The Modern Method of Auction: Is “No Fee to the Seller” Really a Free Sale?

The Modern Method of Auction has become an increasingly common sight on property portals.

It is easy to understand why estate agents and auction companies promote it. Sellers are offered an auction legal pack, a structured sales process, fixed timescales and, frequently, little or no estate agency commission to pay themselves.

For an agent, it can appear easier to win than a conventional sole-agency instruction. Instead of discussing a commission of perhaps 1% plus VAT, the seller can be told that the buyer will meet the auction costs.

But that does not mean the sale is free.

It normally means the selling cost has been moved from one side of the transaction to the other. Once that cost is included in the buyer’s overall budget, it can affect affordability, mortgage options, demand and ultimately the price the seller receives.

At House Sussex, we believe the fundamental question should be:

What is the Modern Method of Auction?

The Modern Method of Auction, sometimes called a conditional auction, sits somewhere between a traditional property auction and an ordinary private-treaty sale.

The successful bidder will usually:

• Pay a substantial reservation fee immediately.
• Sign a reservation agreement.
• Receive an exclusivity period.
• Be given a defined period—often up to 56 days—to exchange and complete.
• Arrange their legal work, survey and mortgage during that period.

Unlike a traditional unconditional auction, the winning bid does not normally result in an immediate exchange of contracts. The reservation fee creates a financial commitment, but the buyer is not necessarily contractually bound to complete the purchase at that point.

That distinction is important.

The buyer can still withdraw, but they may lose thousands of pounds if they do. The seller receives evidence of commitment, but not necessarily the same legal certainty provided by exchange of contracts.

The Property Ombudsman’s 2026 auction report acknowledges that auctions can provide speed and defined timescales. However, it also warns that modern auction can look like an ordinary estate agency sale while involving substantially different costs, deadlines and commitment points. The Property Ombudsman’s Auctions Guide

How large are the buyer’s fees?

Fee structures vary between auction providers and properties, so every legal pack and reservation agreement must be checked individually.

However, iamsold currently gives a typical Modern Method of Auction reservation fee of 4.5% of the purchase price including VAT, subject to a minimum of £6,600 including VAT.

The company also confirms that:

• The fee is normally paid on top of the agreed price.
• It is used to cover the auctioneer’s and estate agent’s fees.
• It is generally non-refundable.
• It does not normally form part of the property purchase price.
• A separate Buyer Information Pack fee may also apply.

These are the provider’s own published figures and explanations. iamsold fee information

Consider what this means in practice:

*Before conveyancing, survey, mortgage costs, removals and any applicable property taxes.

A seller looking at a £250,000 winning bid may understandably believe the market has paid £250,000 for their home. But the buyer has committed £261,250 before the normal costs of moving.

That buyer is unlikely to ignore the additional £11,250 when deciding how much to bid.

The seller does pay—through the buyer’s bid

Auction providers are generally open about the fact that buyers should include the reservation fee within their total budget.

That point dismantles the idea that the seller is receiving a genuinely free service.

Suppose a buyer believes a property is worth £250,000 and has a maximum acquisition budget of approximately that amount. In an ordinary sale, they might be prepared to offer close to £250,000.

If purchasing through a modern auction with a 4.5% buyer’s fee, their equivalent bid would be approximately £239,000:

• Auction bid: approximately £239,000
• Reservation fee: approximately £10,755
• Total: approximately £249,755

The seller has avoided paying an estate agency commission directly, but may have received approximately £11,000 less for the property.

For comparison, a conventional fee of 1% plus VAT on a £250,000 sale would be £3,000.

This does not prove that every modern auction property sells for less. Competitive bidding could produce a strong result. But the reservation fee creates an unavoidable financial headwind: every rational buyer should include it in their maximum bid.

Even the auction industry advises buyers to do exactly that.

The effect on first-time buyers and mortgage borrowers

The greatest concern is the impact on buyers with limited cash.

A reservation fee is not normally treated like a conventional exchange deposit. It does not build equity in the property and is not deducted from the completion balance.

iamsold states that it is unlikely a mortgage lender will include auction fees within its mortgage calculation. iamsold mortgage and fee explanation

Consider a first-time buyer purchasing at £250,000 with a 10% deposit:

The buyer has not simply paid a more expensive version of their deposit. They need the deposit and the reservation fee.

If the buyer only has £30,000 available, the fee cannot simply be removed from the deposit while leaving the mortgage unchanged. A smaller deposit could move the buyer into a higher loan-to-value bracket, produce a more expensive mortgage rate or make the application unworkable.

