When it comes to selling a property, auctions offer speed, transparency, and the opportunity to achieve competitive prices. However, not all auctions operate in the same way.
In recent years, the ‘modern method of auction’ has emerged as an alternative to the long-established traditional auction process. Whilst both methods involve competitive bidding, there are some crucial differences in the process, level of certainty and overall outcomes for sellers.
In this article, we explain the differences between the two and why traditional auctions are quite rightly, still the preferred choice for the majority of sellers.
What is the Traditional Method of Auction?
A traditional auction is a straightforward and legally robust method of selling property.
Properties are marketed for a set period and then offered for sale at auction, either in person or online. When the auctioneer's hammer falls, contracts are exchanged immediately. The successful bidder pays a 10% deposit and is legally committed to complete the purchase, usually within 4 to 8 weeks.
What is the Modern Method of Auction?
The modern method of auction is a more recent sales model that combines elements of auction and private treaty sales.
At the end of the online bidding period, which operates in a similar way to eBay, the highest bidder does not exchange contracts immediately. Instead, they pay a non-refundable reservation fee, typically at least 4.5% of the purchase price plus VAT, to secure the property. They are then given a reservation period of up to 56 days to arrange finance, carry out surveys, and progress to exchange of contracts if they are able to do so.
If a buyer does not proceed to exchange within the reservation period, none of the reservation fee goes to the seller and they are back to square one.
So why is Traditional the better method?
With the Traditional method, you benefit from:
· Guaranteed Price - you set a minimum reserve price, which protects you from selling for any less than you want.
· Speed - Contracts are exchanged on the day of the auction with a fixed completion set for 4, 6 or 8 weeks.
· Certainty - The buyer is committed to purchase the property on the fall of the hammer (paying a non-refundable 10% deposit) with no renegotiation.
· High Profile Marketing - An intensive, high-profile 4 - 6 week marketing campaign will ensure maximum bidders.
· Best Price - The best price will be achieved under competition, and your lot will be sold to the highest bidder.
· Expert Auctioneer – Our auctioneer has the skill and expertise to generate additional bids that would not be achieved through an eBay style auction.
· Online, Telephone & Proxy Bidding – Bidders can choose to bid online on the phone or by proxy (leaving a maximum bid).
· Competition – Our auctions typically include 30-40 lots all being offered on the same day ensuring maximum bidder numbers and competition.
· Auction Buyer Database – Our extensive database of active auction buyers has been compiled over 35 years of holding regular property auctions in Bristol and the Southwest.
Alternatively, the ‘modern method of auction’ is a hybrid method of selling that is still in its infancy. The method has been widely criticised for being fundamentally flawed for a number of reasons:
· Unsuccessful results – A very high percentage of lots being offered by the modern method go unsold.
· Off-putting fees for buyers – Buyers are required to pay a ‘Reservation Fee’ of 4.5% of the purchase price in addition to the purchase price, which means they will bid less for the property.
· No exchange of contracts – If the property meets its reserve price, contracts are not exchanged and the buyer has another 56-day period to exchange contracts. If they do not exchange, the agents keep the full reservation fee paid – none goes to the seller!
· Limited auction buyer database – Agents are heavily reliant on Rightmove enquiries - very few of these buyers are in a position to purchase at auction.
· Lack of competitive bidding – The modern method of auction is an ‘eBay style’ auction that runs for a set period in the hope that bids are made. There is no auctioneer to generate additional bids.
· Only online bidding – There is no option for proxy or telephone bidding which limits bidder numbers.
Final Thoughts
Both traditional and modern property auctions provide alternatives to conventional estate agency sales, but they operate very differently.
Traditional auctions remain the superior option for sellers who value speed, certainty, established expertise and a legally binding sale on the fall of the hammer.
At Maggs & Allen, we specialise exclusively in traditional property auctions. With decades of experience, we have helped countless sellers achieve strong results through a transparent and time-tested process.
If you are considering selling property by auction in Bristol or across the Southwest, our experienced team would be delighted to explain how this proven method can help you achieve the best possible result. Contact us on 0117 973 4940.
