Online auctions and modern method of auction explained
An online auction is not a faster private sale. It is a different product with different rules, and the fee structure decides who pays for the speed.
Online auctions and modern method of auction have become the default route for a fast sale in many parts of the country. The property is marketed for a set period, usually four to six weeks, bids are placed through a platform, and the sale is agreed at a fixed date.
The formats differ mainly in when the contract becomes binding and who pays the fee, and the difference matters more than the marketing suggests.
The two formats
A traditional online auction is unconditional: the successful bidder exchanges immediately and completes within a fixed period, usually 28 days. A modern method of auction sale is different — the buyer pays a non-refundable reservation fee and typically has 28 to 56 days to exchange, with the seller unable to accept other offers in that window.
- Traditional online auction: immediate exchange, completion in 28 days, buyer pays deposit
- Modern method of auction: reservation fee of 4–5% plus VAT paid by the buyer, exchange within a set window
- Reservation fee is usually paid on top of the price, which reduces what buyers can bid
- Seller's fee may be low or nil in the modern format, because the buyer is paying
- The property is withdrawn from the open market for the duration of the reservation period
Who really pays
The claim that the seller pays nothing in a modern method of auction is technically true and economically misleading. The buyer's reservation fee reduces the amount the buyer can afford to bid, so the cost is reflected in the price achieved.
On a £250,000 property, a 4.8% buyer's fee is roughly £12,000. A buyer with a fixed budget will bid £238,000 rather than £250,000, so the fee has effectively been paid by the seller through a lower price. Whether that is better or worse than paying a conventional commission depends on the numbers.
When the format works
It works best for properties that are hard to sell conventionally — needing work, non-standard construction, short leases, tenanted — where the certainty of a sale on a fixed date is genuinely valuable, and for sellers with a deadline they cannot miss.
It works less well for a desirable property in a strong market, where an open market campaign would attract competing buyers. Sending a good property to auction usually means selling it for less than a conventional sale would have achieved, because the audience is narrower and the fee structure suppresses bids.
Common questions
- Is a modern method of auction sale binding?
- Not immediately. The buyer pays a non-refundable reservation fee, which commits them financially, and then has a set period — commonly 28 to 56 days — to exchange contracts. If they fail to exchange, they lose the reservation fee but you have lost the marketing period. In a traditional auction, exchange is immediate and the sale is binding at the fall of the hammer.
- Do I pay fees in a modern method of auction?
- Usually little or nothing, because the buyer pays a reservation fee of around 4–5% plus VAT. But that fee reduces what buyers can bid, so the cost is reflected in the price. Compare the net proceeds against a conventional sale rather than comparing the headline fees.