This can exclude precisely the buyers who often have the greatest need for affordable homes.

It also reduces the seller’s potential market. A property may technically be mortgageable, but the sales method can make it practically unaffordable for buyers without substantial additional savings.

Possible additional Stamp Duty

A compulsory fee can also form part of the chargeable consideration for Stamp Duty Land Tax.

HMRC states that a buyer-paid fee may need to be included where paying it is a condition of acquiring the property or completion is dependent upon it. The treatment depends on the facts and terms of the individual transaction, so buyers should obtain advice from their conveyancer. HMRC guidance on fees and chargeable consideration

This matters particularly where the combined price and fee crosses an SDLT threshold.

For first-time buyers in England, the current nil-rate threshold is £300,000, with 5% charged on the portion between £300,001 and £500,000. Current residential SDLT rates

An additional-property buyer can face an even more significant tax effect because higher SDLT rates apply.

The buyer can therefore end up paying tax on a compulsory charge which does not increase their ownership stake in the property and is not received by the seller as part of the price.

A conflict at the point of advice

There is another issue that deserves discussion: incentives.

Under many partnership models, the referring estate agent receives a share of the buyer-funded auction charge. The exact amount varies by provider and agreement, and sellers should never assume a particular figure without seeing it in writing.

However, where an agent may earn more from recommending auction than from a conventional sale, a potential conflict arises.

That does not automatically mean the recommendation is wrong. Modern auction may genuinely be suitable. But the seller should be told clearly:

• What the total buyer’s fee is likely to be.
• How much the estate agent will receive.
• How that compares with the agent’s conventional commission.
• Whether the fee is payable immediately after reservation or only on completion.
• Whether the agent benefits financially if the buyer pays a fee but the property never completes.
• How the buyer’s fee could affect demand and the final bid.
• What alternative methods of sale were considered.

An agent’s duty should be to advise on the method most likely to serve the seller’s objectives—not the method producing the highest or fastest referral income.

Is 56 days really enough to arrange finance?

One of the Modern Method of Auction's main selling points is its extended completion period. Unlike a traditional auction, where completion may be required within 28 days, buyers are commonly given up to 56 days to complete.

For an ordinary residential buyer with a straightforward property, a broker already instructed and an agreement in principle, that may be achievable.

For commercial, semi-commercial and development property, however, 56 days can be seriously restrictive.

Commercial lenders frequently require:

• A full commercial valuation.
• Detailed title and lease reviews.
• Evidence of rental income or proposed use.
• Business plans and cash-flow forecasts.
• Planning and building-regulation information.
• Environmental, structural or specialist reports.
• Personal guarantees and additional security.
• Credit approval by an underwriter or lending committee.

These steps do not necessarily begin immediately. The buyer must first appoint advisers, submit a complete application and pay valuation and legal fees. The lender then needs to instruct its valuer, receive the report, approve the application, issue formal terms and complete its own legal work.

A commercial finance broker consulted by House Sussex has confirmed that, in practice, 56 days is often insufficient to assemble and complete a new commercial mortgage—particularly where the property is unusual, requires development or involves a limited company borrower.

Specialist bridging finance may be quicker, but it is generally more expensive and can introduce arrangement fees, valuation costs, legal charges, exit fees and higher interest. The buyer must then refinance onto longer-term borrowing after completion, creating a second round of costs and risk.

This has an important consequence for the seller.

A property may be suitable for a broad range of commercial investors or developers in principle, yet the auction timetable can restrict the realistic buyer pool to those who:

• Already have finance approved.
• Have an established relationship with a specialist lender.
• Can use existing property as security.
• Have access to bridging finance.
• Are able to purchase entirely with cash.

That can exclude credible buyers who would have been capable of purchasing through a conventional sale with a realistic financing period.

It can also reduce competition. Fewer finance-ready bidders can mean fewer bids and a lower eventual price—even though the seller was initially attracted by the promise of speed.

The advertised 56-day period should therefore not automatically be described as generous or mortgage-friendly. Its suitability depends heavily on the property, the type of lending required and the buyer most likely to purchase it.

For commercial and development opportunities, sellers should ask:

A fast completion is only valuable if the timetable still allows the right buyers to participate.

Is it really more secure?

The Modern Method of Auction does create a financial deterrent against withdrawal. A buyer who has paid £10,000 or more has a powerful reason to proceed.

But it should not be confused with immediate exchange of contracts.

