Modern Method of Auction Explained: The Fee, The 56 Days, and Who Really Pays

The modern method of auction gives you 56 days and a fee, not a binding sale. The fee falls on the buyer, and it is a big one. The HomeOwners Alliance puts it at "usually at least 2.5% + VAT of the sold price, or a minimum of £6,000 inc VAT". Its own worked case is a house at £275,000 with a fee of £8,250 including VAT at 3%, paid on top of the price. So take the route at face value. It is faster than a normal sale and far less certain than a real auction, and someone has to find that £8,250 in cash before they own a brick of the house.

If you are the seller, that someone is bidding against your price. The pitch is a faster sale at no cost to you, and the first half of that is often true. The second half is where the money goes. For the traditional route, where the hammer makes the sale on the day, see selling a house at auction.

What is the modern method of auction?

It is a sale run online, to a deadline, through an auction platform that your estate agent works with. You will also see it called a conditional auction, an online auction, or an auction with a reservation agreement. The last name is the honest one.

Bidding ends at a set time. The top bid is accepted. The buyer then signs a reservation agreement and pays the fee, and that fee is not coming back if they later walk away. From that point the two sides have a set number of days to exchange contracts and complete. Only at exchange does either of them hold a promise about the house.

How is it different from a traditional auction?

At a traditional auction the fall of the hammer makes the sale. The law treats a public auction as a special case, so a contract is made in the room, on the day, and neither side can walk away from it.

The modern method cannot work that way. A winning bid buys a reservation, and a reservation is not a contract to buy or sell land. The sale contract still has to be drawn up, signed and exchanged in the usual way. Nearly every complaint about this route traces back to that one fact. The fee is paid and the clock starts before anyone is bound to the sale itself.

Question	Traditional auction	Modern method
When is the sale binding?	On the fall of the hammer	Not until contracts are exchanged, weeks later
How long to completion?	Generally about 28 days, per iamsold	56 days from receipt of the draft contract, per iamsold
Who pays the auction cost?	Normally the seller, out of the price	The buyer, on top of the price
What does a buyer lose by walking away?	Their deposit, and they can be sued on the contract	The fee, plus any further claim under the terms they signed

How much is the reservation fee, and is it ever refundable?

There is no single figure, because the percentage is set lot by lot. iamsold, one of the biggest platforms in this market, says plainly that "the percentage payable varies by property, so always check the Fees & Charges section in your Buyer Information Pack". The HomeOwners Alliance range quoted above is the best published guide to what that percentage tends to be.

Two features matter more than the number. First, the fee is paid in addition to the purchase price, and it is not deducted from it. Second, it is not refundable. iamsold's buyer FAQ is blunt: "If you do not complete, you will lose your non refundable Reservation Fee", with possible further financial consequences for breaching the terms. You may have been told the fee comes back if the seller withdraws. The platform's own terms do not say that, so check your agreement rather than plan around it.

The figures below are the published ones from those two sources. Legal costs turn on the title, the lender and the chain, so get quotes for those before you bid.

Cost	Who pays it, and how much	Does it come off the seller's gain?
Reservation fee	Buyer. Usually at least 2.5% plus VAT, or a minimum of £6,000 including VAT. That is £8,250 at 3% on a £275,000 house	No. The buyer paid it, so it was never the seller's cost
Buyer information pack	Buyer. £349 including VAT on iamsold lots	No
Seller's own auction or agent fee, where the agreement provides for one	Seller. Set by the agreement, and iamsold says its seller fees vary with the deal and the services included	Yes. A sale fee to an agent or auctioneer is on the closed list
Legal work, seller's side	Seller	Yes
Legal work and searches, buyer's side	Buyer	No, but it goes into their own cost of the house for later
Buyer's cash total on that £275,000 lot, platform fees only	£8,599	Nothing of it is yours to deduct

What happens in the 56 days after you win the bid?

The HomeOwners Alliance describes the timetable as "28 days to exchange contracts and a further 28 days to complete". iamsold puts the same window as "56 days from receipt of draft contract". The wording is worth reading twice, because the clock in the second version starts when the papers arrive, not when the bidding stops.

• Bidding closes and the top bid is accepted.
• The buyer signs the reservation agreement and pays the fee. The house comes off the market for the reservation period.
• The seller's solicitor issues the draft contract. This is the point to chase, because everything after it is timed from it.
• Searches, survey and mortgage offer run in parallel, not in sequence. There is no room to do them one after another.
• Contracts are exchanged, usually by day 28. Now both sides are bound to the sale.
• Completion follows, usually by day 56. The keys change hands.

Extensions are a matter for the agreement rather than a right, and any charge for one will be in the buyer information pack. Ask about that before you bid if your funding looks tight.

Can either side pull out once you have reserved?

Yes, and this is where the route surprises people in both directions.

A buyer who walks away loses the fee. On the figures above that is £8,250 on an average priced house, gone, with no house to show for it. iamsold also warns of further financial consequences for breaching the auction terms, so the fee is the floor of the loss rather than the ceiling.

A seller is in a stranger position. No contract for the house exists yet, so nobody can force the sale through. But iamsold's FAQ says that once the buyer has signed, "the seller cannot sell to anyone else during that time". So the seller is not bound to sell, and is bound not to sell to anyone else. That is a contract term, not a rule of law, and other platforms word it differently. Read the one in front of you.

