What is Modern Method of Auction?
Also known as a ‘conditional’ auction, selling a house via Modern Method of Auction lengthens the amount of time between the close of the auction (exchange of contracts) and completion of the sale.
In most cases, as with traditional auctions, much of the conveyancing process is undertaken before the modern auction bidding starts.
Usually undertaken online, once the virtual hammer has fallen, the winning bidder pays a non-refundable reservation or holding fee. This charge tends to vary between different modern auction service providers.
This provides the buyer with a period of exclusivity, typically 4 weeks (28 days).
Within this time, the modern auction buyer must exchange contracts, on which date a 10% deposit needs to be paid (unless otherwise agreed).
Then, the buyer has a further 28 days to complete on the sale (where the full purchase price is paid).
As with traditional auctions, if completion doesn’t happen after the exchange of contracts, the buyer could lose both the non-refundable and 10% deposit paid. The auction house may also impose financial alongside abortive legal costs.
These processes combined, in most cases, mean that modern method of auction sales are much more secure.
How Does Modern Method of Auction Work?
Modern Method of Auction (or MMoA) is not reinventing the wheel in terms of buying and selling properties.
What it does bring is the ability to ‘lock-in’ buyers. If they were to pull out of the sale after the hammer falls, they will lose the reservation fee.
As a result, home sellers increasingly use this type of service as it’s a great way to overcome the many archaic processes of a ‘normal’ house sale, without compromising on getting a good price.
Many modern method auctioneers partner with estate agents across the country or are agents themselves that have bolted-on MMoA as part of their service.
However, as highlighted below, there are a couple of key differences with an estate agency sale.
As with traditional auctions, 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 the bidding is done, safe in the knowledge that there’s very little chance of things falling apart.
Check out the various pros and cons of using a modern auction service.
