A member of a prominent legal network is warning buyers and their conveyancers to be ”wary” of the Modern Method of Auction because of the fees attached to the process.
A member of the Bold Legal Group - an information exchange service whose members conduct around a third of all property conveyancing in the UK - has issued the warning.
It says: “We are coming across more and more properties being dealt with in this manner and there are a few well known estate agencies where this is becoming the norm.
“Clients and their lawyers really need to be wary as buyers pay a non-refundable ‘reservation fee’ – usually a percentage of the purchase price.
“Many clients do not realise this is an extra payment on top of what they have agreed to pay for the property and I suspect nearly all will not realise that this sum will need to be taken into account in the calculation of the stamp duty payable.”
The warning appears from the unnamed conveyancer in a BLG newsletter to members.
Modern Method of Auction allows buyers to bid on a property online with a long completion timescale - rival purchasers may have up to 30 days before the end of the bidding - giving the eventual buyer time to sort mortgage finance.
However, once the online hammer falls, the buyer must pay a substantial non-refundable reservation fee: this can be several thousands of pounds and can, depending on the property price, attract stamp duty.
This fee, hitherto attracting little publicity, has prompted a number of concerns from consumer bodies and some agents.
The HomeOwners’ Alliance has written a major report on the process, describes the world of online auctions as “murky” and says the reservation fee - which it claims can be £5,000 - is little-known and “goes straight to the auctioneers and estate agent.”
IAM Sold, the country’s largest MMA operator which works with 1,900 estate agency branches, says the HomeOwners’ Alliance report highlights “confusion from buyers and sellers, and evidently, not enough transparency from some agents.”
Late last year IAMSold revealed that on a £19m turnover in the financial year to the end of October it generated £10.6m for agent partners based on 3,300 completed sales.
It also said its annual customer survey showed an 87 per cent recommend rating from consumers and an average nine out of 10 in its annual service review by partner estate agents.