Modern Method of Auction

Agriculture and Land Development specialist Janette Woodland considers how the modern method of auction differs from a traditional auction.

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Auctions have long been a popular method for buying and selling property. Historically, traditional in-room auctions have dominated the scene, offering a fast-paced and transparent process. However, in recent years, a new approach has emerged—the modern method of auction. This method combines online convenience with auction principles, generating both interest and controversy within the property sector.

What is a traditional auction?

In an earlier article, we examined how a traditional property auction works. They are often held in person and simultaneously streamed online by auction houses, and involve competitive bidding on properties within a fixed timeframe. Prospective buyers must usually:

Conduct surveys and legal checks before the auction.
Be ready with finance (typically cash or mortgage offer) in advance.
Exchange contracts immediately on the day of the auction, with completion often within 28 days.

Among the advantages of a traditional auction are:

Certainty: Once the gavel falls, the sale is legally binding.
Speed: The exchange occurs instantly, and completion is swift.
Transparency: Bidders can view rival offers and respond instantly.

However, there are some disadvantages for the buyer:

Pressure: Buyers need to act swiftly, as they can be outbid easily.
Finance risk: Mortgage arrangements must be sorted before bidding, which can restrict buyers. Also, cash buyers, without a reality check from a mortgage lender, can easily become carried away in the auction atmosphere and overstretch financially.
Upfront costs: Legal and survey fees are payable even if the buyer does not win the auction.

What is the modern method of auction?

Also known as a conditional auction, the modern method of auction is conducted online and offers greater flexibility. On acceptance of the winning bid:

The buyer pays a non-refundable reservation fee.
The buyer then has 28 days to exchange contracts and a further 28 to complete.

The advantages of the modern method of auction are:

A wider pool of buyers: More time allows mortgage buyers to take part.
Lower initial risk: Less pressure than in-room auctions.
Convenience: The process is entirely online with clear timelines.

However, for the buyer, the drawback is paying reservation fees. These are in addition to the purchase price and are non-refundable. Furthermore, both parties must remember that the deal is not legally binding on the bid’s acceptance, so the transaction may fall through.

There has also been criticism directed at agents for not fully explaining the operation of fees to buyers.

Key differences at a glance

Feature	Traditional Auction	Modern Method of Auction
Sale type	Unconditional (legally binding)	Conditional (not binding at bid stage)
Completion time	28 days after auction	Up to 56 days (28 to exchange, 28 to complete)
Buyer type	Mostly cash/mortgage-ready	Broader pool, including mortgage buyers
Upfront costs	Survey and legal fees	Reservation fee and optional surveys
Flexibility	Low	Higher
Risk of falling through	Low (post-auction)	Higher than traditional auctions

Which is right for you?

Sellers aiming for speed and certainty may prefer the traditional auction, especially for properties with high demand or requiring quick disposal. However, those targeting a wider audience – such as first-time buyers or those relying on a mortgage – might find the modern method beneficial.

Buyers must carefully consider their readiness to commit, financial circumstances, and risk tolerance. Understanding the legal implications and (arguably) hidden costs – particularly reservation fees – is crucial.