The Modern Method of Auction (MMA) has become one of the fastest-growing sectors in property, according to online auction service LetsBid Property.
It says this innovative property sales process helps to reduce transaction times and fall-throughs, provide more assurance to movers and create additional revenue opportunities for estate agents in a challenging market.
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.
Meanwhile, several other online auctioneers have reportedly sped up transactions and generated millions of pounds in fees for estate agents.
Shaking off a negative reputation
Like most emerging sectors which utilise technology, the MMA has received criticism from some agents and consumer bodies, which is largely focused on alleged lack of transparency over the non-refundable reservation fees paid by purchasers. This often costs around £5,000 plus VAT or circa 5% of the agreed purchased 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 transaction at market appraisal stage.
Milton Rodosthenous, director of LetsBid Property, says the MMA has battled back strongly from criticism. He comments: "The Property Ombudsman's recent intervention was welcomed 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 will be required to pay, they'll then 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 taken steps to address this, for example, by taking the buyer's reservation fee off the agreed sale price as long as the exchange happens within the agreed timescale."
He adds: "We have therefore eliminated buyers’ fees after feedback we received from agents who identified them as the biggest obstacle to selling this way. The MMA is an impressive fledgling industry which has helped to keep the property market moving during a difficult period.”
Helping agents to get results
Official government figures show that the average property sale takes 18 weeks, with up to 33% of transactions falling through. However, the MMA aims to help agents beat these figures and guide consumers to move home more quickly and with greater certainty.
"Our estate agents control the duration of each listing. 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," Milton explains.
He says that agents using the MMA are benefitting from being involved in more transactions which involve no chain.
"Our agents enjoy working with committed buyers and sellers who have no fear of being gazumped or gazundered. The Modern Method of Auction is improving fall-through rates and helping to increase consumers' confidence in agents and the wider property market," he says.
Daniel Levine, branch manager of Winkworth Hendon, one of LetsBid’s partner agents, adds: "In an ever-changing market place, agencies need to be able to adapt to the new technologies and services available to them."
"With the Modern Method of Auction, vendors are able to achieve a great price for their property in a much quicker timeframe with less hassle. Not only is the LetsBid platform fully controlled by the agent, it offers vendors an insight into the level of interest and bids being made on their property.”
He continues: "Legal packs are prepared in advance by registered solicitors so buyers are able to have all the information they or their solicitor needs to act fast and move to an exchange within 28 days.”
An attractive option for buyers and sellers
As more consumers and agents have become aware of the sector’s existence, it has been growing in popularity. Opting to buy or sell a property via the MMA can provide buyers and sellers with a range of benefits.
Milton adds: "The Modern Method of Auction provides consumers with more flexibility and time than the traditional auction process. However, it provides more certainty and a quicker turnaround than the private treaty 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," he says.
"It's for this combination of reasons why we expect the MMA sector to grow further in the coming months and years."
"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," Milton concludes.