What are the pros and cons of the Modern Method of Auction?
The modern method of auction or MMOA means that upon the fall of the hammer in an in-person or online auction, the highest bidder must place a non-reservation fee to secure the property.
This reservation fee is not part of the deposit or the purchase price. It goes into the pockets of auctioneers and estate agents. The buyer then has 28 days to exchange contracts and a further 28 days to complete the purchase.
Let’s review pros and cons of MMOA.
Table of Contents
Modern method of auctions pros and cons for sellers
One of the perceived benefits of the Modern method of auction is that there’s a promise of a ‘free sale’; however, you could be worse off as a buyer will factor in the buyers’ premium or reservation fee when bidding.
Another benefit is that you have a wider pool of buyers who need a mortgage to buy your home, but equally, there’s no guarantee that they will be able to come up with a deposit, particularly when they have paid up to 5% of the selling price as a reservation fee.
Yes, you can sue the buyer in theory, but many sellers give up when looking at a £300/per hour litigation solicitor. The ‘buyer’ may not have the funds to pay you compensation, so you could lose money.
One of the biggest frustrations with the Modern method of auctions is the time it takes to sell. The buyer has 28 days to exchange contracts and a further 28 days to complete the purchase, and you could wait 4-6 for the next auction.
If the sale is completed, it will take three months as a best-case scenario, but what happens if you need to sell now and need certainty that the property will sell?
Both buyers and sellers question the reservation fee, particularly as the seller is told ‘there are no fees to pay’, and if the buyer hasn’t read the legal pack, it will be an expected surprise. This leaves sellers and buyers asking if the Modern method of auction is even legal.
Another pitfall with the Modern method of auctions is that once a buyer’s reservation fee, also known as buyer’s premium, is added to the purchase price, it will attract additional stamp duty.
So, let’s say your buyer bought your home for £200,000 plus a buyer’s premium of 5% or £10,000. He/she will pay stamp duty on the purchase price of £210,000. HMRC call is a chargeable consideration.
Sell with certainty & speed
What is Modern Method of Auction?
Unlike a traditional auction with a Modern Method Of Auction, the winning buyer must pay a reservation fee of up to 5% of the purchase price. This doesn’t form part of the deposit or the purchase price.
The buyer then has 28 days to exchange the property and a further 28 days to complete. The difference is that with the Modern method of auction, the buyer can get a mortgage on the property if it is in good condition.
Is Modern Auction good?
That depends on what is your definition of what a good modern auction looks like?
If as a seller, you are getting the best price, can wait up to 3 months for sale to complete and the eye-watering buyers’ premium isn’t a concern then Modern auction might be good for you?
Can a seller pull out of a Modern auction?
If you are a seller and you have signed up for the Modern method of auction, check the wording in your contract to see if there’s any cooling off period. Once the property is sold in auction, you can’t pull out.
Is an auction sale legally binding?
The auction sale is legally binding both on the buyer and the seller; however, if the winning buyer fails to complete the purchase, the seller can sue him/her.
Legally enforcing a purchase or suing for losses is another matter. Litigation is very expensive, and often, you could end up throwing good money after bad, particularly if your buyer has no assets or fixed income.
What’s the alternative to Modern method of auction?
Even if you opted to go with a traditional property, you still have around £2,500-£3,000 of commission fees to pay and still wait 2-3 months for the sale to take place with NO CERTAINTY of sale taking place!
Any property auction comes with a degree of risk and uncertainty. Not every seller is comfortable announcing to the world that they are auctioning their home, which is why many sellers opt for a discreet sale.
This is where Property Saviour offer a real alternative in terms of a GUARANTEED SALE and a FAIR PRICE for your property in return for quick completion.
Property Saviour are genuine cash buyers. We can buy any property within days rather than months. We can quickly exchange contracts and complete at a date that suits you. Again, this can be achieved within 7-10 days.
The real question is, how quickly can you get your solicitor to send us a sale contract?
We do not need a mortgage or bank financing, be it a bridging loan, re-mortgaging another property or an equity release. You can sell your property in its current condition, and we will buy your house if it is unmortgageable or has no facilities such as a kitchen or bathrooms. If your property has a defective title or boundary disputes with neighbours, we will still buy it.
Once a price has been agreed, that’s the price you get! We will even pay for your legal fees, too. And we will fully insure your property at our own cost while buying! Can any property auctioneer do that?
So why not call us today on 0113 320 6700 to get a free no obligation offer? Or fill in the form below:
Sell with certainty & speed
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.
