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Auctions Via Traditional Estate Agents
MrBox
Posts: 13 Forumite
I just felt I had to write this here as a word of warning, or maybe to see if there’s anyone out there who can see what my wife and I may be missing here in regard to this new trend of property auctions.
Basically my wife and I are currently house hunting in our town for a new family home. We’ve managed to narrow our searches down to a couple of houses, one of which being a house that is lsited in a local estate agents but is on sale with a regional auction service.
Now, after being a little put off by this and not wishing to go to an auction or bid on a property (we prefer the traditional way of using the agent to arrange viewings and make bids, basically leasing with the vendor and certainly didn’t fancy doing the whole bidding war thing), we were reassured that this didn’t have to be the case with the “modern property auctions”.
We were told that bids could be made at any time, and having seen the property had been on the market for 6 months we felt there was clearly no deadline (or certainly short deadline).
We were also led to believe by the auction company that the “buyers premium” basically was a non-refundable deposit that then was deducted from the price of the property. The was reinforced by my father- in-law who told us he had sold a property he owned using this method and was also told the same thing.
The top and bottom of it was, we loved the property and felt its price was well within our budget so made a traditional offer to the estate agents (who seem to have some sort of arrangement with the auction company). At which stage, we realised something was not right.
Upon submitting our offer we were asked if it included the “fees”. Not being too alarmed by this after being led to believe the premium was basically a deposit, we said yes it did include the fees.
Then upon seeing the bit formailsed via the online auction site/email thing, we noticed our offer was £6000 lower than the offer we made. We noted that this was the buyers premium and looked for more assurances over what it actually covered and that it was just the “deposit” we were led to believe.
After speaking to the estate agents again we were now told that it WASN’T just a deposit and it was purely a buyers fee that the buyer paid for the auction’s services!
After asking what exactly those services I wasn't given any kind of answer but I was told “well the houses are usually a bit cheaper”.
This is true, they can be but we now understand that this is because they are marketed well below their true value and that the auction house put pressure on the sellers to advertise well under market value and reduce their reserve price. They also mislead them into thinking the buyers premium is deposit, as confirmed by the vendor we spoke to and my father in-law (who had used them previously too).
As it turned out, the vendor is related to my wife so we had arranged a second viewing and a bit of an informal chat with her about the house anyway. She had told us what she was expecting to sell for and what her “reserve” price was, some £20k above what the property was marketed at. She had told us she doesnt know why they had listed her property at teh price it was being marketed at and she was also not aware of our true offer, which was £6k above what the estate agent/auction team told her (because they deduct their buyers premium from it).
With this information we could see why this amazing property had been on the market for so long, despite the very reasonable guide price. It would mean to meet what the vendor had in mind for the property we’d have to pay more than the property was realistically valued at simply because she wasn't aware of how the buyers premium worked either.
The vendor also told us that she had been constantly pestered by the auction company telling her she “ had to be realistic about her pricing”, and were putting pressure on her to reduce further - obviously to bring the price down more suitably for them or make her more open to accept less than she wanted so that buyers wouldn’t mind being stung with that buyers premium (around£6k).
This would mean ultimately the buyer would get a decent deal, as would the estate agents and auction team (we were told they split the money when asking further questions) but leave the vendor with less than they expected by selling a property under its market value all to ensure the auction company and estate agents hawking their properties made their significant profit for doing next to nothing.
Now to me, I can only see this being a beneficial service that some may consider for properties that were of a low market value and/or are in need of some major work where seller is going to struggle to market the property to the right folks and the auction’s buyers premium isn’t going to be as proportionally large. In which case going to an actual auction was pretty much the best solution.
However, for your average decent to high-end properties, it seems to me that this is a way to cash in with high premiums on properties that are obviously going to sell purely by deceiving sellers into selling below their true market value and skimming that extra premium from the buyer for themselves.
Again, I may be missing something massive here but that’s how both us, the buyers and the vendor have felt in our specific situation. Our problem is though that this whole thing wouldn’t be half as bad if first of all the estate agents that are in bed with this auction house weren't so keen to pass as many of their properties to auction as possible and if the auction house wasnt misleading (well actually telling lies) about the fees and implications of them. In my mind they are intentionally misleading both sellers and buyers.
I wont name the company in case it’s in breach of some forum rules, but I certainly would advise buyers and sellers be extremely careful of this.
In our situation, the seller is looking to switch estate agents and we’re also investigating the possibility of pursuing a private sale, but understand we may get penalised depending upon the agents pursuit of introduction to the buyer.
Basically my wife and I are currently house hunting in our town for a new family home. We’ve managed to narrow our searches down to a couple of houses, one of which being a house that is lsited in a local estate agents but is on sale with a regional auction service.
Now, after being a little put off by this and not wishing to go to an auction or bid on a property (we prefer the traditional way of using the agent to arrange viewings and make bids, basically leasing with the vendor and certainly didn’t fancy doing the whole bidding war thing), we were reassured that this didn’t have to be the case with the “modern property auctions”.
