I spoke to the broker I recently used for my own home remortgage and he said 8 weeks is a bit iffy and couldn't guarantee it would get done on time.

I'm meeting another broker today who works from the EA's office so I'll get a second opinion from him but just wanted to put it on here to see what feedback I get.

Thanks for reading, any advice appreciated:)

Davesnave

Hmmmmm....'The Modern Auction Method.'

Not even with someone else's barge-pole!

ScorpiondeRooftrouser

I think you need to go back to the EA and say that as per your original conversation, your offer isn't anything to do with the auction process, and you are not going to enter the auction process. If they can't entertain offers outside the auction process, you're not interested.

Doozergirl

You won't lose £6k if you walk away, which I suggest you do.

There's no need for this "method" at all. It is normal and it isn't acceptable. Both vendor and purchaser are fleeced by this.

noh

If you do complete on time the £6k fee is still payable in addition to your accepted offer.

eddddy

mikeopvc wrote: »

So basically if my offer is accepted they want £6k upfront and if I don't complete on time I will lose it, Is correct?

In your position, I would send an email saying something like:

"I am offering £81k with all estate agency fees to be paid by the seller. I plan to exchange contracts within 28 days.

(Plus any relevant info like... I have no property to sell, I have a mortgage offer in principle etc)

Please inform the seller of my offer, and I look forward to hearing their response."


The bottom line is that the seller will have to pay the EA's fees if they accept your offer - so they will probably treat your offer as though it was £75k.

And make sure you use words like "I plan to exchange..." not "I will exchange..."

mikeopvc

So it seems this method of auction isn't liked by many?
Does this mean the buyer who's mortgage fell through actually did lose £6K then? Poor sod that's terrible!

davidmcn

mikeopvc wrote: »

So it seems this method of auction isn't liked by many?

I can't imagine why it would be liked by anyone other than the people pocketing the deposits.

eddddy

mikeopvc wrote: »

So it seems this method of auction isn't liked by many?
Does this mean the buyer who's mortgage fell through actually did lose £6K then? Poor sod that's terrible!

Yes - the buyer would lose their £6k.

Very slightly on the plus side, the 28 days before exchange is a 'lock out' period, rather than a hard deadline.

After 28 days, the seller can accept an offer from somebody else (or change their mind about selling).

But if your mortgage application etc is progressing, and nobody else comes in with a better offer - I guess most sellers would wait a long way beyond the 28 days.

Mfw2016

I hate it and I wasn't really affected by it. You will have to pay £6K just to hold the property, so it is on top of the purchase price. My seller used it when selling their house and it caused issues. It made everyone uneasy. We were both glad when the time ran out and reverted to a standard house sale.

mikeopvc

Mfw2016 wrote: »

I hate it and I wasn't really affected by it. You will have to pay £6K just to hold the property, so it is on top of the purchase price. My seller used it when selling their house and it caused issues. It made everyone uneasy. We were both glad when the time ran out and reverted to a standard house sale.

So did your time run out but you were still able to continue with the purchase?