Sell a house by auction - can't find independent advice anywhere

Scotbot

 
In a traditional auction you the seller pay the fees/comission in the modern method the buyer pays them. The fees are also higher for the modern method. They are expensive, usually 4% and unsurprisingly this put many buyers off.  Savvy buyers just reduced the offer by the fee amount. The house is often marketed by a local EA in the modern method. The winners from the modern method are the auction company and the EA as they make more money than a traditional sale or auction.

They will tell you the modern method is better for buyers as it gives them time to arrange as mortgage. In practice this isn't the case, whilst there is longer to completion it is not enough
time to guarantee a mortgage will be in place. If the buyer can't get finance sorted in time or they find issues with searches or surveys they lose their deposit and fees if they pull out. Unsurprisingly in practice this limits the market to cash buyers same as a traditional auction. 

Completion is usually 56 days after the auction for the modern method but less for traditional auction.

63_jen

youth_leader said:

Do you have no choice but to go to auction?  Could you avoid it?  I sold through traditional auction but as it was Covid it was on-line, I do feel I might have missed out on bidders.  Check if it's live or on-line.

It was a lot more expensive than I'd realised, I hadn't done my sums properly.

I paid £790 to be entered into the catalogue and auction, £1200 to my solicitor to do the legal pack.  It didn't reach the guide price on the day, so the auction house rang round all viewers, and rang me with a bid £40K under the guide price.  As I was desperate to sell I accepted.  The commission of 2.5% for the sale on £275K was a whopping £6,600 including VAT.   

Thank you so much for sharing this, I'm sorry it was so awful for you. No, don't need to sell by auction - just keen to move on and was honestly thinking I could get a better price not to mention the fact that (if successful) no chain misery.

63_jen

Scotbot said:

 
In a traditional auction you the seller pay the fees/comission in the modern method the buyer pays them. The fees are also higher for the modern method. They are expensive, usually 4% and unsurprisingly this put many buyers off.  Savvy buyers just reduced the offer by the fee amount. The house is often marketed by a local EA in the modern method. The winners from the modern method are the auction company and the EA as they make more money than a traditional sale or auction.

They will tell you the modern method is better for buyers as it gives them time to arrange as mortgage. In practice this isn't the case, whilst there is longer to completion it is not enough
time to guarantee a mortgage will be in place. If the buyer can't get finance sorted in time or they find issues with searches or surveys they lose their deposit and fees if they pull out. Unsurprisingly in practice this limits the market to cash buyers same as a traditional auction. 

Completion is usually 56 days after the auction for the modern method but less for traditional auction.

Many tks for that succinct and helpful insight. I always knew there was no free lunch, now I know more about why, thanks again!

63_jen

eddddy said:

A 'conventional' auction is an unconditional auction - when the hammer (or virtual hammer) drops the property is sold and the buyer cannot back out (unless they breach the contract). So there isn't really time for buyers to get a mortgage etc.




The modern method of auction is a conditional auction - when the hammer (or virtual hammer) drops, the buyer has only reserved the property. But the buyer has to pay a hefty non-refundable reservation fee (often a minimum of £6k) to the auctioneer on top of the bid price.

The buyer usually has 6 weeks to arrange a mortgage, get surveys etc. The buyer can back-out if they can't get a mortgage, or the survey is bad etc.

The big problem from the buyer's perspective is they don't get their reservation fee back if they back-out. So it's a big risk, which probably puts a lot of people off bidding.

That is really helpful, thanks so the info, exactly what I wanted to know "what's the catch?" - tks again!