Zoopla has entered into a partnership with an online platform to promote the so-called Modern Method of Auction option to estate agents.
The portal is to launch a marketing campaign later this year to “highlight the benefits auctions bring to both buyers and sellers” as part of its link with iamsold, the UK’s largest property auction house.
Zoopla - which describes this as an industry-first - says its work in the coming months will help agents expand their activities to embrace online auctions and will also “educate homemovers.”
MMA has been criticised in the past by groups such as the HomeOwners Alliance for its high fees, usually paid by the purchasers.
MMA allows prospective buyers to place bids on a property within a given timeframe. At the end of the auction, the highest bidder is required to pay a reservation fee to secure the property.
The buyer then has 28 days to exchange and a further 28 days to complete.
The fledgling sector has been criticised by some for an alleged lack of transparency over the non-refundable reservation fees paid by purchasers, which often cost around £5,000 plus VAT or five per cent of the agreed purchase price.
iamsold, which already has links with some 2,500 agency branches even before the Zoopla partnership, has developed what it calls a ‘Best Practice Guide’ outlining the the code of conduct for those agents offering MMA.
Currently, only two per cent of property transactions in the UK are completed via auction but Zoopla says this type of disposal enjoys high completion rates compared to traditional sales, 25 per cent of which fall through, costing sellers £400 million in fees, and jeopardising millions of pounds in agent commission.
A statement from Zoopla says that “in contrast, the Modern Method of Auction, where the whole process is completed online, offers a range of benefits for both agents and homemovers alike.” The portal claims MMA secures a completion rate of around 95 per cent.
“Our mission at Zoopla is to be the agents’ champion and by partnering with iamsold we believe we are doing just that. Our research shows property auctions are misunderstood by many agents and consumers alike but we are confident that in iamsold we have a partner that can help us bring auctions to a whole new generation of homebuyers who might have only ever seen them on TV” says Andrew Marshall, Zoopla’s chief commercial officer.
“The benefits of selling at auction for agents are clear. Faster sales, higher completion rates leading to an increased rate of return. It’s also a great way to bring to the fore properties that might have previously struggled to get the attention they deserve. We firmly believe that all of this, combined with Zoopla’s reach and recognition, will be a winning combination for agents in the months and years ahead.”
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I have been saying for some time that in the portal arms race - Zoopla will convert to a sales platform, in order to trump Rightmove, the inclusion of auction on Zoopla and its heralding this as a better solution than private treaty will be very interesting.
The grey area is indeed fees, at auction some agents are charging the buyer 2% as a fee, which in my mind must lessen the selling price as it would need to be factored into the transaction, eg I bid 500k, but as I have to pay 10k to the auctioning agent I will bid 490K to compensate.
The compelling immediacy of auction is brilliant, but the halfway house the 28 days to exchange for me is a bit of a fudge, having overseen maybe 18,000 sales in 30 years of being an agent, an exchange on the gavel is worth far more than a hope of an exchange dependent on factors that are yet to come over in the next four weeks.
Lockdown has given real estate a reset button for sure.
What's in it for Zoopla? Is it a paid sponsorship arrangement?
Trust Zoopla!
I am not surprised to see Zoopla jumping on the MMA bandwagon. The reservation fee goes to them in the event of default, along with the eye-watering sales fee. The major winner of any sale is the auctioneer and the loser is either the vendor who receives a reduced sales price or the unwitting buyer who hasn't realised he has to stump up another wedge on top of the agreed purchase price.
Zerchingg and doubles all round at the Zoopla office, methinks.
I've seen this at work up North, the vendor is always the loser. They think it's a good deal because the buyer pays the fees, then the buyer wants the £6K off to counter the cost. Agents have actively coach buyers into how to make a bid to secure a sale at the behest of the vendor.
As I have mentioned to the point of boredom I'm sure, this so-called "Modern" method is going to blow up in their face before long. This is quite simply because the massive reservation fees encourage people to take action when they have been disappointed which they would not otherwise be bothered to do and a large number of marketing agents are doing something wrong, whether it is glossing over the reduction in sale price to sellers because bidders are reducing their maximum bids or simply not crossing the Ts and dotting the Is. The only light in the tunnel at the moment is the fact that an increasing number of traditional auctioneers using the method (and it can be a good method of sale when used correctly) are not charging massive fees and that could kill the goose. Wait for the national media to pick this all up, which should be in three to four months time when the Covid news is hopefully on the back page.
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