Estate agents acting under a new Code of Conduct should warn sellers using the Modern Method of Auction that there are disadvantages as well as benefits to the system.
Specifically sellers must be made aware at the outset that the method may not secure them the best price as buyers may factor in their premiums.
The warning comes from the industry itself in a new Code which has been put together by leading modern method of auction provider iamsold.
With input from the Property Ombudsman, the Code says that agents should: “Explain any buyer reservation fee/buyer premium to the vendor.
“If these are paid in addition to the purchase price, confirm the buyer may consider the fee as part of the total amount they wish to pay for the property.”
The new best practice guide has also had input from auction data firm Essential Information Group.
The Code refers to “clients” but stops short of specifying who the agent’s client is – the seller, who pays no commission, or the buyer who does.
However, it does set out best practice as far as not only vendors are concerned, but also viewers and bidders.
Agents should take time to explain to potential buyers how the auction works, the fees payable, and the importance of viewing the information pack and doing their own due diligence.
The new code also says that agents should always state fees with VAT included, and that fees charged as a percentage must be confirmed as an actual amount including VAT.
Bidders should also be told of the associated Stamp Duty implications – although the guidance does not go into whether the buyer’s premium is part of the purchase price for tax purposes.
Newcastle-based iamsold – whose modern method of auction is white-labelled by a number of estate agents – is calling for other providers to adopt the guide.
Ben Ridgeway, of iamsold, said: “This best practice guide demonstrates our commitment to championing progress within our industry.
“MMOA is on an exciting upward trajectory as many are turning to it as an alternative to the unreliable status quo.
“At iamsold we operate with a well-respected, strong estate agent network and wanted to help educate our industry and those reporting on it, to increase awareness and ultimately improve the overall service offering.
“No one provider owns the space, but we believe all should comply to minimum standards, so all parties involved can make informed decisions.”
Comments (3)
This is a watered down version of what agents should be saying, see above with Roz’s comment on the fact that the premium is added to the purchase price for stamp duty purposes – a killer for many bidders. No emphasis on the fact that the high buyer’s premium materially affects the price the seller will obtain for his/her home. Very sad to see EIG supporting this initiative. A way to increase revenue at the expense of an excellent reputation as the nation’s primary portal for property auctions.
The Code refers to “clients” but stops short of specifying who the agent’s client is – the seller, who pays no commission, or the buyer who does.
Apparently commendable motives on the part of those involved in producing the code but they are dodging the thorny question. Who is the client?
In the modern auction set up, it will be the seller (in my opinion) – the only difference is the buyer is paying part of the VENDORS SELLING COSTS of which the selling agent/auctioneer is receiving a share of the commission.
I believe a bigger issue is the extortionate fee the BUYER has to pay as we still have a duty of care to the buyer and should therefore have a disclaimer at the START of the advert/First Line of the advert and not tucked away at the end of the advert. This should be show as an estimated figure based on the Guide Price along with the percentage.
The average estate agents fee is around 1.5%. The average online auction fee which the buyer pays is around 4% – So an extra 4% on top of the purchase of say £400k will equate to £16,000 which is an EXTRA cost the buyers needs to find and can’t add this to their mortgage as it is classed a fee not part of the property purchase figure.
The other major issue is that some BUYERS are making a decision to exchange within a 28 day period and are making a NON-REFUNDABLE payment of about 4% without having the full legal pack and or taking proper legal advice.
As with a traditional auction the buyer will ask their solicitors to check the legal pack before bidding.
This method of sale is great providing ALL parties know EXACTLY what the pro’s and con’s are not just the seller. I also feel the fees the BUYER is asked to pay towards the seller selling costs should be in line with what the average estate agent fee is.