Modern Method of Auction (MMoA) provide a great combination of estate agent pricing and the assurance of a property sale at auction.
MMoA is also credited for bringing first-time buyers into auction rooms, so should you sell with a Modern Method of Auction?
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What is Modern Method of Auction?
Also referred to as a ‘conditional’ auction, selling a house through a Modern Method of Auction extends the time between the end of the auction (contract exchange) and the completion of the sale.
The conveyancing process is completed before the modern auction bidding starts. This auction is usually conducted online; once the virtual hammer falls, the winning bidder pays a non-refundable reservation or holding fee, which tends to differ among modern auction service providers.
This gives the buyer a period of exclusivity of usually 28 days. During this time, the modern auction buyer must exchange contracts and pay the reservation fee of £9,600.
The buyer then has a further 28 days to complete the sale (paying the full purchase price).
Unlike traditional auctions, if the completion doesn’t take place after the contract exchange, the buyer could lose the non-refundable reservation fee paid, as well as face financial and legal costs from the auction house.
While buyers are encouraged to get a mortgage, it isn’t always possible, and that’s why some buyers can pull out of the sale.
How Does Modern Method of Auction Work?
Modern Method of Auction, or MMoA, is not a novel way of buying and selling properties. What it does offer is the capability to ‘lock in’ buyers. If they try to pull out after the hammer falls, they will forfeit the reservation fee.
House sellers are increasingly utilising this type of service as it is an excellent method of overcoming the outdated processes of a ‘normal’ house sale without compromising on getting a good price.
Many modern method auctioneers team up with estate agents nationwide or are agents themselves that have added MMoA to their service. Nonetheless, as shown below, there are a couple of major contrasts with an estate agency sale.
Just like with traditional auctions, the majority of the legal ‘leg work’ takes place prior to the auction.
This is because buyers pledge themselves to the sale when the virtual hammer falls. It makes sense for them to want to be aware of the details before bidding.
There is a financial commitment once the hammer falls, which is not found in conventional estate agency home sales. Although it may seem like a lot of hassle, it all serves to make the whole process much more secure.
Sellers can also feel at ease once the bidding is done, secure in the knowledge that there’s a reduced possibility of things falling apart. Although there are no guarantees that the sale will go ahead, chances are in your favour.
Below, we highlight some of the key procedures involved with this kind of property sale.
- Property Valuation for Modern Auction
- Suggested Guide and Reserve Prices
- Modern Auction Legal Pack
- Photography, Floorplans and EPC
- Auction Listing and Marketing
- RICS Survey
- Viewings and Open Days
- Auction Bidder Registration
- Modern Method of Auction Bidding
- Modern Auction Close & Payment of Non-Refundable Reservation Fee
- Exchange of Contracts
- Completion
What if the Modern Auction Buyer Does Not Pay the Reservation Fee?
It is unlikely that a modern auctioneer will charge a bidder’s credit or debit card and instead put a “payment shadow” or hold on funds. When the virtual hammer falls, the winning bidder’s card will be automatically debited, and the losing bidders will have their payments released.
If the property sale does not go through due to the vendor’s inaction, the buyer can get back their reservation fee in full.
However, if the buyer fails to move things forward adequately, the fee will not be refunded.
The buyer can pull out of a sale if new information comes to light that was not in the legal pack or not disclosed by the seller. For instance, you may have a cannabis-smoking neighbour, and there’s a strong whiff as you open the front door!
This is a conditional sale; therefore, the buyer can find a reason not to purchase.
If the buyer does not exchange contracts within 28 days of the auction’s close, the non-refundable deposit will be lost. The buyer is likely to face abortive legal fees.
It is up to the seller to decide if they will provide extra time. The seller is able to put the property back on the auction market and even contact previous bidders.
Modern Method of Auction Pros and Cons
Since its introduction, Modern Method of Auction has encountered its share of criticism. Here, we outline the main advantages and disadvantages of using this method to sell your house:
Pros of Using Modern Method of Auction to Sell
- It’s a faster and simpler way to sell your home than using an estate agency. Once the online auction is over, the chances of the sale collapsing are very low;
- With more time given to buyers to complete the purchase, you stand a greater chance of getting the full market value for the property.
- You can list your property right away, rather than having to wait for the next ‘slot’ with a traditional auction house. Sellers usually wait 2 to 3 months before the auction takes place, followed by another 28-56 days for the sale to be completed.
- As everything is online, you’re likely to draw in both domestic and foreign buyers in a way that isn’t possible with traditional auctions. You can still accept pre-auction offers (and sell under auction conditions).
- Online auctions are becoming commonplace in a post-coronavirus world. It’s flexible and convenient – as the seller, you can decide when to market the property and when to close the auction.
- Buyers can take part from the comfort of their homes or using their devices, making the entire process easy and less intimidating. Buyers are under pressure to act and have little opportunity to mess around or delay things.
Cons of Using Modern Method of Auction to Sell
- The buyer is expected to pay the fees. The costs of using a modern auctioneer are comparatively higher than those of an estate agency sale. This is mainly due to the extra work involved.
- When large sums of money are involved, there may be some worries about online security. However, such concerns are often unfounded, as money transfers are usually carried out by conveyancers, just like with traditional auctions;
- As a seller, you still have to allow people to view your property. Although modern auctioneers tend to reduce disruption by running open days (with multiple viewings), it may be better to use a Cash Buying service if you want a completely private sale;
- The sale process is much quicker than with an estate agency. You may still have to wait a while before the sale is complete. We recommend working with a modern auctioneer who will not delay in listing your property;
- Various modern method auctioneers only list their properties on their own portals. Even though this is beneficial, make sure your property is also listed on Rightmove, Zoopla and Prime Location at the very least;
- Many modern auction clients have criticised the hidden fees that are only mentioned in the small print.
- Some modern auctioneers – particularly those associated with estate agencies – may sometimes overvalue properties to win business. This can be risky for sellers if bids at auction do not meet the reserve price;
- In house repossession cases, there may not be enough time for a sale to complete. In such cases, selling quickly for cash can often be the best solution.
Property Saviour
Property Saviour offers you a real alternative to selling at auction.
You don’t need to wait 56 days for the completion and allow 28 marketing time before the auction.
We’ll complete the sale within 10 days. Pay £1,500 towards your legal fees.
We hope to earn your review. Get in touch with us today.
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
