How much does it cost to sell a property at auction? Find out about the costs of selling your house or flat at auction and how to save money by passing some of your costs to the buyer.
Our guide has all the information you need regarding selling your home in the traditional ‘in the room’ way or online. Find out about the costs associated with selling your house or flat at auction and how you can save money.
Table of Contents
Why Sell Your House at Auction?
Using an auction is a great way to secure a quicker sale compared to using an estate agent. It can be a good option for properties that require a lot of repairs, are unusual, or difficult to sell on the open market.
Once the traditional auction bidding is complete and the hammer falls, buyers typically have to pay a deposit right away.
They must then complete the sale within 28 days, which is a legally binding contract. If the buyer does not proceed, they will lose their deposit and be subject to fees and other penalties.
This makes the chances of a sale falling through very slim.
Auctioning a property can be intimidating, especially if it’s your first time. Thankfully, the sector has moved beyond stuffy auction rooms and intimidating sales tactics, making the process more transparent and easier to navigate.
Additionally, there is the modern method of auction, which has grown in popularity over the last year or so. This can be thought of as a combination of selling on the open market and using a traditional auction service.
How to Find an Auction House?
Across the UK, you can easily find several reputable operators by searching Google using the term ‘property auctions’.
You’ll see auction houses advertising properties on sites including Rightmove, Zoopla, and On the Market, as well as other more ‘niche’ and property auction news sites.
Each listing should provide the contact details of the auctioneer. Additionally, some estate agents have separate departments that solely focus on auction sales.
There is also an increasing presence of online auctions and traditional agents offering properties via their platforms, even if they don’t advertise on the portals.
Pros and Cons of a House Auction Sale
Misconceptions about auction sales can lead people to believe that things can be sorted quickly. However, this is not the case. Calling an auction house does not guarantee a speedy resolution.
Preparations for auction day are similar to selling through an estate agent. Once a buyer has been successful at auction, the process is usually much smoother and more secure compared to an open market sale.
When considering the pros a property auction sale:
- It is important to note that buyers tend to be more serious and business-minded than those who use estate agents.
- Plus, the buyer will have no onward chain, so there is less hassle. Auction buyers tend to know what they want and are generally less concerned about the property’s condition.
- They are also likely to be looking for tenanted properties or inherited/probate properties that could not be mortgaged.
- Furthermore, auctions tend to attract cash buyers who bypass the mortgage application process.
On the Downside
- The auction process can be longer than expected, as there will be viewings, open days and surveys/valuations before auction day.
- The cost of selling a property through auction may also be higher than using an estate agent. Additionally, the reserve price for the property should not be set too high, or buyers may not bid at all.
- Finally, if the property does not reach its reserve price, sellers will have lost both time and money.
How Much Does it Cost to Sell A House at Auction?
When selling your property through an auction firm, it's important to understand all fees associated with the process. Keep in mind that some costs may be combined, and you should also consider the extra VAT.
- Auction Fee makes up 1.5 to 3% of the value of your property. As with estate agencies, you will generally be charged a percentage of the sold price upon completion. Some auction houses may require you to pay a separate fee upfront. You may be able to request for the buyer to cover your legal expenses (as mentioned in the Special Conditions). This cost may be factored into the guide price.
- The Marketing Fee is 0 to 1.5% of the property value. This covers placement of the property on the main portals (like Rightmove and Zoopla), as well as producing the listing in the auctioneer’s catalogue and other materials to generate buyer interest. It also includes the auction house organizing viewings and open days at your property.
- The Room Hire Fee is 0-1.5% of the value of your property. Auctioneers will need a suitable space to conduct the bidding process. Bigger and more reputable firms usually hold their auctions in central locations with accessibility and parking. This cost may be incorporated into the overall fee, although it can be quite high. The more people in the room, the better your chances of getting a good price.
