Modern auction combines the speed and certainty of an auction sale, along with the marketing effort of a good local estate agent. Reserve prices tend to be higher with modern auction compared to traditional auction.
Modern auction is not particularly new, in fact the concept has been around since the 1990’s. However, it’s becoming a more popular option as property owners recognise the range of benefits it offers. As this article explains, the “modern method” irons out many of the inefficiencies of a private treaty (estate agency) sale.
How does the modern method of auction work?
The modern method of auction is just like an ordinary estate agency sale, but with the added control and transparency offered by an auction sale. To briefly summarise; an estate agent is appointed to drum up interest in the property and conduct viewings. All prospective buyers are told they can make an offer for the property by placing a bid online – and the process for bidding is very simple.
With a normal estate agency sale, once an offer has been accepted the property is marked as “sold subject to contract” and all other prospective buyers are turned away – which is a major disadvantage to the seller.
The modern method is different; the sale is not dependent on just one selected buyer, instead it allows all prospective buyers to make an offer and bid against each other.
The auction is very simple; the seller sets a reserve price (minimum price they will allow the property to sell for) and an end date for the auction (usually 28 days or more). Prospective buyers then compete against each other by increasing their bids until the auction expires. If there’s a frenzy of activity towards the end of the auction the auctioneer will automatically add extra time (typically an additional two days) to ensure the property achieves its top price.
The auction part of the sale takes away control from the buyer – instead of the offer price being chipped away stage by stage (e.g. after the survey or a few days before exchange) as is common with an estate agency sale, with the modern method the price can only go upwards! And the risk of the sale falling through is virtually eliminated because the winning bidder is financially committed.