The modern method of auction is the same as any ordinary estate agency sale, but with the additional control and clarity offered by a sale of traditional auction methods.

For example: an estate agent is instructed to vigorously market the property and conduct viewings. Potential buyers are informed they can make an offer for the property by placing a bid online.  

The seller sets a reserve price (minimum price they will allow the property to sell for) and an end date for the auction. This tends to be around 28 days but can be longer. Rather like the way eBay operates. Potential buyers then compete against one another by increasing their bids until the auction expires. 

On property, where there is a frenzy of activity just before the expiry of the auction, the auctioneer automatically adds extra time, usually around two days, to make sure the property achieves its best price. 

There are two types of the modern method of auction:

1. An estate agent drums up interest in the property, conducting viewings and encouraging potential buyers to make an offer; and
2. An online auction which encourages competitive bidding, providing a buyer with the certainty of an ‘end date’ for the sale.

Property sellers appear to like the concept of the modern method of auction because they can be confident they will achieve the best possible price for their property in a truncated amount of time. Unlike traditional property auctions, arguably best suited to those properties in need of updating or renovation, the modern method of auction gives more time and flexibility for potential buyers to organise a mortgage. 

One of the major criticisms seems to be that buyers incur extra stamp duty liabilities. The buyer fee is a chargeable consideration, and therefore the Stamp Duty Land Tax calculation will be based on the agreed auction price plus the fee. For example, if a property sells for £200,00 at auction, attracting a buyer’s fee of 5%, the Stamp Duty will be payable on £210,000.

In response, modern method auctioneers now ensure the additional Stamp Duty liability is expressly stated on their websites. Buyers are also advised to instruct a conveyancing solicitor before bidding.

The benefits of the modern method of auction are that there is no erosion of the sale price because the buyer is only allowed to increase their offer. Additionally, fall throughs are almost eliminated because the buyer is already financially committed to the purchase, and within the time specified. Taking control away from a buyer makes an enormous difference; the sale is considerably more transparent, and any potential manipulation by an estate agent or third-party interference is removed. 

The modern method of auction is most suited to those situations where there is no ‘upward chain’, because if a seller has to synchronise the purchase of their new property, they may end up in a situation where they have to find temporary accommodation. This makes the modern method of auction ideal for vacant properties, or where the seller is moving into a chain free property, such as a new build. That said, the modern method of auction is suitable for selling all types of property no matter its condition, including complex property like those held on a short lease.

We at Express Conveyancing specialise in all manner of property transaction with our speciality being auction by both traditional and modern method of auction schemes. Please contact us directly on how our expert property lawyers in the field can assist you with your next property move.