We were told that bids could be made at any time, and having seen the property had been on the market for 6 months we felt there was clearly no deadline (or certainly short deadline).
We were also led to believe by the auction company that the “buyers premium” basically was a non-refundable deposit that then was deducted from the price of the property. The was reinforced by my father- in-law who told us he had sold a property he owned using this method and was also told the same thing.
The top and bottom of it was, we loved the property and felt its price was well within our budget so made a traditional offer to the estate agents (who seem to have some sort of arrangement with the auction company). At which stage, we realised something was not right.
Upon submitting our offer we were asked if it included the “fees”. Not being too alarmed by this after being led to believe the premium was basically a deposit, we said yes it did include the fees.
Then upon seeing the bit formailsed via the online auction site/email thing, we noticed our offer was £6000 lower than the offer we made. We noted that this was the buyers premium and looked for more assurances over what it actually covered and that it was just the “deposit” we were led to believe.
After speaking to the estate agents again we were now told that it WASN’T just a deposit and it was purely a buyers fee that the buyer paid for the auction’s services!
After asking what exactly those services I wasn't given any kind of answer but I was told “well the houses are usually a bit cheaper”.
This is true, they can be but we now understand that this is because they are marketed well below their true value and that the auction house put pressure on the sellers to advertise well under market value and reduce their reserve price. They also mislead them into thinking the buyers premium is deposit, as confirmed by the vendor we spoke to and my father in-law (who had used them previously too).
As it turned out, the vendor is related to my wife so we had arranged a second viewing and a bit of an informal chat with her about the house anyway. She had told us what she was expecting to sell for and what her “reserve” price was, some £20k above what the property was marketed at. She had told us she doesnt know why they had listed her property at teh price it was being marketed at and she was also not aware of our true offer, which was £6k above what the estate agent/auction team told her (because they deduct their buyers premium from it).
With this information we could see why this amazing property had been on the market for so long, despite the very reasonable guide price. It would mean to meet what the vendor had in mind for the property we’d have to pay more than the property was realistically valued at simply because she wasn't aware of how the buyers premium worked either.
The vendor also told us that she had been constantly pestered by the auction company telling her she “ had to be realistic about her pricing”, and were putting pressure on her to reduce further - obviously to bring the price down more suitably for them or make her more open to accept less than she wanted so that buyers wouldn’t mind being stung with that buyers premium (around£6k).
This would mean ultimately the buyer would get a decent deal, as would the estate agents and auction team (we were told they split the money when asking further questions) but leave the vendor with less than they expected by selling a property under its market value all to ensure the auction company and estate agents hawking their properties made their significant profit for doing next to nothing.
Now to me, I can only see this being a beneficial service that some may consider for properties that were of a low market value and/or are in need of some major work where seller is going to struggle to market the property to the right folks and the auction’s buyers premium isn’t going to be as proportionally large. In which case going to an actual auction was pretty much the best solution.
However, for your average decent to high-end properties, it seems to me that this is a way to cash in with high premiums on properties that are obviously going to sell purely by deceiving sellers into selling below their true market value and skimming that extra premium from the buyer for themselves.
Again, I may be missing something massive here but that’s how both us, the buyers and the vendor have felt in our specific situation. Our problem is though that this whole thing wouldn’t be half as bad if first of all the estate agents that are in bed with this auction house weren't so keen to pass as many of their properties to auction as possible and if the auction house wasnt misleading (well actually telling lies) about the fees and implications of them. In my mind they are intentionally misleading both sellers and buyers.
I wont name the company in case it’s in breach of some forum rules, but I certainly would advise buyers and sellers be extremely careful of this.
In our situation, the seller is looking to switch estate agents and we’re also investigating the possibility of pursuing a private sale, but understand we may get penalised depending upon the agents pursuit of introduction to the buyer.
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Comments
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This type of auction has been discussed many times in this forum over the years.
Here's a small sample:
https://forums.moneysavingexpert.com/discussion/3923873
https://forums.moneysavingexpert.com/discussion/5505588
https://forums.moneysavingexpert.com/discussion/5573510In our situation, the seller is looking to switch estate agents and we’re also investigating the possibility of pursuing a private sale, but understand we may get penalised depending upon the agents pursuit of introduction to the buyer.
If they sell to you privately, the contract the seller signed with the Auction House would still make them liable to pay the £6k fee. (Typically, it would apply if you buy that property privately within the next 2 years).
If the Auction House finds out, I suspect they would pursue the seller all the way to court.
And remember that if you and/or the seller lie to the Auction House in an attempt to avoid the fee, that would be Fraud by Misrepresentation, which is a criminal offence.
(Although I'm not sure if the Auction House would actually report you to the police, and how keen the police would be to investigate!)0 -
This is exactly how the MMoA works and is quite well known. Personally I think it's a disgrace and an excuse for the EA to make more money, but vendors who agree to sell there houses in this way (presumably to avoid sellers fee and pass them to the buyer) are equally complicit. I would never entertain buying a property sold using this method.
