What is Modern Auction Method? Otherwise known as Conditional Auction
For us to understand this, let’s first look at what it is not!
Well, it’s not the normal method of auction sale that we are all used to seeing, the age old traditional unconditional method of auction sale that has worked well for hundreds of years and resulted in millions of houses, cars, antiques and chattels be sold through auction rooms across the UK, and the world each year.
The traditional method of auction sale otherwise known as unconditional auction is the very same method of auction sale that is watched by households all over the GBR Homes under the Hammer featuring many of the best property auctioneers across the UK.
The traditional method of auction allows the buyer prior to the auction access to a full legal pack, and gives the buyer and the seller a fixed, certain outcome, with a legally binding exchange of contracts on the fall of the hammer. With buyer paying a 10% deposit and fixed completion typically 14, 21 or 28 days after auction day.
The modern method of auction or conditional auction is a very different story from the moment the hammer falls, firstly NO legal pack is supplied prior to bidding!, secondly there is no legally binding exchange of contracts, the buyer pays a non-refundable 5%+vat or £5,000+vat (£6,000) minimum reservation fee and with the seller enters into an exclusivity period – the seller has to hold the house for the buyer and cannot sell it to anyone else for the next 28 days, allowing the buyer 28 days to decide whether to proceed with their purchase or not, and then exchange by the end of the 28 day exclusivity period.
The buyer during this 28 period will typically get a survey or mortgage valuation done, legal paperwork, enquiries, maybe local searches, quotes for work and hopefully be able to secure their mortgage in time, if the buyer fails to exchange, finds a problem, can’t get the mortgage or decides to withdraw then the sale falls through.
If the buyer does not proceed, the seller is back to square one – no sale and no financial compensation. The buyer is equally punished by losing their reservation fee, don’t forget this is a minimum of £6,000 Inc. VAT or 5% of the purchase price. With the BBC reporting the average UK home costing around £211,000 in July 2016 this would cost the buyer £12,660 in lost reservation fees!
If the buyer does proceed to exchange in the initial 28-day exclusivity period (if that wasn’t nerve wracking enough for the seller) then the buyer is granted a further 28 days to complete the purchase. Effectively taking 8 weeks to complete with no guarantee of the sale proceeding in the first 4 weeks, compare that to traditional auction with guaranteed exchange on auction day and completion in as little as 14 days.
If you are looking to sell by auction and are wondering which method of auction sale is best for you, get in touch with Sell by Auction experts and get professional auction advise and a free auction appraisal from local auctioneers.
Before you rush off just ask yourself this question
If a modern method auction sale does not exchange contracts, and the buyer loses their £12,660 reservation fee for a UK average priced home at £211,000 and the seller receives no financial compensation then where does that money go?
Answer: believe it or not – the Auctioneer and Estate Agent that recommended modern auction method gets to keep all the money, yes that’s right, they keep it all and split it between them so they win either way, sale goes through they get paid, sale falls through they still get paid, how hard will they work and how much time do you think they will dedicate to chasing and progressing that sale through if they get paid anyway
Don’t just take our word for it, many property market related websites and articles can easily be found online:
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