Estate agents acting under a new Code of Conduct should warn sellers using the Modern Method of Auction that there are disadvantages as well as benefits to the system.
Specifically sellers must be made aware at the outset that the method may not secure them the best price as buyers may factor in their premiums.
The warning comes from the industry itself in a new Code which has been put together by leading modern method of auction provider iamsold.
With input from the Property Ombudsman, the Code says that agents should: “Explain any buyer reservation fee/buyer premium to the vendor.
“If these are paid in addition to the purchase price, confirm the buyer may consider the fee as part of the total amount they wish to pay for the property.”
The new best practice guide has also had input from auction data firm Essential Information Group.
The Code refers to “clients” but stops short of specifying who the agent’s client is – the seller, who pays no commission, or the buyer who does.
However, it does set out best practice as far as not only vendors are concerned, but also viewers and bidders.
Agents should take time to explain to potential buyers how the auction works, the fees payable, and the importance of viewing the information pack and doing their own due diligence.
The new code also says that agents should always state fees with VAT included, and that fees charged as a percentage must be confirmed as an actual amount including VAT.
Bidders should also be told of the associated Stamp Duty implications – although the guidance does not go into whether the buyer’s premium is part of the purchase price for tax purposes.
Newcastle-based iamsold – whose modern method of auction is white-labelled by a number of estate agents – is calling for other providers to adopt the guide.
Ben Ridgeway, of iamsold, said: “This best practice guide demonstrates our commitment to championing progress within our industry.
“MMOA is on an exciting upward trajectory as many are turning to it as an alternative to the unreliable status quo.
“At iamsold we operate with a well-respected, strong estate agent network and wanted to help educate our industry and those reporting on it, to increase awareness and ultimately improve the overall service offering.
“No one provider owns the space, but we believe all should comply to minimum standards, so all parties involved can make informed decisions.”