Published On: Sat, Apr 13th, 2019

House prices SHOCK: The new way to buy a home that could cost you THOUSANDS in extra fees

Some estate agents around the UK have started working with eBay-style auctioneers to sell homes online. This has been dubbed the “modern method of auction” as it has a longer completion time than traditional auctions. But Homeowners Alliance says this makes buying a property complicated, especially as estate agents can also make more commission from this method of selling too. 

Homeowners Alliance chief executive Paula Higgins said: “Although we think the modern method of auction could be an exciting way forward, we aren’t impressed with the hefty fees being charged.

“Meanwhile, the process can be complicated, and buyers and sellers are not always fully aware of what they are letting themselves in for.”

Online auctions come with a guide price and a reserve price set.

Buyers are required to register with the auctioneer and then place their bids over a 30 day auction period. 

At a traditional proper auction, the winning bidder will sign the contract on the day and has to complete the purchase in 28 days. 

But modern auctions gives the buyer a 28-day exclusivity period for them to change contracts and 56 days to complete the purchase. 

The winning bidder must also pay a reservation fee on top of that, which is set by the estate agent or auctioneer. 

Auctioneer IAM Sold is working with Right Move estate agents and usually charges a reservation fee between 2.5 percent and 4.2 percent, with a minimum of £6,000.

The reservation fee also needs to be paid straight away as it is not part-payment of the final selling price. 

People will still need to pay stamp duty on the purchase price though, for tax purposes. 

Buyers will also lose out on money if they withdraw from the sale.

However, they should get this back if the vendor also pulls out. 

Homeowners Alliance added this fee is shared between the auction house and estate agent.

So even if it is shared equally, agents can still make more of a profit than if they were selling on a traditional commission basis. 

Ms Higgins said: “In our recent investigation we found properties being advertised where the achievable commission would be more than 15 percent due to the low guide price.

“This fee is not part of the overall purchase price – it goes straight to the estate agent and auctioneers, yet buyers will be liable for stamp duty on it.”

Jamie Cooke, managing director of IAM Sold, said: “In general, auction fees are higher than in private treaty, as in IAM Sold’s case.

“It’s not just about technology, 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.” 

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