Traditional Auction Vs Modern Method of Auction: Which is Better?

If you’ve been thinking of selling a home at auction, you might have noticed there are two different kinds. As well as traditional auctions, there is a newer type called the “Modern Method of Auction”.

So, what’s the difference between modern auction and traditional auction?

Traditional property auctions offer a fast sale, with high certainty because contracts are exchanged on the day – but sale prices tend to be lower. Modern auctions usually take longer but can get you a higher price, if the property is in good condition. However, the sale is less certain, and completion takes longer.

In this article, we’ll explain the differences in more detail, and look at the pros and cons of both types of auction. We’ll help you decide whether a traditional auction or Modern Method of Auction is the best way to sell your home.

You might also have seen the terms conditional auction and unconditional auction. We’ll cover those, too.

Don’t want to wait? Click below to start our free online quiz and we’ll tell you in 2 minutes if auction suits you. If so, we’ll recommend the best one to use…

1. How does a traditional property auction work?

Even if you’ve never been to an auction yourself, chances are you’ve seen them on TV. (Especially if your guilty pleasures include Homes Under the Hammer or Bargain Hunt!)

The basic process is simple. Buyers gather in a room and bid on an item (or property, in this case). Whoever bids the most gets to buy it. Buyers can also bid by phone or over the internet – or the whole auction room might be online.

Top tip: These days, many auction rooms are virtual, not physical. But just because an auction is online, that doesn’t make it a modern auction.

Although the process is simple, auction rooms can be intimidating. Average buyers are less likely to venture in. Bidders are often canny professionals who like to drive a hard bargain.

Traditional auctions take place at a set time, often once a month. The auction house lists the properties for sale ahead of time, so buyers can research them.

The seller pays an “entry fee” (usually several hundred pounds). Then, when the property is sold, the seller pays commission, usually 1.5% to 2.5% of the sale price (plus VAT).

Each property will have two prices: a guide price and a reserve price.

• The guide price is listed on the advert and in the auction catalogue. Bidding usually starts at this price.
• The reserve price is the lowest amount the seller will accept. The exact amount is kept secret from bidders, but by law it must be within 10% of the guide price.

Buyers bid in real time against each other. When there is only one bidder left, the hammer falls and the sale is final – as long as bids hit the reserve price.

As soon as the auction ends, the buyer pays a 10% deposit to the seller and contracts are exchanged. This makes the sale legally binding, and the buyer and seller have 28 days to complete the sale.

(One caveat: while 28 days is usual, these conditions can sometimes be varied if the seller chooses.)

Top tip: Traditional auctions mean a fast sale, so there is usually no time to arrange a mortgage. That limits potential bidders to cash buyers.

2. How does the Modern Method of Auction work?

Unlike traditional real-time auctions, modern auctions are more like eBay. They can begin at any time, and usually last for a month or more.

Properties are advertised on estate agents’ websites, Rightmove and Zoopla. This means even buyers who aren’t looking at auctions can find them.

With the Modern Method of Auction, the seller doesn’t usually pay an upfront fee. (But beware: some auction houses do charge sellers an entry fee! Take our quiz and if modern method is right for you, we’ll only recommend one with no upfront fees.)

Instead, the winning bidder pays a “reservation fee”, usually 3%-5% (plus VAT) on top of the sale price.

Top tip: Even if you don’t pay any fees as a seller with the modern method, remember that the buyer does. If they have a final price in mind, they’ll knock the fee off when bidding, so the price you get will still be lower.

Like a traditional auction, there’s a secret reserve price that is usually higher than the starting price.

Buyers have more time to bid. Like eBay, prospective buyers can set a maximum price and the system will bid automatically. Unlike eBay, though, there’s no sniping. If a bid comes in at the last moment, the timer gets extended by a few minutes, letting other buyers respond.

Modern auctions attract a wider audience, and they have longer to bid. That means they can get you a better price than traditional auctions.

Modern auctions attract a wider audience, and they have longer to bid. That means they can get you a better price than traditional auctions.

Here’s a crucial difference: at the end of the auction, contracts don’t exchange straight away. Instead, the winning bidder pays a reservation fee. They then have 28 days on average to exchange contracts, and another 28 days to complete.

Would a modern auction be the best way to sell your home? We can tell you in 2 minutes!

Top tip: The reservation fee is not like the deposit paid to the seller in a traditional auction. If the buyer pulls out, they lose the fee – but it goes to the auction house, not the seller!

3. What are conditional and unconditional auctions?

Conditional and unconditional auctions are really just a different way of describing the difference between modern auction and traditional auction. It’s all about what happens when the hammer falls and how certain the sale is. It can be hard to remember which is which, so try this:

• The Modern Method of Auction is a conditional auction. The winning bidder is not legally committed – beware, “terms and conditions apply”.
• Traditional auctions, when contracts are exchanged straight away, are unconditional. The buyer loves your home unconditionally and the sale is (virtually) certain!

4. How do modern and traditional auctions compare?

Now that we’ve seen how each type of auction works, how do they stack up? Here are the differences at a glance:

*Modern auctions usually achieve a higher price than traditional auctions, but there's one exception. If a house is in poor condition or has a serious problem, it is likely to do better at a traditional auction.

Want to know more? We’ve also written a guide to the top 10 pros and cons of selling at auction.

5. Which type of auction is right for you?

Before choosing the right type of auction, first you need to decide whether auction makes sense for you.

Selling property is a compromise between price and convenience. If you want to sell quickly, chances are you’ll have to accept a lower price. If a higher price is more important, you need to be patient.

Auctions can be a great option if you value speed and certainty over getting the best price, but you don’t need a super-quick sale. It gives you a higher price than a home buying service, and a faster sale than an estate agent.

However, this method is not right for every seller, or every property. Answer our quiz to check if it’s right for you.

OK, I want to sell at auction. Which should I choose?

In most cases, it’s your home that will be the decider. Traditional and modern auctions attract different types of buyers, so they suit different types of property.

• Traditional auctions are best for problem properties. They attract buyers who see property as an investment. They’re looking for a bargain which they can add value to – like a run-down home they can do up and sell on. They are likely to be cash buyers, so it won’t matter if a property is unmortgageable due to subsidence or non-standard construction.
• Modern auctions are best for homes in good condition. They attract more “normal” buyers: families or first-time buyers looking for a home to live in. They might still be prepared to take on a project, but in general they will want a home with no major issues, which they can get a mortgage on.

Related: What Types of Property Are Suitable For Auction?

6. What are the alternatives to selling by auction?

As we mentioned above, selling a home is a trade-off between speed and price.

Auctions sit somewhere in the middle. They pay more than a quick-sale company, but take longer. They’re faster than an estate agent, but you won’t get full market price.

So:

• If speed is vital, you could consider a quick-sale company. This will give you the fastest result (you can sell in as little as two weeks), but you will have to compromise on price. A genuine house buying company will only be able to offer you around 78-83% of your home's market value.
• If price is more important, an estate agent might be the best route. A good agent will be best placed to get you the best possible deal, but you might have a long wait: 25 weeks on average. And you might not sell at all: estate agents only shift about half of homes they list.

Can’t decide? We created a free online quiz to help. Just answer a few questions and we’ll advise you on the best way to sell, based on your home and your priorities. Best of all, we’ll recommend a company we know and trust. Click below to get started.