Regarding a private sale, the vendor needs to read their contract but you will probably have to wait at least 6 months from the date they withdraw the property to start proceedings if you wish to avoid the EA's feeIt may sometimes seem like I can't spell, I can, I just can't type0 -
Yea I think a private sale is a no go to be honest, I'm just so annoyed that we're missing out on a property due to underhand and devious estate agents trying to push this greedy method of selling a property. I'm more annoyed because we know that the company are deliberately misleading sellers into this being the best way to sell their properties.
Who could we report this to, specifically the way they are telling buyers and sellers that its "just a deposit"?
We won't be looking at anymore auction properties now that's for sure.0 -
MyOnlyPost wrote: »Regarding a private sale, the vendor needs to read their contract but you will probably have to wait at least 6 months from the date they withdraw the property to start proceedings if you wish to avoid the EA's fee
Just to clarify, it's almost certainly...
6 months if the buyer buys through another EA - or 2 years if the buyer buys privately.
In fact...
Last time I looked at this Auction House's t&cs, they didn't even limit the time to 2 years. But the Property Ombudsman's Code of Practice says the limit is 2 years - so a seller should win a complaint, if it came to that.0 -
Now, after being a little put off by this and not wishing to go to an auction or bid on a property (we prefer the traditional way of using the agent to arrange viewings and make bids,
Until the 1970s the vast majority of sales of existing (as opposed to new-build) properties were by auction, admittedly the "old fashioned" method of auctionIf you are querying your Council Tax band would you please state whether you are in England, Scotland or Wales0 -
We sold our house at auction, suspect the auction house was more interested in keeping the buyers/developers/investors sweet rather than looking after the sellers interest. If I had my time again I would not touch an auction house and just sell it cheaply privately if your in a hurry.0
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tommie1shunt wrote: »We sold our house at auction, suspect the auction house was more interested in keeping the buyers/developers/investors sweet rather than looking after the sellers interest.
Did you pay the auction house a fee to sell or was the fee paid by the buyer? The reason I ask is that it could be argued the auction house should act in the interests of the person paying them, although invariably they act in their own interest onlyIt may sometimes seem like I can't spell, I can, I just can't type0 -
From my experience here, the auction team are only interested in the sale and getting their percentage (or the minimum fee of £6000) - whether that be from the buyer or the seller. The lady I just spoke to from the auction house in question basically told me when I've kicked up a fuss about it not to worry, they will just negotiate with the vendor and hit them with the price instead. So basically what she means is they will put pressure the seller to just sell and absorb the costs from their profits.
Even as a buyer getting the better side of the deal (and its still not as good a deal as a traditional sales negotiation would have been), I feel terrible as this inflexible cost is eating into either the sellers profits or the buyers hard earned deposit/savings . What exactly is this fee for anyway ? I cant seem to get a reasonable or explanatory answer. The property just goes on the same property website as the other properties, it doesn't even get an agent showing you round in most cases, so how is that worth the £6 grand?
I'm really struggling to see why a "normal" house would go through this process as its just adding complication and an obviously expensive and inflexible middleman. The only people who are really benefiting are the auction team.
Just out of interest, how does the seller stand once the auction reaches its deadline date? I know that the auctions tend to reset if no bids are made and the property is just re-listed, but are there typically any loopholes allowing them to switch to a different agent/seller at such a time?
I'm just quite keen to pursue this property but i know that we cannot afford those fees with the expected price and i know the seller cannot afford to take them herself. Had this been a traditional sale we would have had a bit more room to negotiate a reasonable price.
Cheers for feedback so far though.0 -
The vendor should be able to change to another agent with some notice which will be laid out in there contract. In doing this they can then sell as a traditional sale. Even then though as previously stated there will be a clause regarding clients the current EA introduced whereby if you bought it straight away the auction fee may still be payable. It is likely to be a shorter period however than if the house is pulled from sale and sold privately. It is possible in these situations to end up on the hook for 2 lots of fees, one for each agent
Bear in mind this advice is based on switching estate agents when using the normal sales technique. As the house is up for auction it may be a different scenario. Also as you previously knew the vendor you may be able to do some kind of work around but I doubt anyone on here would know how. Legal advice seems the only way forward but the vendor is under contract so it won't be straight forward.
As for the extortionate fees, as far as I can see the EA tempts the vendor with £0 fees to sell and doesn't bother to explain that because the buyer will be paying £6,000 +VAT to the EA that they will factor this cost into the offers they make, thereby costing the vendor more to sell than the traditional method. The buyer makes his offer including fees and so bids an overall price he is happy to pay and the EA pockets 3-4 times the fee for selling. As I said previously a disgraceful practice that definitely isn't in the best interest of the vendor and I feel should be stopped a.s.a.p.It may sometimes seem like I can't spell, I can, I just can't type0 -
I absolutely agree, its a terrible practice that is clearly designed for the EA/Auction team to cream more money than they're entitled to. Lets face it, their traditional fees aren't exactly cheap and don't always represent value for money when you consider what's involved in most house sales. I just cant understand why there isn't tighter legislation controlling this as it's clearly day light robbery in most cases!0
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