Modern auction

Worzel51015

I am currently looking to bid on a house through a modern auction. It seems to be the method used more and more by agents in our area, particularly at the lower end so its becoming a choice you have to go with whether you want it or not. The auction agent was all keen and contacting me with positives to go ahead. However they say they have a cash buyer and are keen to proceed with them, however they still want auction to go ahead to its conclusion. They are telling me its not worth me bidding and even if I win the seller can choose not to sell it to me and go with the cash buyer or whoever they feel offers them the criteria they want. Is this true? I thought the winning bid was binding for both parties. 

GDB2222

Perhaps, the EA has a mate he wants to sell to cheaply?

Slithery

Worzel51015 said:

I thought the winning bid was binding for both parties. 

In a traditional auction it is. It isn't in a 'modern method'.

That's why agents love them so much - they can get £6k in fees for every potential buyer they suck in without ever having to actually sell the property.

https://forums.moneysavingexpert.com/discussion/comment/78977706

https://forums.moneysavingexpert.com/discussion/comment/78993192

user1977

Modern "auction" terms are typically heavily weighted in favour of the vendor, so I wouldn't bet on them actually binding the vendor to do much at all. But you'd have to read them to find out.

Worzel51015

Surely only the fees are only paid by winning bidder and if the vendor completes?

user1977

Worzel51015 said:

Surely only the fees are only paid by winning bidder and if the vendor completes?

Ha. This is why the general advice is to avoid them like the plague.

Slithery

Nope. With the 'modern method' you are paying the agent for a chance of buying the property. If it then falls through the agent gets to keep them.

Worzel51015

How is this allowed and not regulated by financial authority etc? Especially now estate agents seem to be advising sellers to use thus method mire and more.

julicorn

Worzel51015 said:

Surely only the fees are only paid by winning bidder and if the vendor completes?

It is only the winning bidder that pays, yes, but if they don't make it to completion they don't get their money back. 

https://www.fosters-solicitors.co.uk/insights/modern-method-of-auction/#

"The modern method of auction means that upon the acceptance of an offer or at the close of the auction, the successful buyer must place a non refundable reservation fee to the agents to reserve the property."

This article also says:
"If the property falls through due to the Vendor, the reservation fee will be refunded to the buyer in full. If the sale falls through due to the Buyer, it is non-refundable." - not sure what 'due to the vendor' really looks like in practice, beyond simply pulling out. 

user1977

Worzel51015 said:

How is this allowed and not regulated by financial authority etc? Especially now estate agents seem to be advising sellers to use thus method mire and more.

It's allowed mainly because the assumption is that for property-related contracts everybody has the benefit of legal advice.

Worzel51015

julicorn said:

Worzel51015 said:

Surely only the fees are only paid by winning bidder and if the vendor completes

"The modern method of auction means that upon the acceptance of an offer or at the close of the auction, the successful buyer must place a non refundable reservation fee to the agents to reserve the property."

This article also says:
"If the property falls through due to the Vendor, the reservation fee will be refunded to the buyer in full. If the sale falls through due to the Buyer, it is non-refundable." - not sure what 'due to the vendor' really looks like in practice, beyond simply pulling out. 

But can the vendor choose not to accept the winning bid (reserve met) and go with a lower bidder because they prefer them? Therefore not honoring the auction process.