- Online Sales Fees are typically 0%. This type of auction occurs on digital platforms and buyers bid on properties in an ‘eBay’ style. The process can run for days to ensure maximum exposure. Note that it’s rare for an auction house to run both an online and offline auction simultaneously. However, many are offering ‘hybrid’ options, when the auctioneer invites bids on lots live on camera.
- Conveyancing Legal Fees vary from £500 to £1,500 depending on the solicitor’s location. They may differ according to the size of the property, its tenure and any other complications. Refer to our post on the modern method of auctions for more information on the essential elements of an auction legal pack.
Note that the requirements are usually the same regardless of the type of auction. Solicitors may also charge more for inquiries before the auction. Also, any immediate issues to deal with on the day may come at a cost.
Some auction houses may suggest that the buyer covers the auction fees, which will normally be factored into the purchase price.
Costs for cancelling or withdrawing from auction
If you have booked your property for an auction but then change your mind, you may be liable to pay the auctioneer’s withdrawal fee if you choose to back out of the sale. Withdrawal fees vary but can be as much as the full commission rate that you would have been required to pay if your property had sold successfully.
It is worth noting that if you signed the auctioneer’s terms remotely (not in the auctioneer’s office), there is usually a 14-day cooling-off period.
However, since the timescales for an auction sale are very short, the auctioneer may ask you to tick a box on the auction contract that waives your right to cancel, so that they can commence their service immediately and start marketing your property right away.
Are there any costs to pay if a property fails to sell at auction?
Just like selling through a traditional high street estate agent, the auctioneers’ commission works on a “no sale, no fee” basis.
So, they only charge their fee when the property is sold and contracts are exchanged. If the property doesn’t sell, the only costs the seller incurs are their legal fees for preparing the auction legal pack, and any entry/catalogue fee they may have paid before the auction.
How much does it cost to prepare the auction legal pack?
The auction legal pack is essential for a successful sale of a property at auction. It contains all the legal information related to the property, such as land registry documents, deeds, searches, property information questionnaires, lease documents, and tenancy agreements.
The more information in the legal pack, the more confident potential buyers will be on auction day. That’s why it’s vital to not cut costs when preparing the legal pack, as it could harm the final sale price.
The cost of preparing an auction legal pack for a freehold property can range from £200 or higher. For a leasehold property, obtaining the management information pack from the freeholder/landlord will add another £200 or more.
Most of these legal costs are not exclusive to selling at auction. When selling through an estate agent or privately, the seller will still need to prepare legal documents for the prospective buyer.
The only difference is that the searches (local authority search, water search, etc.) are obtained by the buyer in the case of an estate agency sale, while the seller obtains them in the case of an auction sale.
Other costs to consider when selling a property at auction
When selling a property, there are other costs to consider, including legal fees, moving costs and taxes such as capital gains tax on buy-to-let properties and inheritance taxes for probate sales.
Furthermore, don’t forget to factor in any early redemption penalties on your mortgage or secured loans. Your solicitor can help you determine your reserve price by calculating these payments.
In most cases, if the property doesn’t sell at auction, there will be no costs or obligations for the seller, unless otherwise stated in the auctioneers’ terms.
Cost benefit analysis – is it worth selling at auction?
With so many affordable online estate agents available, it’s worth considering if an auction sale is a sensible option.
Apart from the speed and reliability it offers, is it worth it from a financial point of view? Can you get a better price at auction than through any other method?
It all depends on the type of property being sold – some properties can achieve much higher prices at auction thanks to two distinct features: competition and transparency.
- Competition is key – when people know they can buy a property at auction, refurbish it, and sell it for a profit or live in it themselves, it drives the price up. This is because the auction environment allows the cost to go only one way: up.
- Transparency – In a closed or private sale, like that of an estate agent, the agent has a big influence over negotiations. If after a few months of marketing the agent tells the seller that £100,000 is a fair price, the seller is likely to accept it.
As these properties are sold as “properties with potential” in the transparent and competitive bidding environment of a public auction, their prices are pushed significantly higher.
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