What is the Modern Method of Auction?

What the Modern Method of Auction actually is

The Modern Method of Auction (MMoA), also called a conditional auction or online auction, is a way of selling property through timed online bidding rather than in an auction room on a fixed day.

The key word is "conditional". In a traditional auction, the fall of the gavel is an exchange of contracts: the buyer is legally committed there and then, pays a 10% deposit immediately, and usually completes within 28 days. In an MMoA sale, winning the bidding does not exchange contracts. Instead, the winning bidder pays a reservation fee that takes the property off the market and gives them an exclusivity period to get the purchase done.

MMoA lots are typically listed by local estate agents through platforms such as iamsold or Pattinson Auction, running alongside the agent's normal sales. The stock tends to look more like ordinary estate-agency stock than classic auction stock: more habitable homes, fewer wrecks, and sellers who chose auction for speed and certainty rather than because the property could not sell any other way.

Some MMoA lots run with a fixed bidding deadline; others run rolling sales with no fixed end date and simply show as open for bids until an acceptable offer arrives.

The reservation fee: the number that changes your maths

The defining feature of MMoA is the reservation fee. When you win, you pay the auction platform a fee on top of your bid, typically around 4-5% of the purchase price including VAT, with a minimum that is commonly in the £6,000-£7,000 range. The exact percentage and minimum vary by platform and by lot, and they are always stated in the lot particulars.

Three things matter about this fee:

It is on top of the price. It does not come off the purchase price and it does not go to the seller. On a £100,000 winning bid with a 4.5% fee, your real acquisition cost is £104,500 before legal fees, tax and works. On cheaper lots the minimum fee bites hard: a £60,000 bid with a £6,600 minimum fee is an 11% premium.

It is non-refundable. If your survey turns up a problem, your mortgage falls through, or you simply change your mind after winning, you lose the fee. This is what buys the seller certainty.

It may affect your tax. Depending on how the fee is structured, HMRC can treat it as part of the chargeable consideration for Stamp Duty Land Tax. Ask your solicitor to confirm how the fee on your specific purchase is treated before you rely on an SDLT figure.

The 56-day timescale, and why mortgage buyers can play

The standard MMoA timetable gives you 56 days from the date you receive the draft contract: normally 28 days to exchange contracts and a further 28 days to complete. Some platforms and lots vary this, so check the particulars, but 56 days is the common pattern.

This is the feature that opens MMoA to mortgage buyers. A traditional auction's 28-day completion is very tight for a mortgage application, which is why traditional auctions skew towards cash and bridging finance. Eight weeks is enough time for most buy-to-let mortgage applications to go from full application to offer to completion, provided you start prepared.

Prepared means: a decision in principle already in place before you bid, a lender whose criteria fit the property (some lenders dislike properties below a value floor, above commercial premises, or of non-standard construction), and a solicitor who has already reviewed the legal pack and can start immediately.

If the mortgage is not done in time, you are exposed. The seller can walk away and keep your reservation fee. Investors who cannot complete on schedule sometimes end up taking bridging finance at short notice to save the fee, which is an expensive way to rescue a deal. If your financing is uncertain, price that risk in or do not bid.

MMoA vs traditional auction: the real differences

Commitment: traditional auction exchanges contracts on the hammer, MMoA gives an exclusivity period with a fee at risk on both sides of the decision. Counter-intuitively, MMoA is legally less binding on the seller too: until exchange, the seller can also withdraw (though in practice they rarely do, and platforms usually then refund the buyer's fee).

Upfront cost: traditional auction takes a 10% deposit on the day, which counts towards the price. MMoA takes a roughly 4-5% reservation fee that does not count towards the price.

Timescale: traditional auction usually completes in 28 days; MMoA usually allows 56 days to exchange and complete.

Finance: traditional auction effectively requires cash or bridging; MMoA is designed to work with mortgages.

Stock: traditional auction catalogues carry more distressed, problem and unmortgageable stock, which is where the deepest discounts live. MMoA stock is closer to normal market stock, so headline discounts tend to be thinner once the fee is counted.

Competition: MMoA lots are marketed to ordinary home buyers through the estate agent and the portals, not just to investors, so you may be bidding against owner-occupiers who think in terms of the asking price of a home rather than the yield of an investment.

Running the numbers on an MMoA lot

Work through an MMoA lot exactly as you would any other deal, with one adjustment: your effective purchase price is the winning bid plus the reservation fee.

Worked example. A two-bed terrace has a starting bid of £79,000 and you win at £92,000. The reservation fee is 4.5% including VAT with a £6,600 minimum, so the fee is £6,600 (4.5% of £92,000 is £4,140, below the minimum, so the minimum applies).

Effective price: £98,600. If comparable sold prices for the street are around £105,000, your true discount is about 6%, not the 12% the bid alone suggests.

Yield: if the realistic rent is £650 per month, gross yield on the bid is 8.5%, but on the effective price it is 7.9%. Run your cashflow, refinance and return calculations on the effective price. The Proppys calculator lets you add the fee into your purchase costs so the BRRR numbers stay honest.

Also budget for: legal pack review before bidding, a survey if access allows (remember the fee is at risk if you find problems after winning), SDLT on your solicitor's confirmed basis, and normal buying costs.

What to check before bidding

Before you bid on any MMoA lot:

- Read the legal pack in full, or pay your solicitor to. Title problems, short leases, restrictive covenants and punishing special conditions live here, exactly as in traditional auctions. - Check the reservation fee terms in the particulars: the percentage, the VAT treatment, the minimum, and whether any part is refundable in any circumstance. - Check the special conditions for extra costs. Some sales oblige the buyer to pay the seller's legal fees or other charges on top. - View the property and, where possible, survey before bidding rather than after winning. - Confirm your finance can complete inside the timetable, with a decision in principle in place. - Research sold prices for the street and comparable rents for the area, and set your maximum effective price before bidding opens.

Browse current Modern Method of Auction lots on the Proppys online auctions page: every lot card carries the same yield and BRRR analysis as our traditional auction listings, so you can compare both routes on the same footing.

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