If you’re thinking about using a modern auction to sell your property, it’s important to understand the key differences with both an estate agency and traditional auction sales.
Crucially, much of the legal “leg work” happens before the auction.
This is because buyers commit themselves to the sale when the virtual hammer falls. It makes sense for them to want to know the ins and outs before bidding.
There are also financial obligations to be made once the hammer falls which do not exist with 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 relax once after the bidding ends, safe in the knowledge that there’s very little chance of things falling apart.
Below, we highlight some of the key processes involved with this kind of property sale:
Property Valuation for Modern Auction
Professional auctioneers will use HM Land Registry data and RICS-approved Red Book guidelines to give you an accurate and non-speculative property valuation estimate.
This may coincide with an agent representing the modern auction house visiting the property to confirm the process and answer any questions you may have. Due to the sector being relatively new (as the name suggests), both buyers and sellers will indeed be weighing up the pros + cons.
They will typically look at the condition, size, market conditions amongst a range of micro and macro factors.
Much will also depend on the type of property. For example, the valuation criteria would likely change if it’s tenanted, unhabitable / unmortgageable, has land attached, repossessed, commercial or mixed-use.
Please feel free to also request one of our bespoke auction valuation reports.
Suggested Guide and Reserve Prices
Based on the above, the auctioneer will discuss pricing your property in order to get the best outcome.The reserve price is the minimum figure you would be willing to sell at. If the bidding does not reach this figure, the property will be unsold (and typically put back on the next auction). Buyers at auction do not know the figure.
The guide price is often based on what the property is worth in its current condition (as outlined above). Other auctioneers may suggest a ‘price to entice’ strategy in order to create a competitive bidding environment which, in turn, will drive the price upwards.
The slight variation with modern method auctions is that auctioneers will typically propose moving forward with slightly higher guides and reserves.
This is because modern method auction buyers are less time-pressed relative to traditional auctions (where the winning buyer must exchange at the end of the bidding process). They have more time to be able to organise finances and can therefore pay more.
Modern Auction Legal Pack
Different to open market sales in England and Wales, sellers instruct a conveyancer to prepare a series of legal documents. Although this is not compulsory, we would strongly recommend having a legal pack in place before listing.
It ultimately provides more transparency and minimises the risk of buyers ‘low balling’ on your property (or worse, not bidding at all).
Photography, Floorplans + EPC
As with an estate agency sale, the modern method auctioneers will organise this for you.Check out our 101 tips on how to sell your home quickly where we go into the various steps you can take to present your property in the best way.
Auction Listing + Marketing
This is where modern auctions are miles better. With many traditional auctions, you often end up waiting for the next slot. Equally, every property is on an equal pegging to the other – i.e. there’s no risk of your property getting buried in an auction catalogue.
As a bare minimum, the auctioneer should market your property on Rightmove, Zoopla and Prime Location. The modern auctioneer should also have a strong presence on social media platforms like Twitter, Instagram, Facebook and LinkedIn.
As with the legal pack, some sellers choose to get their own survey against the property.It’s not compulsory but can be a good way to keep things transparent with buyers and can result in more confident bidding.
Viewings and Open Days
The modern auctioneer will either request a set of keys, install a secure key box or organise convenient times to conduct viewings.
More frequently, the auctioneer will host open mornings or afternoons. With multiple viewers attending, it’s a great way to create a ‘buzz’ around your property – especially when buyers clearly see that there’s competition.
Modern Auction Bidder Registration
Before allowing the potential buyers to bid, the modern method auctioneer will undertake a series of processes:This typically includes:
- Email / mobile number verification;
- Identification checks (passport / drivers licence + proof of residential address);
- Acceptance of auction terms and conditions (usually aligned with the RICS Common Auction Conditions);
- Extra checks if the bidder is from overseas or deemed ‘politically exposed’;
- Bidder security (involves placing a hold on a debit or credit card for the reservation fee).
Modern Method of Auction Bidding
Bidding periods can vary from a few days to a few hours (and even less). Other modern method auctioneers run ‘Zoom-style’ live events that attempt to broadly replicate traditional auctions – i.e. a filmed auctioneer calls for bids from a rostrum.
Typically, interested buyers bid in line with pre-determined increment levels using the bid increase (+) and decrease (–) buttons on the auctioneer’s platform. Once the amount is set, there is usually a ‘Place Bid’ button. The bidders will also be notified as to when the auction is drawing to a close.
On many platforms, it’s also possible to proxy bid. Similar to eBay, this is essentially where the bidders set a maximum amount and the system will automatically bid on their behalf. Note that this will only happen if other bidders drive the price upwards.
Modern Auction Close + Payment of Non-Refundable Reservation Fee
The fall of the electronic happens at the specified time. Then, the winning bidder has an exclusive ‘right to exchange contracts’ within the prescribed timeframe. This is usually set at 28 days (20 business days).It’s during this period that the buyer may book a survey and secure mortgage finance.
At this point, the auctioneer also takes payment for the non-refundable buyer’s fee and draw up the Sales Memorandum. The seller cannot sell to another buyer during this period.
Note that this reservation fee does not go towards the total purchase price. Also, the buyer can only get a refund of the reservation fee if the seller deliberately scuppers the sale.
Exchange of Contracts
At the end of this period, contracts will be exchanged.Unless otherwise agreed, the buyer will pay a 10% deposit into the conveyancer’s client account.
The buyer then has a further 28 days between exchange and completion. Failure to do so could potentially mean loss of the entire deposit paid to the conveyancer plus more severe abortive costs. It’s for this reason that very few sales fall through by this stage.
It’s worth noting that some auctioneers (including Property Solvers auction service) offer both the modern and traditional method.
The latter being a more time-pressured sale where buyers effectively exchange contacts when the virtual hammer falls. At this juncture, they must typically pay 10% of the purchase price and have 28 days to complete.
What if the Modern Auction Buyer Does Not Pay the Reservation Fee?
This is unlikely to happen as, in most cases, the modern method auctioneer will register the bidder’s credit or debit card and place a hold (or “shadow”) on funds without charging.
Once the virtual hammer falls, the winning bidder’s card will be automatically debited. The losing bidders will have their payments released.
Note that if the property sale falls through due to the vendor’s inaction, the buyer can claim back the reservation fee in full.
If the reverse happens (i.e. the buyer fails to move things forward adequately), the fee will not be refunded.
…And if Exchange of Contracts Doesn’t Happen After a Modern Auction?
If the buyer does not exchange contracts after 28 days of the auction’s close, the non-refundable deposit will be lost. The buyer is also likely to incur abortive legal fees.
It will be at the seller’s discretion as to whether to provide extra time. The seller is well within his/her rights to put the property back on the auction market and/or approach previous bidders.
What About Pre and Post Auction Offers?
Pre-auction offers are entirely possible and can sometimes make sense if the seller is happy with the price. The sale can then proceed under auction conditions to provide the same level of security.
If the property doesn’t sell, most modern auctioneers extend the timeframe. Buyers can still make offers which, if acceptable to the seller, can also move forward under modern auction conditions.