A firm which links with agents to operate online auctions has hit back at a consumer group's allegations that this growing sector is “murky” and “milking buyers for profits.”
IAM Sold, which works with 1,900 estate agency branches, says the report from the HomeOwners’ Alliance - which we carried yesterday here, and which was sharply critical of some auction operators and agents - highlights “confusion from buyers and sellers, and evidently, not enough transparency from some agents.”
The HOA is concerned at what it regards as the high and often under-publicised reservation fee paid by the successful purchaser.
“This must be paid upfront by the winning bidder at the auction’s close by debit or credit card or bank transfer and can be anything upwards of 2.5 per cent + VAT. There is usually a minimum reservation fee of at least £5,000 + VAT.”
The HOA continues: “And it [the reservation fee] doesn’t usually form part of the overall price paid; it’s an add-on which goes straight to the auctioneers and estate agent.”
The association says the fee - even if shared equally between agent and auction platform - means the agent stands to receive more from an auction buyer than from a traditional seller in a private treaty deal, particularly on lower-price properties.
However, a lengthy statement from online auction service IAM Sold - which is featured in the HOA report - makes a vigorous defence of the growing online auction sector and links between agents and online platforms.
“From the offset, IAM Sold talk through all methods of disposal with sellers; the outcome of this transparent and informative approach is that for almost two thirds of sellers, it is not the right tactic for them to sell via auction. That is a consistent metric IAM Sold have seen over nine years of trading” says Jamie Cooke, managing director of IAM Sold.
“Sellers choose the Modern Method of Auction for speed and security if in need of a guaranteed sale, or in the case where a seller wants the competitive bidding environment to maximise value. The seller also chooses the fee model - pay the reservation fee or charge their buyer. Likewise, the charging of reservation fees to buyers as a method of an upfront security payment is completely clear to all parties involved in the transaction” he continues.
Cooke admits that in general online auction fees are higher than private treaty commission. But he insists "the seller is receiving a service from two professional companies which results in the property getting sold in a timeframe that suits their needs at a price that they are happy with.”
He continues: “Buyers are willing to pay a premium for speed and security and to secure the property that they want. The fees charged by IAM Sold and our partners are made clear to all parties at all points of the transaction; prior to payment they are required to read and sign a very clear and specific reservation form which again, states the cost of fees, purchase price, timescales and terms of the agreement.”
He says a copy is available in a free-to-download pack for all properties, and that all buyers are made aware of the reservation fee and all specific terms and condition in advertising on a portal, an agency’s website or that auction platform itself.
The pack, claims Cooke, offers more security to a buyer that they would get in a mainstream private treaty transaction because it includes copies of title and title registry, searches, a property information forms and property information questionnaires along with other documents specific to a property.
“Fees and charges are clearly marked on the bidding platform and calculated as part of the bidding process. Buyers enter into all transactions fully aware of their obligations” he says, adding that only five per cent of transactions via his online auction method falls through compared to around 30 per cent in private treaty.
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'Buyers are willing to pay a premium for speed and security and to secure the property that they want', really?
SDL Auctions are also seeing the genuine need to offer vendors and buyers this 'modern method' auction service. The key is transparency and the inference from the HOA report that it is murky is certainly not how we do business.
Up to 40% fall through rates in private treaty is also not serving home owners and costing whole chains and real families money and stress.
The protection from 'gazumping' and 'gazundering' protects home owners, buyers and vendors alike. It’s not for everyone but I can assure you our buyers experience is as important as our vendors.
This was always a likely scenario. HMRC and the Property Ombudsman did exactly the same thing a few years ago with informal tenders (also known as "sealed bids") where many London estate agents were making buyers pay high premiums (but not nearly as high as £5,000+ in most cases).
The TPO Code of Conduct was altered and is still in place and used as Best Practice by other redress schemes. It reads as follows: "Current HMRC policy is that the chargeable transaction (monies or monies worth) for a land transaction is what has been given (either directly or indirectly) in order to acquire the subject-matter of the transaction, by the purchaser or a person connected with him. This includes fees which have been paid in order to acquire the property. This means that whatever the buyer pays, it will form of the purchase price for the property and will be included in his liability for stamp duty." for those who want chapter and verse, this is Clause4(iv) of the TPO Guidance for Agents and is emphasised in Clause2(v-vi).
As conditional auctions are legally options to purchase or tenders, this is a natural progression and the easiest way to redress the balance as it did for sealed bids.
In reponse to Lousie Jeffries:
Louise, you seem to have completely missed the point. Traditional auctions and conditional auctions charging fair fees do exactly what you claim and traditional auctions which are open to the public (that is why they are called "public auctions") are the only guarantee of transparency. It is the fee which is the argument here and we all know that the reason for the high fee is to pay for the plethora of non-auctioneer estate agents who market the properties and use their share to boost their income.
Every Modern Method Auction I've seen has a 'reservation fee' of 4.2% with minimum of £5,000 plud VAT. So for an inexpensive house in the Midlands £50,000, the fee is a whoping 10%. This makes the US Realtor fees (supposedly the most expensive) of up to 6% look reasonable.
I bought a house (my winning bid was £6,000 below the guide price) at such an auction and was told the auction was unconditional and therefore contracts were exchanged on 'the fall of the hammer', therefore I didn't get 28 days, had to complete the transaction within 28 days.
I think this is nothing but a thinley veiled scam! Now I don't even consider properties sold this way.
I am buying through Iamsold. I handed over the reservation fee to not lose the house but have not received the pack. I didn’t sign their contract which they have sent to me.My mortgage company have since refused to mortgage the property as it is in a flood risk area.This was not disclosed to me by the agent.
Am I entitled to my money back if I haven’t signed any contract with them yet?
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