Modern Method of Auction explained
As the ‘modern method of auction’, also known as conditional auctions, becomes a more common way of selling property, we look at what sellers and buyers need to beware of.
What is the Modern Method of Auction ( MMoA ) ?
The Modern Method of Auction is a type of property auction you can use to sell or buy a house. Buying and selling with online property auctions offers some advantages on both sides.
Sellers benefit from online property auctions because a substantial reservation fee must be paid upfront by the purchaser so there’s far less chance of them pulling out than with the traditional no sale no fee route.
Added peace of mind
For buyers it gives added peace of mind as once you’ve agreed a sale and paid the Reservation Fee, the property is exclusively reserved for you. Unlike Private Treaty where you're often left worrying the seller might change their mind or accept another offer.
It gives buyers the chance to purchase a property quickly and with no chain. But there are some potential pitfalls for buyers and sellers to consider. Read on for more.
Modern Method of Auction vs traditional house auctions: What’s the difference?
There are a number of key differences between the Modern Method of Auction and a traditional house auction:
Conditional vs unconditional: A traditional auction is an unconditional sale process; once the hammer falls you’ll need to exchange contracts and usually pay a 10% deposit. You’ll then usually need to pay the rest a month later. By comparison, Modern Method of Auction is a conditional sale process. The winning bidder pays a reservation fee at the end of the auction. This gives them an exclusive period in which to buy the house but it’s not legally binding. They’ll have 28 days to exchange contracts and a further 28 days to complete.
Longer bidding period: Unlike a traditional auction where bidding happens on a fixed date and time, with the Modern Method of Auction, properties are advertised online, often for around 30 days. Buyers can usually bid online at any time within this period, just like eBay, with the highest bid at the end of the auction winning. However, unlike Ebay if buyer leave bidding to the last moment an extra few minutes is added to the auction, giving other opportunity to bid, just like in an auction room “ any other bids before the auction ends “
Mortgages: It’s easier to buy a house via the Modern Method of Auction with a mortgage, as assuming there aren’t any problems, you’ll have longer to arrange your mortgage
Clear and transparent process
Our Buyer Information Pack contains material information and other vital details about the property upfront – you can access this straight away, making for a clear and transparent purchase from the very beginning.
Not just for cash buyers
With MMoA there's time to arrange finance, so you can purchase with a mortgage (subject to lending criteria, affordability and survey). Auction is more accessible than before; for first time buyers, or investors.
Fast and efficient purchases
Our routes include the 56-day* Modern Method of Auction, or Traditional Auction, which offers completion in 28-days. Both offer a faster transaction than Private Treaty, which can take over 100-days^.
https://www.iamsold.co.uk/estate-agent/acres/ Click here to visit Acre Auction webpage
Who pays Modern Method of Auction fees?
Modern Method of Auction fees are paid by the buyer of the house. Usually an online auction house is working in partnership with an estate agent for example Acres, they will usually split the fee between them. By comparison, with a traditional house sale, the seller pays the estate agent’s fees.
Selling via online property auction: How it works - This is the process involved:
- Setting the price
If you’re selling by the Modern Method of Auction, your estate agent should visit your property then give you an ‘Auction Appraisal’, which will contain information including the suggested guide price. You’ll also need to decide on your reserve price; this is the lowest you’re prepared to accept. It will be kept confidential. The only prices anyone else sees are the starting and actual bids.
Remember, your property may end up selling for less than the price it’s marketed at. So you need a very clear sense of what you are prepared to part with it for. You should resist pressure to set the reserve too low simply to achieve an easy sale.
- Getting prepared
You’ll need to take the usual steps when selling a house such as liaising with your estate agent about photographs and a floor plan. You’ll also need to make sure the house has an Energy Performance Certificate.
But when you’re selling via the Modern Method of Auction, you’ll also need to get a legal pack prepared and this can cost up to £450. However, some or all of this cost is sometimes passed onto the buyer, so check the contract for details of this.
The Modern Method of Auction legal pack may include:
The Title Register and Plan from HM Land Registry
Conveyancing searches
Any special conditions of sale, such as any of the seller’s legal fees or disbursements payable upon exchange or completion.
