A number of agents and auction houses are now selling properties under the 'Modern Method of Auction'.
This is known as a conditional auction and must not be confused with the traditional method of auction.
The modern method of auction means that upon the acceptance of an offer or at the close of the auction, the successful buyer must place a non refundable reservation fee to the agents to reserve the property. It is really an option to purchase that is created with the agents securing a much higher fee than the usual method of auction.
The deposit paid can vary from agent to agent so check this with the agent and is usually based on a percentage of the final sale price (subject to a minimum amount). This deposit does not contribute towards the purchase price of the property and 10% of the purchase price will still be required on exchange of contracts and the balance of the purchase price payable on completion.
Following acceptance of the buyers offer and payment of the reservation fee, the buyer is given 28 days to exchange and then a further 28 days to complete. Although the modern method of auction is still a fixed timescale this allows longer periods for exchange and completion to accommodate the residential buyer and seller over the traditional method of auction. This allows the buyer more time to arrange finance to complete the exchange and completion if the buyer is reliant upon a mortgage.
The non refundable reservation fee paid by the buyer covers the agents fees (unlike the traditional auction or traditional sale where the Seller pays the agents fees). If the property falls through due to the Vendor, the reservation fee will be refunded to the buyer in full. If the sale falls through due to the Buyer, it is non-refundable.
It remains to be seen whether purchasers and sellers prefer the modern method of auction, does it give the buyer greater flexibility than the traditional method of auction but at a premium? Does it provide the Sellers with the comfort of knowing that the purchaser is committed to purchase the property and is able to proceed and unable to walk away from the purchase without financial loss?