The Modern Method of Auction has become increasingly popular with estate agents and auction providers, often being promoted as a quicker, more secure way to sell a property.

The promise is attractive:

• A committed buyer.

• A faster sale.

• Fewer fall-throughs.

It all sounds great... if everything goes to plan.

But before you choose this route, ask yourself one simple question:

What happens if the sale falls apart?

In a traditional property auction, when the hammer falls the buyer immediately pays the auctioneer's buyer's premium (where applicable) together with a 10% deposit. Contracts are exchanged immediately, making the sale legally binding.

If the buyer later defaults, the seller has contractual protection and the deposit can help compensate them for their losses.

The Modern Method of Auction Works Very Differently.

Instead of paying a deposit towards the purchase, the successful buyer usually pays a reservation fee, often between 4% and 6% plus VAT, simply for the exclusive right to buy the property within a fixed period.

To put that into perspective, on a £350,000 property a reservation fee charged at 6% plus VAT would amount to £25,200.

Unlike a traditional deposit, this reservation fee does not usually form part of the purchase price. It is generally retained under the auction provider's terms and, depending on the commercial agreement, the introducing estate agent may also receive a referral fee or share of the revenue.

If The buyer Can't Proceed - The buyer may lose all of their £25,200 reservation fee. The auction will get paid, the estate amy well get a share too, but the seller gets nothing

Instead, they'll just have lost weeks—or even months—while their property has been tied up before returning to the market to start all over again.

Who Wins and Who Loses?

*Commercial arrangements vary between auction providers and estate agents.

Is That Fair?

We're not suggesting the Modern Method of Auction has no place. Certain properties and certain sellers can genuinely benefit from this method of sale.

However, we believe sellers deserve similar protection to that offered in a traditional auction.

If a buyer is paying many thousands of pounds before completing their purchase, shouldn't at least part of that money compensate the seller if the buyer later withdraws?

At present, a failed transaction can leave:

• The buyer out of pocket.

• The seller back to square one.

• Yet the reservation fee may already have been retained in accordance with the auction agreement.

That raises a genuine question about whether the balance of risk is being shared fairly.

Questions Every Seller Should Ask

Before agreeing to the Modern Method of Auction, ask your estate agent:

• Who keeps the reservation fee if the sale fails?

• Do I receive any compensation if the buyer withdraws?

• Does the estate agent receive a referral fee or commission from the auction provider?

• Why isn't part of the reservation fee used to protect the seller?

If you don't know the answers, make sure you do before signing any agreement.

What Do You Think?

Should reservation fees continue to work this way?

Or should sellers receive compensation when a buyer withdraws after paying a substantial reservation fee?

We'd genuinely like to hear your views. Is the current system fair to buyers and sellers, or do you think it needs reform? Leave your comments below.