The Modern Method of Auction – a new trend?

Selling or buying a property in a traditional property auction can be a hair raising affair sometimes with nerves of steel involved. It is not for the faint hearted. But the auction arena is changing and another method of buying property and land is becoming increasingly popular – the Modern Method of Auction or the Conditional Auction and there are definite advantages for both the buyer and the seller.

Many different types of properties and land are bought and sold by a traditional auction method – often properties such as repossessed properties, uninhabitable properties, unmortgageable properties and land for development,

Under the traditional method the buyer is committed to the purchase and a completion date regardless of any potential issues they may then subsequently discover on the property. A 10% non refundable deposit is required and contracts are exchanged on the same day. Due to the immediate timescales buyers need to have their finances in place prior to attending the auction.

Completion must happen within 28 days.

How does the modern method of auction work?

Modern auctions take place on line.

With the modern method of auction the buyer pays a non-refundable reservation fee or reservation deposit within 48 hours of the auction ending which does not form part payment of the final selling price. The buyer is required to formally exchange and complete within 56 days of their solicitor receiving the draft contract from the seller’s solicitor. This is the reservation period.

After securing the property at the modern method of auction the buyer will need to carry out the usual searches, check the title and the information pack.

The auctioneer prepares the buyer’s information pack under the modern method of auction in the same way as they would have done under the traditional method.

The buyer’s information pack includes the title register and plan, property information questionnaire, water and drainage search and the local search.

The modern method of auction allows buyers time to check the property and to raise funds but the deposit will be lost if the sale does not proceed. It is definitely advisable to ensure the funding is in place and the title is checked prior to making the bid at the auction and entering into the reservation agreement.

The seller or buyer cannot terminate the reservation during the exclusivity period of 56 days which gives some buyers a grace period and limits the possibility of being gazumped. The reservation can be terminated at the discretion of the auctioneer.

The seller can also terminate if the buyer is in breach of its conditions.

The seller can reoffer the property for sale at the end of the reservation period should formal exchange and completion of contracts not have taken place.