Conflict of Interest with fees paid by purchaser?

Conflict of Interest with fees paid by purchaser?

10:10 AM, 28th July 2022, About 2 weeks ago 20

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Hi All, I have recently come across a ‘Modern’ online method of auction. The house to be sold was circa £225,000.

The online auctioneer was instructed by the vendor, but the fee of £6,000 was to be paid by the purchaser.

Now, this seems to be a big fee, but the client, the vendor paid no fee. The entire sales fee was paid by the purchaser.

Does this seem to be an enormous conflict of interest?

Is this not contrary to the law? And if not why not?

Please let us know.

David



Comments

CMS View Profile

1:33 AM, 30th July 2022, About 2 weeks ago

I am with Ian on this one. I cannot see a conflict and to be honest, in the auctions i have dealt with, I cannot see any benefit to the auctioneers seeing an exchanged property fail to complete.

Normally when a solicitor is instructed to prepare the auction pack he will give the seller the option of having a special condition inserted so that his auction fees are paid on completion of the sale. Some sellers would rather not as they feel it may jeopardise a sale which is fair comment others want it inserted.

Either way, generally, the seller is not liable to pay the auctioneers fees unless an actual sale is achieved. By that I mean the completion not just the exchange when the hammer goes down. Normally if the seller does want the buyer to pay the auctioneers fees then the fees are only payable on the completion as well so I don't think there is an incentive for an auctioneer to see a sale fail to complete.

If anyone has seen special conditions in an auction pack requiring their fees to be paid regardless of a completed sale i would be interested to know the auctioneers as I have never seen one. Charles

david porter View Profile

6:28 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by TrevL at 28/07/2022 - 18:05
Naivety abounds?
The last time I bought a house at auction the person I was bidding against was the vendor.
Fortunately I recognised the lady in a Chanel suit and acted accordingly.
At the end of the day I emerged with a profit in seven figures and so no harm was done.
Not all estate agents/ auctioneers have clean hands. Knowing what is going on and being able to prove it are two different things.
I very much prefer to see all the cards on the table.

CMS View Profile

8:04 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by david porter at 30/07/2022 - 06:28
That's something completely different to simply having a fee payable by the buyer in the special conditions which are available pre-auction to review.

What you are talking is shill bidding I think and that is illegal. It has nothing to do with the special conditions in the contract but I have no doubt the practice goes on.

david porter View Profile

10:13 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by CMS at 30/07/2022 - 08:04
Thank you for your message.
I invest my own money and take it all on the chin. I am not somebody's legal advisor,
There is a real difference. I think that we all agree that where an opportunity arises for shady dealing it is likely to be prevalent.
Until the Modern method of auction is run by Mary Poppins, I and TrevL will be sitting on the sidelines,
As previously mentioned I prefer to see all the cards on the table and nice clean well scrubbed hands
Happy Saturday
D

Jessie Jones View Profile

10:19 AM, 30th July 2022, About 2 weeks ago

I steer clear of these. In a conventional property purchase, when a price is agreed then the purchaser can go about doing their due diligence, at their own cost, and if something crops up which was unexpected, such as an error with the title deeds, structural defects, or planning for a waste incinerator going next door, then a relatively small amount will be lost. It appears to me that under this new modern auction method, where a non-refundable 10% deposit is required, there is a chance that the buyer will loose a whole lot more money compared with a conventional purchase.
In fact, if I had a house with a hidden structural problem, I might be tempted to 'sell' it via the modern auction method, as by the time 10 different people have agreed to purchase, then found out about the structural problems and pulled out, I will have gained the full value of the house !

david porter View Profile

10:29 AM, 30th July 2022, About 2 weeks ago

There does seems to be a difference of opinion here?
Legal advisors see nothing to fear but investors with their own money running scared?
How curious!

Boble View Profile

10:32 AM, 30th July 2022, About 2 weeks ago

As a sometimes purchaser at auction, I really dislike the buyer's premium. I now have to consider + buyer's premium, + auctioneers administration fee, + VAT, + SDLT, + additional 3% SDLT, ..........

CMS View Profile

10:36 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by david porter at 30/07/2022 - 10:29
Just in case that is directed towards me, I just want to be clear that, I don't think I have suggested that there is nothing to fear by purchasing at auction.

All I have tried to do is answer the initial question posed by the OP.

Also, you can be a legal advisor and investor...Enjoy your Saturday. Charles

david porter View Profile

10:41 AM, 30th July 2022, About 2 weeks ago

Enjoy the sunshine!

CMS View Profile

1:55 AM, 31st July 2022, About 2 weeks ago

Reply to the comment left by david porter at 30/07/2022 - 10:41
You too!

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