16 Apr 2019 By WengYee Loke
If you are currently in the market for buying property, you may have come across the modern method of auction. Or as we call it, a conditional auction. This method of sale is increasing in popularity and it wouldn’t surprise us if it catches up with the private treaty method.
Need a refresher? Read our post here on the difference between a traditional and a conditional auction.
But why is it the ‘modern method’? How has it evolved from the traditional auctions/methods of sale (like private treaty)? Below are a few reasons why the modern method of auction can improve property transactions. After all, it gives everyone a fast, certain and transparent process. All the makings of a modern property sale.
With the rise of on-demand services, it is the natural progression that you can buy a house at your convenience. Most, if not all conditional auctions happen online. This lets interested individuals bid anytime, anywhere. Whether you are on a boat out sailing in Greece or sitting in bed in your pyjamas on a Friday night, bid away!
Note: We also have partners who utilise a traditional auction online - which sees an immediate exchange when the timer reaches zero. So it’s not limited to conditional auctions. Be aware of which method the property that interests you is being sold by.
In contrast to a traditional auction, you don’t have to be a cash buyer to buy at a conditional auction. The modern method opens up the doors to potential buyers who need to raise finances to purchase. As it is a conditional auction, this gives the buyer 20 days to exchange on the property. This should be enough enough time to get a mortgage arranged.
With a deadline for exchange, it gives everyone a concrete goal to work towards. There is no unnecessary delays as both parties are legally obliged to exchange on a set date. So when compared to private treaty method of sale, it can be faster (and more certain).
Gazumping: Gazumping occurs when a seller accepts a verbal offer on the property from one potential buyer, but then accepts a higher offer from someone else. -Wikipedia
Gazundering: The practice whereby a prospective buyer (especially of property) makes an oral offer (a promise to purchase) on the property at an agreed price but subsequently threatens to withdraw the offer unless the seller agrees to a lower price. -Wikipedia
Yes there are technical terms for people who like to play games when buying/selling property. In a private treaty sale, you can only keep your fingers crossed that the buyer/seller you are dealing with don’t play these games. Nothing is more frustrating than having the deal pulled out from right under your feet at the last minute.
A recent article has found that gazundering is becoming an increasing worry for home sellers. With 45 percent of people concerned about this - up from 40 percent last year.
With a conditional auction, if the reserve has been met at the end of the auction; both buyer and seller enter into a legally binding reservation contract.
This means that:
When property is ‘sold’ via private treaty, it might be the first reasonable offer that gets to ‘buy’ the property. *Most private treaty sales are actually Sold Subject to Contract. If you are a day late in making your offer, the seller would have already accepted another offer and ‘sold’ the property.
With the modern method, everyone gets a fair chance to make an offer for the property. The auction timer is set to end at a specific time. This gives everyone interested the opportunity to make a bid.
In a nutshell, the modern method of auction is still similar to a traditional auction. But with extra flexibility - something we have come to expect from present day services.
A few reminders if you’re planning on bidding on a conditional auction.
Make sure you: - Know how much the fee is. - Are happy with the legal pack. - Be prepared with your finances (or at least a plan!).
Sure a conditional auction may not be suitable for everyone. But when it works, it works! It gives both buyer and seller a fast, certain and transparent property transaction.
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