Traditional Auction Vs Modern Method of Property Auction

Are you looking to sell your home quickly – maybe because your sale has fallen through, and you want to keep your chain intact, or you are divorcing and want to free up your cash?

Whether you need a fast sale on your detached home in Porthaethwy, want to sell up a bungalow in Amlwch, or find a new buyer for a period terraced house in Bangor neu Caernarfon, then selling your property at auction could be the answer. However, understanding the different options and how a traditional in-room or online auction differs from the modern auction method is vital.

While selling your home via a modern property auction follows the same principles as putting it under the hammer, there are differences to be aware of too. In this guide, we look at what precisely a modern property auction is, how to sell your house at auction, and the pros and cons of using it versus traditional property auctions. 

What are the different types of property auctions?

There are two different types of property auction:

• Traditional property auctions

These can take place in person in an auction house or, more conveniently, online.

• Modern property auctions

Modern property auctions take place online and have quite different rules and timescales from the traditional method. Some people don’t think they should be called auctions at all, instead referring to them as a modern method of selling.

Why do properties go to auction?

There are many reasons why properties are sold at auction rather than in the usual way. A good estate agent may recommend this as the best way to take your property to market to achieve the highest possible price. Often it is because the home is hard to sell for some reason – it may be in a poor state of repair, have been repossessed by a bank or represents a development opportunity.

Sometimes auction properties are hard to mortgage, attracting only cash buyers. However, people needing a quick sale or whose properties aren’t shifting via the estate agent method also look to auction their homes.

How does a traditional auction work?

In a traditional auction, several properties are sold in turn on a set day. There is usually a starting or guide price and a reserve price, which must be met for the home to sell. All bids taken are legally binding. If you are the highest bidder, and your bid exceeds the reserve amount, you will exchange contracts and pay a 10% deposit immediately.

If you change your mind, you will lose the deposit and may be liable for further costs. Traditional auctions attract all kinds of bidders, including professionals who understand the system and are confident in making bids. Interestingly, we have noticed increased female bidders since moving to online auctions. Buyers must complete the purchase within 28 days – a quick turnaround for anyone looking to secure a mortgage, which is also why they tend to attract cash buyers.

How does a modern auction work?

Modern auctions operate online – in much the same way as eBay auctions. With modern property auctions, winning bidders pay a 5% reservation fee and must exchange contracts within 28 days – not immediately, completing within 56 days of the auction.

The longer timeframe means this method may attract a wider pool of buyers and is more likely to include those who need a loan to fund the purchase. However, if the buyer fails to secure a mortgage, they will be unable to exchange and complete, and so will lose their 5% reservation fee. Estate agents rather than property auctioneers often arrange modern property auctions.

What are the main differences?

The main differences between a traditional and modern method of property auction are:

• Traditional auctions tend to attract cash buyers, as purchases must be completed rapidly (within 28 days). Participants of modern auctions have longer to complete, and so the pool of buyers is more likely to include those who need a loan.
• Traditional auctions are more likely to include hard-to-mortgage properties, whereas modern auctions may attract a wider variety of homes.
• Traditional auctions take place on a set day. Modern auctions can begin anytime and last for 30 days or longer.
• With traditional auctions, you must exchange and pay your deposit on the day, giving buyers and sellers more certainty. Modern auctions give you 28 days to exchange and pay your deposit, increasing the likelihood that the sale may fall through.

What are the pros and cons of auctions?

Traditional and modern property auctions usually mean a quicker sale, and you’ll generally achieve a higher price for the home than from a house-buying company, often with estate agency help available. However, there are differences and both the traditional auction and modern method of auction have pros and cons.

Pros of traditional auction

• Open bidding can drive up competition and potentially raise the final selling price.
• You are likely to find a buyer, even for an unusual property.
• Sellers usually secure a fast sale, with the buyer’s legal commitment.
• They attract more cash buyers than selling through an estate agent, and sellers tend to achieve higher sale prices.
• Many auctions take place online and are easy for both the inexperienced and professional bidder.
• Buyers typically have their finances in order before the auction, reducing the likelihood of the sale falling through.

Cons of traditional auction

• The fees involved in taking your home to auction in this way can be slightly higher.
• Traditional auctions aren’t usually practical for potential buyers needing a mortgage.

Pros of modern method of auction

• Many people are already familiar with using auction sites such as eBay.
• Under the modern method of auction, buyers pay a reservation fee to show their commitment.
• Modern auctions can suit widely appealing properties, such as those in move-in condition.
• Buyers who need a mortgage can bid, due to the longer process.
• Selling prices can be higher.
• The buyer pays the auction fees.

Cons of modern method of auction

• You need a conveyancer to prepare a legal pack before the auction and answer the buyer’s questions afterwards.
• There is a possibility of the buyer pulling out.
• The process takes slightly longer, with a bidding period, 28 days to exchange and 28 days to complete.

Frequently asked questions

What is a conditional vs unconditional auction?

A conditional auction is another term for the modern method of auction –though the buyer commits, the winning bid is not legally binding. An unconditional auction is another name for the traditional method of auction – buyers agree to purchase the property without condition.

What are the fees & costs for modern and traditional auctions?

While the buyer pays the auction fees, the seller pays for a legal pack costing £400 to £500 containing legal documents such as searches, the title register from HM Land Registry, and conditions of sale. Budget £200 to £500 for the management pack if you’re selling a leasehold property.

Which type of auction is best for me?

Choosing the best auction type will depend on your circumstances and motives for using an auction to sell your home. If you want to repair a broken chain, need the cash urgently, or are selling a hard-to-mortgage property, traditional auction offers can be faster and more binding. The modern method may suit more conventional properties, attracting a wider pool of buyers and perhaps a higher selling price.

If you’re looking to sell your home in North Wales, talk to us. We can advise you whether selling your Ynys Môn neu Gwynedd property in the usual way or by auction will work best in your circumstances. As a start, why not book a no-obligation market appraisal today?