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MODERN METHOD OF AUCTION / CONDITIONAL AUCTION
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I hadn't heard of this way of selling property before, but saw it referred to on a Rightmove advert today. I was a bit wary when I read the advert but having done some proper research, I'm entirely opposed to it.

For starters, it's not an auction. Despite the names for it (made up by whichever canny estate agent thought the idea up I assume), legally it is no different to a normal private treaty property sale.

Secondly, the buyer has to pay a massive fee up front which does not count towards the purchase price. This fee goes to the estate agent, not the seller. The seller doesn't pay anything to the agent so you can see why the idea might be appealing to them. Usual fee on this Modern Method seems to be 5%+VAT with a minimum of £5,000+VAT. Usual fee on a sale would be 1-2%+VAT. And the 5% is payable at the beginning, whether or not the sale completes, whereas the usual 1-2% is payable later, at completion, so you can see that the estate agent has an enormous incentive to push sellers into this.

For the seller it's not all rosy though; it doesn't give them any more certainty that the sale will proceed, since their agent is no longer bothered about pushing it through after receiving a fee up front. In fact, it's in the agent's interests for the deal to fall through and to seek another buyer to pay a further fee on the same property!

And a buyer will have to pay so much cash up front (5%+VAT=6%, plus I've seen reference to the 10% deposit being payable too - that's 16% of the full price in cash!), you have to wonder which buyers might be attracted to such a deal.

So, unless you're an estate agent and cavalier about potentially breaching your implied obligations to your client, I wholeheartedly steer you away from this whether you're a seller or a buyer. It has no certainty for either party and will get neither a better deal.

:shock:

Trouble is, most people don't read and take time to fully comprehend what they're signing. Buyer or seller.

We had a right battle getting our preferred agent to amend their contract so that their fee was paid strictly on completion. Along with a load of other terms which we got struck out.

Fortunately this site usually ranks pretty high on Google results so hopefully my post will come to people's attention.

I don't think they used a lawyer to draft their t&cs - they are headed "Conditional Terms and Condtions" (sic) - while it's not unknown for a lawyer to include the odd typo, a heading like that is just nonsense!

Updated May 10, 2013 at 5:04 PM

It sounds like a great way to keep buyers away from your property.

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Out of step with the forum.

Who the hell would want to use that system? Even as a seller I'd be thinking it would put so many potential buyers off that i'd end up selling it for more than 1-2% less. As a buyer, having to find an extra £5k+, I'd have up really want the house and it be very cheap to risk that.

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Cheers

Rich

Jobbo said...

Fortunately this site usually ranks pretty high on Google results so hopefully my post will come to people's attention.

I don't think they used a lawyer to draft their t&cs - they are headed "Conditional Terms and Condtions" (sic) - while it's not unknown for a lawyer to include the odd typo, a heading like that is just nonsense!

Post it on boat shoes ;)

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How about not having a sig at all?

Their marketing materials sell it better than I have done; they do seem to have quite a lot of properties marketed this way.

Jobbo said...

Their marketing materials sell it better than I have done; they do seem to have quite a lot of properties marketed this way.

:shock:

I struggle to see how you can possibly sell that method?!

Because it's an auction so it's a guaranteed bargain. Lemme at it !

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It's not a Golf | Neither is this | This one's just a posh Beetle

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