House purchase by Modern Method of Auction
Discussion
Having accepted an offer on our current house we are looking to buy our next home and may well be interested in the below listed property
http://www.rightmove.co.uk/property-for-sale/prope...
Research suggests that the house has been on the market for a considerable time and prior being put subject of this 'modern auction' was offered for sale for £475k in 2015. Clearly, it did not sell at this time.
It is now to be sold via a "Modern Method of Auction" which is something I've never come across before.
The 'Guide Price' of £345k shown appears to be a starting price but it is also subject of an undisclosed 'reserve price' which is up to 10% higher. The purchaser must also pay a 'reservation fee' of 3.5% plus VAT to the auction house. The purchaser has to sign an agreement to exchange contracts within 28 days of the buyers' solicitors receiving a draft of the contract and then to complete within a further 28 days. There appears to be a 'buyers information package' already prepared containing all the necessary searches etc.
My concerns are:
If, for whatever reason the chain below us breaks down, or a survey throws up a serious problem and we need to withdraw from the purchase then we would lose the reservation fee.
I would also be concerned in case we would not be able to exchange and complete within the set period due to being at the mercy of solicitors or other members of 'the chain'.
Does anyone have any experience of this method of buying a house and have any words of wisdom for us? Thank you.
http://www.rightmove.co.uk/property-for-sale/prope...
Research suggests that the house has been on the market for a considerable time and prior being put subject of this 'modern auction' was offered for sale for £475k in 2015. Clearly, it did not sell at this time.
It is now to be sold via a "Modern Method of Auction" which is something I've never come across before.
The 'Guide Price' of £345k shown appears to be a starting price but it is also subject of an undisclosed 'reserve price' which is up to 10% higher. The purchaser must also pay a 'reservation fee' of 3.5% plus VAT to the auction house. The purchaser has to sign an agreement to exchange contracts within 28 days of the buyers' solicitors receiving a draft of the contract and then to complete within a further 28 days. There appears to be a 'buyers information package' already prepared containing all the necessary searches etc.
My concerns are:
If, for whatever reason the chain below us breaks down, or a survey throws up a serious problem and we need to withdraw from the purchase then we would lose the reservation fee.
I would also be concerned in case we would not be able to exchange and complete within the set period due to being at the mercy of solicitors or other members of 'the chain'.
Does anyone have any experience of this method of buying a house and have any words of wisdom for us? Thank you.
Edited by Rh14n on Friday 2nd December 23:45
Edited by Rh14n on Saturday 3rd December 00:50
Modern method here means piss taking estate agent who is getting a significant fee from the buyer,while not providing an auction house.
Talk to them about your circs and if there is leeway on the dates, probably not if the reserve is far lessthan prev advertised prices, given developers might be circling.
I was first "in" with a sale like this, but with lots of interest it became a cash only buy, which I couldn't do.
Talk to them about your circs and if there is leeway on the dates, probably not if the reserve is far lessthan prev advertised prices, given developers might be circling.
I was first "in" with a sale like this, but with lots of interest it became a cash only buy, which I couldn't do.
It's an utter rip-off and you should do everything you can to avoid engaging with this process. It incentivises agents to cause the sale to fall through, enabling them to get multiple fees from the same house - and as you can see, the fees are many times what a seller would ordinarily pay.
I've wondered what I'd do if I spotted a house I liked which is being sold this way. I'd suggest going to the agent, saying you're not going to enter into this process, make a well targeted written offer based on seller paying agents' fees and specifically stating as a private treaty sale, subject to contract. And pointing out that they have a duty to pass on all offers to the seller.
I've wondered what I'd do if I spotted a house I liked which is being sold this way. I'd suggest going to the agent, saying you're not going to enter into this process, make a well targeted written offer based on seller paying agents' fees and specifically stating as a private treaty sale, subject to contract. And pointing out that they have a duty to pass on all offers to the seller.
Can only speak as a seller,
I used this method a few years ago to sell an inherited property I just wanted shut of, despite there supposedly being 4 ''active bidders'' on the day of the auction they only went up to the VERY low and supposedly ''confidential'' reserve and not one penny higher.
Suspicious much?
