Why is the Modern Method of Auction growing so quickly?
Milton Rodosthenous (pictured) director of LetsBid Property
Over the last few years, the Modern Method of Auction (MMA) has become one of the fastest growing sectors in property.
It’s an innovative property sales process which helps to reduce transaction times and fall-throughs, providing certainty to movers and creating additional revenue opportunities for estate agents in a challenging market.
What is the Modern Method of Auction?
Also known as a conditional auction, the MMA allows prospective buyers to place bids on a property within a given timeframe. At the end of the auction, the highest bidder is required to pay a reservation fee to secure the property.
The buyer then has 28 days to exchange and a further 28 days to complete.
Due to the flexibility it offers, the sector has grown rapidly in recent years as estate agents and consumers recognise its potential.
Here at LetsBid, we’ve already partnered with over 100 agents who have gone on to list over £30m worth of property on our site.
Meanwhile, several other online auctioneers have reportedly generated millions of pounds in fees for estate agents and contributed towards quicker transactions.
Shaking off a negative reputation
Like most emerging sectors which utilise technology, the MMA has received criticism from consumer bodies and some agents.
The criticism has largely focussed on an alleged lack of transparency over the non-refundable reservation fees paid by purchasers, which often cost around £5,000 plus VAT or circa 5% of the agreed purchase price.
From June 1 2019, the Property Ombudsman tightened its membership criteria to ensure agents disclose all referral fees and explain the pros and cons of their recommended method of transaction at market appraisal stage.
I believe we’re now at the point where the MMA has battled back strongly from this criticism to become one of the fastest-growing sectors in the property market.
The Property Ombudsman’s intervention was welcome as it will help to improve transparency. As long as buyers and sellers are aware of how the Modern Method of Auction works, as well as the costs, they’ll be able to decide if it is the right option for them.
The costs levied on buyers and sellers by agents and auctioneers should also be fair and reasonable. We’ve therefore taken steps to address this by taking the buyer’s reservation fee off the agreed sale price as long as the exchange happens within the agreed timescale.
We have subsequently eliminated buyers’ fees after feedback we received from agents who identified them as the biggest obstacle to selling this way.
An attractive option for buyers and sellers
Opting to buy or sell a property via the MMA provides buyers and sellers with a range of benefits. As more consumers and agents have become aware of this type of transaction, it has been growing in popularity.
The Modern Method of Auction provides consumers with more flexibility and time than the traditional auction process. On top of this, it provides more certainty and a quicker turnaround than the private sales option.
Sellers enjoy the potentially lower costs and benefitting from the professional guidance of professional agents and auction platforms, while buyers can unearth a bargain if they calculate their costs effectively.
It’s for this combination of reasons why we expect the MMA sector to grow further in the coming months and years.
Helping estate agents to get results
The MMA has provided agents with a new way to get results for their clients at a time when many properties have been ‘sticking’ on the market.
Official government figures show that the average property sale takes 18 weeks, with up to 33% of transactions falling through.
Selling via the MMA helps agents to beat these figures and help consumers to move home more quickly and with greater certainty.
Most transactions will agree the reservation within 48 hours of agreeing a price, but we give agents the opportunity to come to a suitable agreement of their choosing with buyers and sellers.
The agents we work with are benefitting from being involved in more transactions which involve no chain. They enjoy working with committed buyers and sellers who have no fear of being gazumped or gazundered.
The MMA is improving fall-through rates and helping to increase consumers’ confidence in agents and the wider property market.
While the government continues to attempt to speed up the transaction process and Brexit uncertainty is ongoing, the MMA provides the alternative transaction process the market has been crying out for.