In a new regular feature on Island Echo, Charlie Panayi, CEO of Red Squirrel Property Shop, gives a monthly update on the Isle of Wight’s property market…
The property market is constantly evolving, with estate agents always looking for new ways to attract business. One of the latest trends on the Island is the use of modern auctions, a method being marketed as a quick and cost-effective way to sell property. But is it really the best option for sellers?
Modern auctions are often presented as a hassle-free alternative to traditional sales, promising “no fees for the seller,” a “guaranteed sale,” and “completion within 56 days.” At first glance, this sounds like an attractive proposition. However, while modern auctions may be suitable in specific circumstances, they are not always the best route for every seller.
Understanding Modern Auctions
Modern auctions differ from traditional auctions in that they allow buyers to bid online within a set time frame. The highest bidder then secures the property by paying a non-refundable reservation fee, which is typically a percentage of the purchase price. The sale is expected to complete within a set timeframe, usually 56 days.
This method can work well for distressed properties, homes in need of significant renovation, or sellers who require an urgent transaction way below market value. However, many agents are now promoting modern auctions as a ‘one-size-fits-all’ solution. Not necessarily because it benefits the seller, but because it benefits them.
The Downsides for Sellers
While modern auctions may appear appealing, there are several potential drawbacks that sellers should consider:
- Buyers Pay the Fees – And More: Instead of the seller paying commission, the buyer is responsible for a substantial reservation fee, often much higher than a standard estate agent’s commission. Buyers typically factor this cost into their offer, reducing the purchase price accordingly. In many cases, this results in the seller receiving significantly less than they would through a traditional sale, often costing them more in the long run than a standard selling fee.
- Limited Market Appeal: Many buyers are deterred from modern auctions due to the high upfront costs and stricter terms. Those requiring a mortgage or needing to sell their own property first may struggle to meet the tight deadlines imposed by this sales method. This means fewer potential buyers, reducing competition and potentially lowering the final sale price.
- Not Necessarily a Faster Sale: A key selling point of modern auctions is that they are marketed as a quicker way to sell a property. However, in practice, many auction listings remain unsold for longer periods compared to traditional methods. This is due to the restricted buyer pool and financial constraints that come with auction purchases. While the transaction might move quickly once a sale is agreed, it can actually take longer to find a committed buyer in the first place.
- Potentially Lower Sale Prices: A well-marketed traditional sale can often result in a higher final sale price. The competitive nature of the open market, combined with a tailored marketing strategy, frequently leads to better outcomes for sellers compared to the modern auction process.
Is It Really the Best Choice?
There is no denying that modern auctions have their place in the market. For certain sellers, they provide a swift and structured solution.
However, they should not be viewed as a universal best option for all properties. Sellers should be cautious of agents who push modern auctions as the only or best route without fully exploring the alternatives.
At Red Squirrel Property Shop, we do offer modern auctions as a service because they can be the right solution in the right circumstances. However, we believe in providing tailored advice based on individual needs, ensuring sellers choose the best strategy for their property. A well-executed traditional sale often delivers better results, with broader buyer interest and higher sale prices.
With the increasing number of modern auctions appearing on the Isle of Wight, it’s crucial for sellers to be informed about their choices. Understanding the pros and cons of all available sales methods will help ensure the best possible outcome.
For more information on selling your property and to explore the best options available, visit https://www.redsquirrelpropertyshop.co.uk/contact-us.
For more insights, visit www.redsquirrelpropertyshop.co.uk or www.charliepanayi.com.
Auctions = lower selling prices, cannot
beat the old fashioned way of selling
properties.