Property information forms: The TA6 form,the TA10 form and TA7 form, if the property is leasehold. For leasehold properties you may need to provide a management pack.
The auction house site you use may recommend that you use its in-house conveyancing team.
You’ll need to instruct a conveyancer to look after the legal side of selling your property, so you may feel it’s best to get them to prepare the legal pack too.
- Marketing and viewings
You’ll also need to confirm the details of the auction listing. The property should be listed on all the main property portals including Rightmove.
The estate agent or auctioneer will usually host viewings and open days of your property.
- Watch the bids come in
With the Modern Method of Auction, bidding periods are often around 15-20 days but could be just a few days or even a few hours. You can watch bids being made online so the process is very transparent.
At the end of the auction, the house will be sold to the highest bidder, as long as they’ve met the reserve price. The buyer will have to pay the non-refundable reservation fee. This is in addition to the price of the property and is paid to the estate agent and online auction company, not you.
With many auction house sites, if a bidder places a bit in the last two minutes, the timer will reset to two minutes to allow everyone the chance to increase their bid if they wish.
- The sale completes
The winning bidder will have 28 days to exchange contracts and a further 28 days to complete with the Modern Method of Auction.
Pros and cons to selling with an online property auction
So what are the Modern Method of Auction pros and cons for sellers?
Pros of selling via online property auction include:
Less chance of the sale falling down: In the normal selling process, a buyer can pull out at any point until exchange of contracts, penalty-free. But if a buyer pulls out of a Modern Method of Auction sale they will forfeit their reservation fee which is likely to be thousands of pounds.
Lower selling costs. Sellers benefit from selling with minimal cost to them. Although the sold price achieved at auction will generally be less than on the open market, the outlay is shouldered by the buyer, who may overlook this aspect at the prospect of a bargain.
The process is transparent.
Quick sale. May be an attractive option if you have a property which needs to be sold quickly, perhaps for probate, care home costs or flats with short leases or properties requiring serious renovation, for example.
Speedier completion: There are fixed dates for exchange and completion set by both sides. You should complete within 56 days. This takes away the uncertainty and time-lag often associated with usual sales. Even if you allow for a 30 day bidding period, the timescale is significantly faster than the average time from listing to completion of 207 days, according to data from TwentyEA Insight.
Cons of selling via online property auction:
Lower sale price. The sold price achieved at auction will generally be less than you would achieve on the open market. Broadly speaking Modern Method of Auction sales may sell for around 10% less. However, you won’t have selling fees to cover.
Off-putting to buyers. Expect that many buyers will be put off by the requirement to pay non-refundable reservation fees up-front. Your pool of buyers may shrink.
Are you really saving money? While you think you’re not paying the selling fees, you may be by default because most savvy buyers will work the reservation fee into the price they are willing to pay. So if they are bidding on a house worth £280,000, they may only bid £274,000 if they need to pay a reservation fee of £6,000. So while it looks like the buyer pays all the fees, you are likely to be losing out too. The estate agent and auctioneer split the reservation fee no matter what price you achieve.
If your buyer pulls out after winning the bid they’ll forfeit their reservation fee.
Modern Method of Auction reviews
Make sure you read reviews of house auction sites before deciding to sell your home through Modern Method of Auction..
https://www.iamsold.co.uk/buying-at-auction/
https://www.iamsold.co.uk/buying-at-auction/buyer-information-packs/
https://www.iamsold.co.uk/buying-at-auction/buying-fees-explained/
https://www.iamsold.co.uk/buying-at-auction/registering-to-bid/
https://www.iamsold.co.uk/buying-at-auction/registering-to-bid/
Are you considering moving home? If you would like to discuss selling your home, please get in touch with us This email address is being protected from spambots. You need JavaScript enabled to view it. or call any of our busy, helpful teams / offices :
Four Oaks 0121 323 3088
Sutton Coldfield 0121 321 2101
Walmley 0121 313 2888
Great Barr 0121 358 6222
Thank for reading and your interest in Acres and our property for sale. Nigel & Jayne Deekes – Acres Partners