If the buyer encounters a mortgage problem, an adverse valuation, a serious survey defect or an unexpected title issue, the transaction may still fail. The reservation fee determines who carries the financial loss; it does not guarantee that the seller will complete.

This creates an uncomfortable imbalance.

The buyer may be expected to commit a large non-refundable sum before:

• Receiving a final mortgage offer.
• Completing all legal enquiries.
• Obtaining a detailed survey.
• Fully understanding leasehold or title problems.
• Knowing whether the lender accepts the property.
• Establishing the true cost of necessary repairs.

In an ordinary sale, serious defects discovered before exchange may lead to renegotiation or withdrawal. In a modern auction, the buyer may be forced to choose between proceeding with a problematic purchase and losing the reservation fee.

That does not necessarily create a better transaction. It can simply transfer more risk to the buyer.

The complaint evidence

This is not a theoretical concern.

In June 2026, The Property Ombudsman reported that property auctions account for approximately 2% of home sales but generate more than four times their proportionate share of complaints.

Its casework identified:

• Reservation-fee disputes.
• Buyers believing fees formed part of the purchase price.
• Confusion over refund rights.
• Inaccurate marketing information.
• Incomplete legal packs.
• Unexpected charges.
• Unclear commitment points.

The Ombudsman called for the point of financial or legal commitment to be made “impossible to miss” and said providers should move beyond merely making information available towards ensuring that consumers understand the important risks. The Property Ombudsman’s June 2026 findings

That is an important distinction. Burying a charge inside an accessible document is not the same as explaining its consequences.

Does the Modern Method of Auction ever have a place?

Yes—but it should be used selectively.

It may suit:

• An unusual or investment-led property with a clearly identifiable auction market.
• A seller who prioritises a defined timetable over maximum price.
• A property attracting several informed cash or investment buyers.
• A transaction where the legal pack is complete and reviewed before bidding.
• A seller who fully understands how the buyer’s costs may affect bids.
• A situation where a conventional sale has failed and a different strategy is justified.

It is harder to justify where:

• The property is a conventional first-time-buyer home.
• The likely buyers have limited deposits.
• Achieving the highest open-market price is the seller’s main objective.
• The legal pack or material information is incomplete.
• The guide price is primarily being used to generate enquiries.
• The seller believes the buyer’s fee has no effect on their proceeds.
• The recommending agent earns materially more from the auction route without clearly explaining the conflict.

What should sellers ask before agreeing?

Before signing a modern auction agreement, sellers should obtain written answers to the following:

1. What exactly will the successful buyer have to pay?
2. Is the fee a fixed amount, percentage or whichever is higher?
3. Does VAT apply?
4. Does the fee form part of the purchase price?
5. How much of it will the estate agent receive?
6. When will the agent and auctioneer be paid?
7. What happens to the fee if the sale does not complete?
8. What evidence supports the proposed reserve and likely sale price?
9. How will the buyer’s fee affect achievable bids?
10. What would the seller pay under an ordinary sole-agency agreement?
11. Is there a seller-paid auction option that would reduce the buyer’s burden?
12. Why is auction being recommended for this particular property?

A seller should also compare the likely net result, not merely the visible invoice.

The House Sussex view

The problem is not auction itself.

Traditional auctions provide an established, transparent and valuable route for properties requiring speed, certainty or specialist buyers. A properly advised modern auction can also work.

The problem is presenting a buyer-funded sales model as if the seller pays nothing.

The buyer supplies the money for the entire transaction. If the buyer must pay an additional £10,000 or £15,000 to acquire a property, that money will influence the amount they can bid. It may reduce their deposit, worsen their mortgage options, increase their tax liability or exclude them altogether.

The seller might never receive a commission invoice, but that does not mean the seller has escaped the economic cost.

A fairer system would require:

• Buyer fees displayed alongside the guide price with an illustrative total acquisition cost.
• Clear disclosure to sellers of the agent’s financial benefit.
• A written comparison with conventional agency and traditional auction.
• Legal packs and material information completed before bidding begins.
• Stronger and more consistent refund protection.
• Reservation charges proportionate to the genuine cost of the service.
• Evidence that the recommended method serves the seller’s objectives.

Property professionals should not judge a method of sale by how easy it is to win the instruction or how quickly a fee is generated.

The test should be much simpler:

Too often, the Modern Method of Auction risks falling short for both sides.

---

This article provides general market commentary and does not constitute legal, mortgage or tax advice. Fees and contractual terms vary, and buyers and sellers should obtain independent advice before entering an auction agreement.