If you are looking to buy a property, you might have noticed that some properties marketed on selling platforms, such as Zoopla or Rightmove, have been sold using the Modern Method of Auction. But what does this actually mean?
The Modern Method of Auction is a hybrid approach to property selling: a cross between traditional selling via estate agents and an auction.
The seller sets the rules for the property auction with the help of the estate agent/auctioneer, which includes:
- Setting a commencement date for the auction to start
- Choosing the time frame/duration of the auction (typically 28-30 days, although it can be shorter if the seller wishes to dispose of the property quickly)
- Setting a reserve price (the minimum price the seller will sell at)
Properties that are subject to the Modern Method of Auction tend to be marketed by local estate agents and put onto their website. Potential buyers are invited to view the property, and at some point, the estate agent will invite interested parties to register and make a bid.
It is recommended that buyers carry out their own due diligence on the property, read the Buyers Information Pack and review it properly before bidding, because once the reservation fee has been paid, buyers are committed to the purchase.
Bids are usually made through the estate agent’s website for a specified period of time, typically 4 weeks (28 days). During that time, bids are invited from other potential buyers in order to achieve the best price for the seller by the end of the auction.
Essentially, at the very least, the seller is looking to achieve the reserve price, which is the minimum price that will trigger a sale. Buyers will not necessarily know what the reserve has been set at, but it tends to be within around 10% of the guide price. However, a guide price is not always set. If the reserve price is not met, all bidders will be notified, and the estate agent will attempt to see if a sale can still be achieved.
Successful bidders are expected to pay a reservation fee. Sometimes this is referred to as a ‘deposit’ but should not be confused with the actual deposit, which is at least 10% of the purchase price. The reservation fee, or deposit, is a fee to the estate agent/auctioneer. The reservation fee can only be refunded if the sale falls through because of some fault on the part of the seller. If a buyer pulls out of the sale before contracts are exchanged, they will lose their reservation fee, which can run into thousands of pounds.
Once the reservation fee has been paid and the reservation agreement signed by both parties, the property is then exclusively reserved to the buyer, who is required to exchange contracts and complete the sale within 56 days.
Purchasing a property via auction has become increasingly popular. There are many benefits to be had when buying and selling a property using the Modern Method of Auction, from the speed of the transaction to the ability to achieve the highest possible price.
If you are looking to purchase a property through the modern method of auction, the look no further. Contact Express Conveyancing who will walk you through the complex legal aspects of such a transaction with ease.