Growing in popularity over the last 20 years across the UK the Modern Method of Auction also known as a conditional auction, can be a more buyer-friendly online version of the traditional auction house.
Buying property at auction is no longer just for the experienced investor looking for their next renovation project. Estate agents are appointed by the vendor to arrange viewings in order to generate interest in the property and to encourage potential buyers to put down an offer. Whilst the buyer still pays a non-refundable reservation fee, the Modern Method of Auction allows buyers with a mortgage to purchase an auction property and has realistic completion timescales.
All prospective buyers make an offer and bid against each other, the seller sets the rules for the auction, agreeing a reserve price (minimum allowable sale price), start date and the duration of the auction – typically 30 days or more, but can be less if the seller needs a very quick sale. When a successful bid is made, the buyer is required to pay a non-refundable ‘reservation fee’ on the day of the auction in order to secure the property - this can be up to 5% of the purchase price. Typically you then have 56 days after the auction date to exchange contracts and complete the purchase, which would give you more time to arrange a mortgage.
The reservation fee can be refunded but only if the sale cannot be completed due to a fault from the vendor. If the buyer pulls out before exchange of contracts, the reservation fee will be lost and the vendor can resell the property.
Tips to consider before you buy at any auction;
- Do plenty of research about the property you are buying, including surveys and searches if necessary.
- Find the property you want to buy.
- Get a structural survey.
- Commission a pre-auction report from a conveyancing solicitor.
- Organise finance in advance, such as an agreement in principle from a mortgage provider.
- Keep within your budget, unless you can afford not to.
If you’re interested in buying or selling using the Modern Method of Auction our expert teams of conveyancers are happy to help you through the transaction.