There are two main types of property auctions: traditional property auctions and the Modern Method of Auction (MMoA). Both have distinct processes and appeal to different types of buyers and sellers. Here are the key differences:
Traditional Property Auctions
- Process:
- Auction House: Takes place in a physical venue or more commonly nowadays, online.
- Auction Day: All bids are made on a specified auction day.
- Immediate Sale: If the reserve price is met, the property is sold to the highest bidder immediately.
- Completion Timeline:
- Contracts Exchanged on Auction Day: The buyer and seller exchange contracts on the day of the auction.
- Completion Period: Typically, completion occurs within 28 days after the auction.
- Deposit:
- Immediate Deposit: The buyer must pay a 10% deposit on the day of the auction upon winning the bid.
- Buyer and Seller Commitment:
- Legally Binding: Both parties are legally bound to exchange and complete the transaction once the hammer falls.
- Suitability:
- Types of Properties: Often used for properties needing refurbishment, unique properties, or those requiring a quick sale.
- Buyer Type: Attracts investors and cash buyers due to the need for a quick transaction and the ability to complete the purchase without mortgage delays.
Modern Method of Auction (MMoA)
- Process:
- Online Platform: Typically conducted online.
- Auction Period: Bids can be placed over a longer period, usually 30 days.
- Completion Timeline:
- Conditional Sale: Unlike traditional auctions, the sale is conditional, giving more time for completion.
- Extended Completion: After the auction ends, the buyer has 56 days (28 days to exchange contracts and another 28 days to complete).
- Reservation Fee:
- Non-Refundable Fee: The buyer pays a non-refundable reservation fee (typically around 5% of the purchase price) to secure the property and take it off the market. This fee is separate from the purchase price and does not go towards it.
- Buyer and Seller Commitment:
- Conditional Commitment: The reservation fee secures the buyer’s right to purchase the property but does not legally bind them to complete the transaction.
- Suitability:
- Types of Properties: Suitable for a wider range of properties, including those that might appeal to owner-occupiers.
- Buyer Type: More accessible to buyers needing mortgage finance due to the longer completion timeline, appealing to both investors and residential buyers.
Summary
- Traditional Auctions: Quick, binding sales with immediate exchange of contracts, suitable for cash buyers and investors, and typically for properties needing quick sale or refurbishment.
- Modern Method of Auction: More flexible and accessible with a longer timeline for completion, a reservation fee instead of an immediate deposit, and suitable for a broader range of buyers including those needing mortgage finance.
Essential Information Group - News and Information
Keep up to date with our latest news, case studies and what's going on in the property auction industry on our blog.
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