Do you pay stamp duty on the reservation fee?

This one is buyer side, and the honest answer is that HMRC has published nothing about it. There is no guidance page, anywhere, that names modern method reservation fees.

What does exist is the general test in HMRC's stamp duty guidance on chargeable consideration and fees. It gives three indicators that a fee charged on top of the price counts as part of what you are taxed on. Paying it is a condition of the contract. Or completion depends on it being paid. Or it is only payable once the purchase goes ahead. A fee for something separate is not chargeable consideration, and HMRC's example is your own legal costs.

Hold your reservation agreement up against those three indicators and you will see which way it points. You will see it stated flatly that stamp duty lands on the price plus the fee. That may well be the right answer on standard terms, but it is not a settled one. If your lot sits near a threshold, take an hour of advice before you file. Our stamp duty calculator will show you what a change of that size does to the bill.

Is it really free to the seller?

In cash, often yes. In money, no.

Think about the buyer's side of the table. They need the price, the fee, the pack fee, a deposit and their legal costs. Their budget is fixed. Every pound of fee is a pound they cannot bid. So the fee does not disappear because someone else writes the cheque, it moves into the price.

Here is that in numbers, on the 1.42% average agent fee including VAT. Your own quote will differ, so check the ranges in how much estate agents charge and rerun it.

• Through an agent. The house sells at £275,000. An agent fee of 1.42% including VAT costs you £3,905. You keep £271,095 before legal costs.
• Modern method, fee priced in. A buyer facing £8,250 of fees bids £8,250 less, so the house sells at £266,750. You pay no agent fee, so you keep £266,750.
• The gap. £4,345, in the buyer's favour, if the fee is priced in fully. If bidding is keen and only half of it lands in the price, you are ahead. If the fee scares off the cash buyers who would have bid highest, you are further behind than this shows.

That is the whole argument in one line. You are not being given a free sale, you are being asked to take your selling cost as a lower price instead of an invoice. Whether that is a good deal depends on how many bidders the format brings you, which is a judgement about your street and your house, not about the format itself. The same test applies to the other routes pitched as cheaper: see online estate agents and part exchange.

Why do some lenders struggle with modern method sales?

Nothing in the format is designed to upset a lender, but two features of it do.

The first is that the fee sits on top of the price. A mortgage is advanced against the house and the price agreed for it, so no part of the loan covers the fee. The buyer needs it in cash, on the day they reserve, weeks before any lender pays out.

The second is the clock. A draft contract to exchange in 28 days is tight for a mortgage offer once a valuation, a survey and a leasehold pack are in the queue. Miss the date and it is the buyer's fee at risk, not the lender's money. Where you cannot meet the timetable with a mortgage, short term lending is sometimes used to bridge the gap. Our guide to bridging finance for auction purchases sets out what that costs.

No lender publishes a policy on this, so ask a broker about your lender, on your lot, before you bid.

What must the listing tell you about the fee?

The rules changed on 6 April 2025, and they bite on exactly this kind of fee.

The consumer rules now say that the total price of a product includes any fee, tax or charge that you will necessarily have to pay if you buy it. A fee you cannot avoid is part of the price, not a footnote to it. The same rules treat information given late, given unclearly, or given in a way that means you are unlikely to see it, as information that was not given at all.

Put those together and a listing that advertises a bid level while burying a percentage fee in a linked pack is a live question, not a settled practice. The rules that governed this before April 2025 were withdrawn on the very same day, so guidance written earlier than that is describing a regime that no longer exists.

What to do with that, as a buyer: ask for the fee in pounds, in writing, before you bid, and ask what else is payable on reservation. As a seller: ask your agent how the fee appears in the advert, because a buyer who feels ambushed at day one is a buyer who withdraws at day 27.

What it does to your capital gains tax bill

Skip this if the house has been your only home throughout, because private residence relief normally covers the gain. It matters if you are selling a let property, a second home or a house you inherited. Two things change on this route.

The first is the date. Your disposal happens when contracts are exchanged, not when the bidding ends. Win a bid in February and exchange in June, and the sale lands in the later tax year, which can move the whole bill by a year.

The second is the deduction, and it is the reason this route costs a seller more than it looks. The costs you can take off a gain are a closed list. Fees you pay to an agent, an auctioneer, a solicitor or a surveyor are on it. So is the cost of advertising for a buyer, and your legal costs of transfer. A fee the buyer paid to a platform is not on it, because it was never your cost. On the figures above, the £3,905 you would have paid an agent comes off your gain. The £8,250 the buyer paid comes off nothing of yours, even though it came out of your price.

One more point turns on your paperwork. If a buyer walks and the platform keeps the fee, nothing has reached you, so there is nothing to tax. That is the standard position on the biggest platform, whose FAQ says the retained fee "is used to cover auction, marketing and associated costs and is not paid to the seller". If your agreement instead hands a forfeited fee to you, or nets it off your completion money, that sum is taxable when you receive it. Read the agreement before you assume either way. The date you pay by runs from completion, not from exchange, and the full mechanics are in our capital gains tax on property guide.

Bidding closes on a date. Your own number should be settled well before it does. The cost of selling calculator gives you the exit in one screen, in under a minute: fees, legal work, and what is left after tax. The cost of selling a property guide takes each cost in turn.