A firm which links with agents to operate online auctions has hit back at a consumer group's allegations that this growing sector is “murky” and “milking buyers for profits.”
IAM Sold, which works with 1,900 estate agency branches, says the report from the HomeOwners’ Alliance - which we carried yesterday here, and which was sharply critical of some auction operators and agents - highlights “confusion from buyers and sellers, and evidently, not enough transparency from some agents.”
The HOA is concerned at what it regards as the high and often under-publicised reservation fee paid by the successful purchaser.
“This must be paid upfront by the winning bidder at the auction’s close by debit or credit card or bank transfer and can be anything upwards of 2.5 per cent + VAT. There is usually a minimum reservation fee of at least £5,000 + VAT.”
The HOA continues: “And it [the reservation fee] doesn’t usually form part of the overall price paid; it’s an add-on which goes straight to the auctioneers and estate agent.”
The association says the fee - even if shared equally between agent and auction platform - means the agent stands to receive more from an auction buyer than from a traditional seller in a private treaty deal, particularly on lower-price properties.
However, a lengthy statement from online auction service IAM Sold - which is featured in the HOA report - makes a vigorous defence of the growing online auction sector and links between agents and online platforms.
“From the offset, IAM Sold talk through all methods of disposal with sellers; the outcome of this transparent and informative approach is that for almost two thirds of sellers, it is not the right tactic for them to sell via auction. That is a consistent metric IAM Sold have seen over nine years of trading” says Jamie Cooke, managing director of IAM Sold.
“Sellers choose the Modern Method of Auction for speed and security if in need of a guaranteed sale, or in the case where a seller wants the competitive bidding environment to maximise value. The seller also chooses the fee model - pay the reservation fee or charge their buyer. Likewise, the charging of reservation fees to buyers as a method of an upfront security payment is completely clear to all parties involved in the transaction” he continues.
Cooke admits that in general online auction fees are higher than private treaty commission. But he insists "the seller is receiving a service from two professional companies which results in the property getting sold in a timeframe that suits their needs at a price that they are happy with.”
He continues: “Buyers are willing to pay a premium for speed and security and to secure the property that they want. The fees charged by IAM Sold and our partners are made clear to all parties at all points of the transaction; prior to payment they are required to read and sign a very clear and specific reservation form which again, states the cost of fees, purchase price, timescales and terms of the agreement.”
He says a copy is available in a free-to-download pack for all properties, and that all buyers are made aware of the reservation fee and all specific terms and condition in advertising on a portal, an agency’s website or that auction platform itself.
The pack, claims Cooke, offers more security to a buyer that they would get in a mainstream private treaty transaction because it includes copies of title and title registry, searches, a property information forms and property information questionnaires along with other documents specific to a property.
“Fees and charges are clearly marked on the bidding platform and calculated as part of the bidding process. Buyers enter into all transactions fully aware of their obligations” he says, adding that only five per cent of transactions via his online auction method falls through compared to around 30 per cent in private treaty.