Selling via auction?

eddddy

The main issue isn't really with the £349 + vat for the info pack, it's the reservation fee. The listing says:

• "For Sale by MODERN METHOD of AUCTION: Starting Bid Price £210,000 plus Reservation Fee"

The auctioneer is iamsold, and they generally charge a 4.5% reservation fee - so that would be £9,450 on a successful bid of £210k.

Here's what iamsold say on listings for their Modern Method of Auction properties:

This is likely to put off buyers because…

• The buyer has to have £9,450 in 'spare' cash to pay the reservation fee, in addition to their mortgage deposit. This can't be added to a mortgage, (Many buyers won't have that much 'spare' cash.)

• If the buyer isn't ready to exchange contracts within 56 days, the buyer risks losing the property, and losing their £9k reservation fee

• If the buyer is also selling their current property, they cannot be certain the their buyer (and the chain below them), will be ready to exchange within 56 days - so it's risky for the buyer to bid. (So buyers with a property to sell might be scared away.)

• If the buyer backs out of the purchase they lose their £9k reservation fee

Reasons that a buyer might want to back out of the purchase (and therefore lose £9k) include…

• Their mortgage lender refuses to lend on the property

• Their mortgage lender values the property at less than you are paying

• It takes longer than 56 days to apply for a mortgage, and get a mortgage offer

• Your survey shows up problems

• If a management company is involved, they fail to respond to queries within 56 days

• You find out that the seller has fibbed to you about something about the property, or failed to tell you something about the property

• The seller decides that they don't want to sell to you any more - so they mess you about for 56 days, then sell to somebody else for more money (or just stay where they are).

All those risks might scare away a lot of buyers, because they don't want to risk losing £9k - so the property is likely to sell for a low price.

Baldytyke88

"The buyer has to have £9,450 in 'spare' cash to pay the reservation fee, in addition to their mortgage deposit. This can't be added to a mortgage, (Many buyers won't have that much 'spare' cash.)"

My assumption would be that this house will be bought by a builder/developer who does not need a mortgage, although I am surprised you are saying the fee is 4.5%

That is way over the 1%/2% that I believe it normally costs to buy/sell a house.

I have just read the details on the website, 4.5% is a large fee!

eddddy

Baldytyke88 said

My assumption would be that this house will be bought by a builder/developer who does not need a mortgage,

Why are you assuming that? Does the house have development potential?

For example, conversion into flats; demolishing and being replaced by 2 or 3 new houses, etc?

Or does it need structural repairs?

In your original post you said "The house does need updating and a little work". If that's the only potential, that's not likely to be of interest to a developer. It sounds more like the type of house an owner/occupier would buy with a mortgage - and then get the work done.

If the house really was only of interest to developers/builders buying for cash, then there's no reason to use the 'Modern Method of Auction'. It could be sold through a traditional auction.

Baldytyke88 said

I have just read the details on the website, 4.5% is a large fee!

Yes - so at best, buyers might offer 4.5% less than they would otherwise.

But as I mentioned, there are even more important reasons why buyers might avoid this type of auction altogether.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81951407#Comment_81951407

For a normal sale via an estate agent, the fee is usually around 1.5%, paid by the seller, and is only payable when the transaction completes.

With the Modern Method of Auction ( a fancy name for a somewhat dodgy way of selling houses), the Buyer has to pay a fee of 4.5% ( or similar) to have their offer accepted, and they lose that money if the sale does not progress to completion relatively quickly. This puts off most savvy buyers, but some get involved, often not really understanding the implications.

Baldytyke88

https://forums.moneysavingexpert.com/discussion/comment/81951757#Comment_81951757

I assume you would save on solicitors' costs, but 4.5% is still expensive. The garage roof did leak, those types of repairs, but I guess builders would buy houses via auction and via traditional methods.

eddddy

Baldytyke88 said

I assume you would save on solicitors' costs,

I can't really see a reason why the buyer or seller would save on solicitor's costs.

Both solicitors have to do exactly the same amount of work as for a 'standard' sale/purchase.

(It sounds like the seller's solicitor orders the searches. But then the buyer's solicitor has to buy them from the seller's solicitor. So it makes no difference ovderall.)

In fact, the seller could end up worse off. With a 'standard' sale, the seller's solicitor only starts work after an acceptable offer has received.

With Modern Method of Auction, the seller's solicitor has to do some of the work in advance (preparing the legal pack), which the seller has to pay their solicitor for. If the seller then receives no acceptable offers, the seller's solicitor's fees could end up wasted.

Baldytyke88

The auction site is waiting for land registry records, as the property was last sold in the early 60s

We are still hoping that it comes through and the property is sold at the end of May

Tiglet2

https://forums.moneysavingexpert.com/discussion/comment/82002938#Comment_82002938

Do you know if the property was ever registered?

Tiglet2

If the property was never registered, then Land Registry won't have records. There will be paper documents and deeds held somewhere - either by the father (or son), or with a mortgage lender etc. The documents will need to be located and sent to the solicitor, as they will need these documents to draft contracts/start work. This will add time to the transaction as everything will need to be copied rather than downloaded and a clear line of ownership established from the paper transfer documents, though perhaps the father had owned from new.

FreeBear

https://forums.moneysavingexpert.com/discussion/comment/82003109#Comment_82003109

When I went hunting for the deeds to the family estate, they were eventually discovered in a document store in Cambridge alongside a very old will. Thankfully, the bundle included all the conveyancing documents from the first sale, so we could show a clear line of ownership. This gives us "absolute title" rather than "possessory title" or "qualified title". One saving grace of being an executor doing the compulsory first registration is we did not need to fill out an ID11. Grant of probate was sufficient proof of ID for the Land Registry.