I used this method a few years ago to sell an inherited property I just wanted shut of, despite there supposedly being 4 ''active bidders'' on the day of the auction they only went up to the VERY low and supposedly ''confidential'' reserve and not one penny higher.
Suspicious much?
Steve H said:
So is there an actual auction or is it really just a conventional sale with enforceable time scales?
When I did it, the actual online ''auction'' last for around 12 hours if my memory serves me correctly, then as you say an enforceable time period (around 28 days I think?) after that to complete.Hmm... Thank you for your replies. I'm glad it's not just me who's very sceptical. The 'auction' day is pretty soon and I'm not that convinced that there's a huge amount of interest in it so the timing is quite convenient for us. If we do like it after viewing I'd be mindful to take Jobbo's advice, refuse to engage in the process and insist on a more traditional process.
I would imagine that the vendor has chosen this route as they have been unable to sell it in the more conventional private treaty in an acceptable timescale, and hence want to draw a line under it.
Traditional auctions will tend to restrict owner occupiers relying on a mortgage as the timescales are un-achievable. This property will not be of particular interest to the usual auction purchasers of developers / investors and so wouldn't do very well at a traditional auction.
I would imagine that the vendor would be over the moon at an offer prior to auction, and as someone has already pointed out the agent are obliged to pass on any reasonable offers.
You would have nothing to lose going down this route, it might also give you an idea of reserve (which may well be over 10% more than guide).
If you do decide to bid in the auction, make sure you are fully informed and ready to go prior to bidding, as your deposit will be lost if the sale falls through due to failure on your part / chain. It would be a risky move if you're in a chain, I also wouldn't trust a high street lender to deliver on time for an auction. If you want a survey then it wants to be before the auction to allow you to bid accordingly, if you survey afterwards it would simply be to decide whether or not to proceed or lose your deposit.
There will usually be a legal pack available for a small fee, the auctioneer is usually happy to let me know how many have been sent out to offer some vague idea of interest, if the legal pack is free then this info is less useful.
Traditional auctions will tend to restrict owner occupiers relying on a mortgage as the timescales are un-achievable. This property will not be of particular interest to the usual auction purchasers of developers / investors and so wouldn't do very well at a traditional auction.
I would imagine that the vendor would be over the moon at an offer prior to auction, and as someone has already pointed out the agent are obliged to pass on any reasonable offers.
You would have nothing to lose going down this route, it might also give you an idea of reserve (which may well be over 10% more than guide).
If you do decide to bid in the auction, make sure you are fully informed and ready to go prior to bidding, as your deposit will be lost if the sale falls through due to failure on your part / chain. It would be a risky move if you're in a chain, I also wouldn't trust a high street lender to deliver on time for an auction. If you want a survey then it wants to be before the auction to allow you to bid accordingly, if you survey afterwards it would simply be to decide whether or not to proceed or lose your deposit.
There will usually be a legal pack available for a small fee, the auctioneer is usually happy to let me know how many have been sent out to offer some vague idea of interest, if the legal pack is free then this info is less useful.
Edited by jmsgld on Saturday 3rd December 14:45
Thank you. A bit of research on our part has established that it is subject of an Equity Release Scheme and that the occupier has undertaken what appears to be a failed business venture from the premises having spent quite a bit of money on it and presumably now just needs to move on. Perhaps these factors may go in our favour.
It's important to realise it's not an auction; it's simply disclosed offers and a very expensive exclusivity period. There's been some clever branding but the only people who benefit are the agents. They can sell the process to a vendor easily by saying they don't have to pay a fee, which is why it exists.
I discovered the sales guff about 4 years ago and wrote a long analysis at the time, but it's not published anywhere I can find.
I discovered the sales guff about 4 years ago and wrote a long analysis at the time, but it's not published anywhere I can find.
Rh14n said:
Paul Drawmer said:
I'd be more concerned about the construction methods of the extension around the original, the external walls look bloody thin on the floorplan.
Do you think the floorplan is that accurate or just marked that way to show which parts of the house are original?Cavendish said:
The Modern Method of Auction is a flexible buyer friendly method of purchase.
although he does say this:Cavendish said:
FLOOR PLANS - included for identification purposes only, not to scale.
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