auction fees

FFHillbilly

Just looking at a house I see recently listed for sale in my area. it's below market rate, although it's got not kitchen and bathroom and is mid renovation so I think that may be why. It's £55,000 but they normally sell for £80,000-£100,000 

the auction fees are

• £5000+VAT (£6000) reservation fee
• £720 to the sellers solicitors
• £120 transfer fee
• £6840 total

the fees seem a little high! round here estate agents will sell a property for £1300 if you pay upfront
I know someone else that recently got one at auction and was stung with the fees, in the brochure it listed 2 separate fees that were very similar around £3k and they assumed it was the same fee, but it was not and they paid £6k in fees

what's the attraction with sellers with these auction companies? that same house I'm looking at could be listed at £80k if the seller just agreed to pay £1300 to the EA before the sale.... 

eddddy

FFHillbilly said:

what's the attraction with sellers with these auction companies? that same house I'm looking at could be listed at £80k if the seller just agreed to pay £1300 to the EA before the sale.... 

It sounds like it's listed through the "modern method of auction" - and there are a few reasons why they're best avoided.

Sellers tend to use them because they are fooled by the estate agent's and/or auctioneer's sales patter.

That £5k (or more) reservation fee you mention gets split between the auctioneer and estate agent - so they push some sellers really hard to use that method, because it earns the auctioneer and estate agent a lot of money.





And FWIW, the seller probably doesn't want to accept £55k - they're hoping to get more.

So there's a risk that if you win the bidding at £55k - the seller will use sneaky tactics to refuse to sell you the property for £55k - so you'll end up with no property, having paid £6840 in fees.

MultiFuelBurner

Run away quick

daveyjp

Its not an auction.  Its a fee generation scheme.

FFHillbilly

eddddy said:

And FWIW, the seller probably doesn't want to accept £55k - they're hoping to get more.

So there's a risk that if you win the bidding at £55k - the seller will use sneaky tactics to refuse to sell you the property for £55k - so you'll end up with no property, having paid £6840 in fees.

I do expect it to go for a bit more, But I expect it to still be below market rate .

are there any cases of that happening (seller refusing to sell at price), what sneaky tactics can they use? 

I did just think I'd use a credit card to pay the reservation fee and deposit, that is an option but there's a 3% fee, so another £330

the auction company is Pattinsons 

gwynlas

If you can afford a cash purchase and have a survey completed with valuation it might be worth it but you would not be able to get a mortgage until renovation completed. Beware of modern methods of auction as they are income generators for sellers.

eddddy

 My comments below are about conditional auctions (often called "the modern method of auction") in general.

You've mentioned a specific company. I don't know that company, so I am unable to comment on that company. (And I don't want to get involved with potential litigation with that company.)

FFHillbilly said:

are there any cases of that happening (seller refusing to sell at price), what sneaky tactics can they use? 

I recall at least 2 different people posting on this board who this has happened to.

It works roughly like this:

• You submit the winning bid

• You pay a fee of £6k (or more) to reserve the property. If you check the t&cs - you will see that it is a reservation fee, nothing more 

• The reservation period might be 1 month or 2 months or 3 months (check the t&cs)

• The seller doesn't really want to sell you the property - so they "go slow". They don't reply to your solicitor's questions, put obstacles in your way, etc - so you can't exchange contracts.

• Eventually the reservation period ends - and you haven't exchanged contracts

• Because the reservation period has ended - the seller is now free to sell to somebody else for more money, or not sell at all

The situation above is likely to occur because the auctioneers bully/trick sellers into setting low reserves. For example:

• The seller says "I want a minimum of £70k for the property"

• So the auctioneer says "OK - so set the reserve low at £55k, so you'll get lots of interest and lots of bidders. Then the bidding will easily go over £70k"

• But in reality, the property sells for £55k

FFHillbilly said:

I did just think I'd use a credit card to pay the reservation fee and deposit, that is an option but there's a 3% fee, so another £330

If you're saying that because you think it would give you some extra protection (e.g. section 75), it won't - for lots of reasons (too many reasons to list.)

One example reason is:

• You are paying an auction company a reservation fee - to reserve a property.

• You are buying a house from a completely separate person (with a completely different contract)

• Even if that person breaches their contract with you - the auction house has done nothing wrong. You paid them for a reservation, and they made a reservation. So you have no basis for a section 75 claim

GDB2222

@eddddy. That’s an excellent example of what can go wrong.

 The problem is that the agents and auction houses have no real interest in selling the property. They get paid whether it sells or not. 

jj_43

Your bid should take into account the fees. So you bid less. 

eddddy

jj_43 said:

Your bid should take into account the fees. So you bid less. 

As explained above - there are much bigger risks to think about.

pinkshoes

FFHillbilly said:

Just looking at a house I see recently listed for sale in my area. it's below market rate, although it's got not kitchen and bathroom and is mid renovation so I think that may be why. It's £55,000 but they normally sell for £80,000-£100,000 

the auction fees are

• £5000+VAT (£6000) reservation fee
• £720 to the sellers solicitors
• £120 transfer fee
• £6840 total

the fees seem a little high! round here estate agents will sell a property for £1300 if you pay upfront
I know someone else that recently got one at auction and was stung with the fees, in the brochure it listed 2 separate fees that were very similar around £3k and they assumed it was the same fee, but it was not and they paid £6k in fees

what's the attraction with sellers with these auction companies? that same house I'm looking at could be listed at £80k if the seller just agreed to pay £1300 to the EA before the sale.... 

If it's got no kitchen and bathroom then you will probably need to be a cash buyer for starters... 

This does indeed sound very much like one of these scam modern auction things where you pay fees upfront, then don't get the fees back if you can't complete within their tight time frame. 

I would run a mile personally!