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19 January 2024
To auction, or not to auction? My view on the possible pitfalls of the modern auction…
If you keep a keen eye on the property market you will have noticed more and more properties being offered for sale by “modern auction”, but how many of us really understand what this is? Well, let’s take a look…
Selling a property by modern auction is an option that more and more property owners are being presented with. It is presented to be a great way to sell a property as it offers a faster completion timescale, reduced risk of a sale falling through, more transparency and little or no fee to pay by the seller. These all seem attractive features, but will a modern auction get the seller the best price? In my opinion, the answer to that question is probably… no!
There seems to me to be one fundamental flaw in this sale method, but I doubt it’s one that is highlighted to sellers when they are presented with the option of selling their property by modern auction. The problem is that the buyer pays the fees. Buying through the modern auction method brings with it the need to pay a non-refundable reservation fee, but this does not make up part of the purchase price for the property. This fee is to pay both the auctioneer and the estate agent. This may sound great to the seller, after all, who wouldn’t want to sell without paying a fee. The buyer, however, is lumbered with this cost, a cost that will be higher than a high street agent would charge to a seller. One popular auctioneer company sets this reservation fee at 4.5% of the purchaser price, with a minimum of £6,600 (inc. VAT). If the buyer has a budget and needs to factor in this extra cost, then this is £6,600 the seller could be missing out on!
Another kick in the teeth for the buyer is that they will also have to pay Stamp Duty on the reservation fee amount as this is considered by the HMRC to be a chargeable consideration for a property transaction. How keen will a buyer be to make their best offer when they are not only paying the fees, but also paying Stamp Duty on the fees!
I don’t doubt that there are some situations in which a sale by modern auction can be beneficial, but I firmly believe that the average seller will miss out on thousands of pounds on their property value, even when estate agent fees are taken in to account.
If you are thinking of selling and want to get the very best result, my advice would be to contact a local, reliable, knowledgeable, professional and award-winning high street estate agent and, as luck would have it, I know a very good one…
Written by Stuart Hutchings, branch manager of our Havant office.
If you keep a keen eye on the property market you will have noticed more and more properties being offered for sale by “modern auction”, but how many of us really understand what this is? Well, let’s take a look…
Selling a property by modern auction is an option that more and more property owners are being presented with. It is presented to be a great way to sell a property as it offers a faster completion timescale, reduced risk of a sale falling through, more transparency and little or no fee to pay by the seller. These all seem attractive features, but will a modern auction get the seller the best price? In my opinion, the answer to that question is probably… no!
There seems to me to be one fundamental flaw in this sale method, but I doubt it’s one that is highlighted to sellers when they are presented with the option of selling their property by modern auction. The problem is that the buyer pays the fees. Buying through the modern auction method brings with it the need to pay a non-refundable reservation fee, but this does not make up part of the purchase price for the property. This fee is to pay both the auctioneer and the estate agent. This may sound great to the seller, after all, who wouldn’t want to sell without paying a fee. The buyer, however, is lumbered with this cost, a cost that will be higher than a high street agent would charge to a seller. One popular auctioneer company sets this reservation fee at 4.5% of the purchaser price, with a minimum of £6,600 (inc. VAT). If the buyer has a budget and needs to factor in this extra cost, then this is £6,600 the seller could be missing out on!
Another kick in the teeth for the buyer is that they will also have to pay Stamp Duty on the reservation fee amount as this is considered by the HMRC to be a chargeable consideration for a property transaction. How keen will a buyer be to make their best offer when they are not only paying the fees, but also paying Stamp Duty on the fees!
I don’t doubt that there are some situations in which a sale by modern auction can be beneficial, but I firmly believe that the average seller will miss out on thousands of pounds on their property value, even when estate agent fees are taken in to account.
If you are thinking of selling and want to get the very best result, my advice would be to contact a local, reliable, knowledgeable, professional and award-winning high street estate agent and, as luck would have it, I know a very good one…
Written by Stuart Hutchings, branch manager of our Havant office.