The modern method of auction seems to be gaining popularity at the moment.
Here, we’ll look at what exactly the modern method of property auctions is, and why it seems likely to attract more home sellers in the coming years.
What exactly is the modern method of auction?
The modern method of auction (sometimes known as MMoA) has some differences compared to the traditional method of auction.
Traditional auctions are what are known as unconditional auctions. When a property is sold at a traditional auction the sale is final and must complete within (usually) 28 days.
Sales by the modern method of auction are therfore conditional. In technical terms, the modern method of auction offers the buyer a period of exclusivity or an option to purchase rather then being an unconditional sale.
Amongst other advantages, the modern method of auctions allows more flexibility. For example, they permit a longer period for contracts to be exchanged and the sale to be completed of, typically, up to 56 days.
Very significantly sales by the modern method of auction are usually conducted online, which is not always the case with traditional auctions.
Why is the modern method of auction drawing more home sellers?
There are many reasons why the modern method of auction is very likely to draw more home sellers in the coming months and years:
- There are no auction fees to the seller, in many cases. The buyer pays the auction fees. So the seller gets to keep 100% of the sale price of their property. Note that some auction houses have other structures that split the fees between buyer and seller;
- It’s quick. It can take just a few weeks (or potentially even days) to sell your property using the modern method of auction compared to several months using a private treaty sale. The modern method of auction can be quicker even than the traditional method of auction. Your property can be put up for sale literally within hours. There’s no need to wait weeks for the next traditional auction sale;
- It offers a guaranteed sale. Once your property sells at auction you can be confident that the sale will complete. The buyer pays a non-refundable reservation fee to secure the sale;
- With an auction sale a property sale is much less likely to fall through. In fact, it’s extremely unlikely to fall through. There’s very little chance a buyer will pull out. Or that you’ll be gazundered, ie. your buyer will drastically drop their offer at the last moment;
- It’s flexible. With the modern method of auction there is flexibility to vary the completion date. This isn’t possible with the traditional auction method;
- Selling by auction helps establish the true value of a property. This is likely to be increasingly important over the current months and years, when some people feel property prices might stagnate or even drop;
- There’s less hassle with viewings, compared to a private treaty sale. Sales by the modern method of auction usually have very extensive online listings, so more prospective buyers can decide if they are interested in making a bid without necessarily needing to view the property;
- Sales by the modern method of auction usually provide a comprehensive information pack. So much of the information needed to complete the sale is available before the sale is agreed, rather than having to wait until after it;
- There’s no need to negotiate with prospective buyers with the modern method of auction. You won’t attract ‘silly’ low offers. You won’t get caught up in endless bids and counter-bids. There’s no awkwardness between seller and buyer;
- Because modern method of auction completion times are more flexible it’s possible for buyers who need a mortgage to buy this way. This can attract many more potential buyers and potentially push up the selling price. With traditional auctions sales may be effectively limited to cash buyers only, which can keep the price down;
- The modern method of auction widens the market for your property considerably. You can offer your property not just to prospective buyers in your local area but to prospective buyers nationwide, or even internationally;
- More estate agents offer sales by the modern method of auction than the traditional method of auction. So the chances that potential buyers will find out about your sale should be higher;
- The auction process is much less daunting for both seller and buyer alike with a modern method of auction. Everything happens online. Neither buyer nor seller need to travel to the auction, take time off work etc. There’s no pressure and the sales process is more relaxed;
- Property portfolio sellers can also dispose of stock in a more streamlined manner, whilst optimising the gross sales price.
In many ways, the modern method of auction offers home sellers a good balance between the advantages of an auction sale and the advantages of a private treaty sale. So it’s easy to see that in the coming months and years, when the property market might not be so buoyant as it has been, more house sellers are likely to consider it attractive.
