Modern method of auction fees

Scotbot

Another thread on a modern method of auction contract, that I dont want to hijack, states fees are putting byers off. Hardly surprising The minimum is around 5k plus VAT and that is the minimum

A house that I have followed  was advertised for 600k SSTC , sale then fell through readvertised  at 600k. Then  yesterday was advertised via modern auction for 500k. Assuming a reserve of 550k that is a whopping 25k in buyers fees. Who is going to pay that? They would have been far better off reducing the price IMO

For anyone considering modern method of auction my advice is don't do it.

eddddy

Yep - but that's no the biggest issue. Buyers can deal with that by bidding £25k less than they want to pay.

The bigger issues are:

• Having paid the £25k, there is usually no guarantee that you will buy the property. You might end up walking away £25k out of pocket.

• You need to have the £25k in cash - it wont be treated as part of your purchase price for mortgage purposes. (But it will be treated as part of the purchase price for SDLT)

Scotbot

eddddy said:

Yep - but that's no the biggest issue. Buyers can deal with that by bidding £25k less than they want to

In this example if I were happy to pay 550 I would have to bid 525. The seller loses 25k that they would have got via traditional method, probably 23k after agents fees. Madness, II can't understand why sellers fall for it. 

hazyjo

You've only got to search the forum to reach that conclusion.

Most buyers won't touch it with a bargepole. It also seems to be for the desperate which makes it even more of a catch-22.

hazyjo

Scotbot said:

eddddy said:

Yep - but that's no the biggest issue. Buyers can deal with that by bidding £25k less than they want to

In this example if I were happy to pay 550 I would have to bid 525. The seller loses 25k that they would have got via traditional method, probably 23k after agents fees. Madness, II can't understand why sellers fall for it. 

The risk is, there'll be a reason why you need to pull out which won't be permitted by the contract and you'll still end up having to pay that fee. It's why most buyers won't touch it with a bargepole. I would run a mile. It's certainly not just a case of dropping the price to allow for that fee.

NameUnavailable

A friend of mine was trying to sell his house last year and was getting viewings but no sensible offers. He was persuaded by the agent to let them market it under 'modern method of auction' and despite my very strong advice not to, he went ahead - they apparently told him he could switch back to normal sale at any time (which wasn't the case) and told him that it would encourage a bidding war (which wasn't the case).

From getting some viewings/offers he went to getting none at all. He found out from a neighbour that someone they knew was interested in the house but wasn't even going to look at it whilst it was for sale by 'auction' as they didn't understand how it worked.

He eventually sold it when it went back on the market as a normal sale, to someone who also saw it advertised under modern method of auction but wasn't prepared to pay up front fees to buy it.

DSUP

A modern method of auction only reserves the property for a specified amount of days (usually 56 days) without the seller needing to sell. I paid thousands in a reservation fee and my solicitor did everything in good time but the seller 'dragged their heels' (in mine and my solicitors opinion not to sell the house). Then, once the 56 days were up they sold to someone else, and the reservation fee is non-returnable being kept by the auction site and the seller's estate agent. The seller only has to 'endeavour' to sell the property which they say they did and my solicitor says the reservation contract is written to benefit the seller. Beware - you could pay thousands for nothing in return! 

diane***

thanks for the above experience shares,  a property i want and am viewing 25th 9 23 5pm is up on modern auction, didn't know what it was nor how it works, became doubtful, tried to ask indepth questions about costs to agent , got no where, odd i thought, aren't finantial things supposed to be transparent, why do i have to pay for their solicitor and surveyor? it's in the info i requested,  if i do or don't use them i still pay as the buyer, they won't share the charges/costs of these services until i am the winner,  they mention a percentage,  to be the winner i have to pay a non refundable deposit to even bid, costs are added to the buying price and i will get taxed on all of it , i can't work out how much the extras are along side the bid i make,  how can i know if i can afford it?.  I am a cash buyer, to old for mortgage lenders to lend me.   Thanks to the above advice i am going to view the property, waste their time and become a nuisence, i am going to make all the right noise and keep my money, just because i can. do they want to sell or not and who is profiting here?   seems very dodgy when you can't work out the charges until your committed to it.  the info says once i have paid the non refundable deposit i am held hostage,  no end date is given until all bids are in, they decide when the end date is........ it's as dodgy as.

EssexHebridean

diane*** said:

thanks for the above experience shares,  a property i want and am viewing 25th 9 23 5pm is up on modern auction, didn't know what it was nor how it works, became doubtful, tried to ask indepth questions about costs to agent , got no where, odd i thought, aren't finantial things supposed to be transparent, why do i have to pay for their solicitor and surveyor? it's in the info i requested,  if i do or don't use them i still pay as the buyer, they won't share the charges/costs of these services until i am the winner,  they mention a percentage,  to be the winner i have to pay a non refundable deposit to even bid, costs are added to the buying price and i will get taxed on all of it , i can't work out how much the extras are along side the bid i make,  how can i know if i can afford it?.  I am a cash buyer, to old for mortgage lenders to lend me.   Thanks to the above advice i am going to view the property, waste their time and become a nuisence, i am going to make all the right noise and keep my money, just because i can. do they want to sell or not and who is profiting here?   seems very dodgy when you can't work out the charges until your committed to it.  the info says once i have paid the non refundable deposit i am held hostage,  no end date is given until all bids are in, they decide when the end date is........ it's as dodgy as.

Regardless of whether you approve of the method of sale or not, please do try to remember that there are other human being involved here in the shape of the sellers. If you have no intention of buying the property, then for goodness sake just walk away from it - all  you will achieve by "becoming a nuisance" is to cause disruption to the sellers, and to ensure that if it is subsequently moved to a standard method of sale, you won't be taken seriously if you wanted to move to buy on that basis. 

eddddy

diane*** said:

Thanks to the above advice i am going to view the property, waste their time and become a nuisence, i am going to make all the right noise and keep my money, just because i can. do they want to sell or not and who is profiting here? 

If you're actually interested in buying the property in the future - perhaps after the auctioneer's sole selling rights period has ended - it would be best not to do that.

If you view the property and/or discuss it with the auctioneer, that's likely to count as an "introduction". So the seller would have to pay the extortionate fees to the auctioneer, if you buy it later.

MultiFuelBurner

@diane*** you have a thread back in 2022 about modern auctions. Surely you have had enough time to research them fully?

https://forums.moneysavingexpert.com/discussion/6171820/w-h-brown-modern-property-auction#latest