Why are property auction fees so high?
There are several different types of fees payable when it comes to property auctions.
In this article, we’ll explore upfront fees, no-sale-no-fee and buyer fees.
Table of Contents
How do auction fees work?
Auctioneers charge both buyer and seller fees. These include a buyer’s premium – which can be as much as £9,600.
The buyer is also responsible for paying an ‘administration fee’ which can be another £1,250 plus VAT.
The seller is also expected to pay several fees including an entry fee, fees for exchanging contracts, and auctioneer’s commission.
Let’s cover selling at auction fees in more detail:
What percentage do most auctioneers take?
The auctioneer’s fee or commission is typically 2% plus VAT of the final sale price, which is only payable when the property sells successfully.
Entry Fee
Most auctioneers require an upfront catalogue/entry fee of around £500 plus VAT, although it may be possible to postpone payment until after the property has sold.
The auctioneer will only postpone payment of the entry fee if they are satisfied that the property guide price is low enough to sell.
Auction Legal Pack
The seller’s solicitor is responsible for putting together the auction legal pack, which usually costs £1,000 or more and needs to be paid before the auction takes place. Legal pack includes:
- Copies of searches
- Property title & plan
- TA6 & TA10 enquiry forms
- EPC
- Other relevant documents such as CPSE (if it is a commercial property) or documents relating to a tenancy agreement.
What happens if you can't afford to sell at an auction?
A key advantage of auctioning is that the seller has full control over the sale agreement without any input from the buyer. This allows the seller to specify terms such as the date of completion, the buyer’s responsibilities after exchange, and any additional costs to be borne by the buyer.
By including a simple clause in the special conditions of the contract of sale, you can make the buyer responsible for your auction costs and legal fees.
This is a standard practice for regular auction sellers, such as property traders, banks, and local authorities. In fact, most bidders may be put off by the clause in the legal pack, but you are hoping that your buyer will not have read the legal pack.
Most buyers expect to pay an auctioneer’s ‘administration fee’ of £ 1,250, so loading all fees into a contract may result in the property not achieving its full potential.
Be warned: auction buyers are savvy and will pay less for a property when they have to pay extortionate fees. Your auctioneer will tell you that it is a ‘free auction’, but there’s no such thing.
If you can’t afford auction fees, would you consider selling your property for cash instead – with no fees to pay?
Negotiating sales commission with the auctioneer
The starting commission rate for an auctioneer is usually around 2% plus VAT or more – and that’s only paid when the property sells successfully. For example, if the property sells for £200,000, the commission payable to the auctioneer will be £4,000 plus VAT.
For high-value or particularly saleable properties, the auctioneer may be willing to reduce their commission, but much organising and marketing is necessary to justify the fee.
Normally, auctioneers charge a minimum selling fee of anything from £1,500 and up, so if a low-value property, such as a garage, sells for £10,000, the 2% commission rate will not apply and the auctioneer will instead charge the minimum fee.
When it comes to selling your property, you may find that paying an online estate agent a fixed fee is a more cost-effective option than going to auction. That’s why it’s important to do a cost-benefit analysis to determine whether the auction is the best choice for you.
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 – such as land registry documents, deeds, searches, property information questionnaires, lease documents, tenancy agreements, etc. – related to the property.
Thus, the more information contained in the legal pack, the more confident prospective buyers will be when bidding on auction day. This is why the legal pack should be uploaded as soon as possible – ideally without making too many changes to it.
The cost of preparing an auction legal pack for a freehold property can range from £1,000 upwards. If the property is a leasehold, the cost of obtaining the management information pack from the freeholder/landlord will add £1,500 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 also need to prepare legal documents for the prospective buyer.
If a property is sold via an estate agency, the buyer will have to pay for local searches, whereas, in a property auction, the seller picks up the bill.
Who pays for the survey?
We are often asked if the seller must include a survey report in the auction legal pack. This is not the seller’s responsibility. There is no need for a survey report to be included in the auction legal pack.
Many of the buyers at the auction are cash buyers and do not require a survey. If the buyer does need a survey, they must have sorted that out (and see the report) before the auction day.
With an unconditional auction sale, the buyer is bidding to buy outright – no conditions. They are not bidding subject to contract or survey unless they are buying in a Modern Method of Auction.
Costs for cancelling or withdrawing from auction
If you have booked your property for auction but have since changed your mind, you may be liable to pay the auctioneer’s withdrawal fee. This fee can be as much as the full commission rate that you would have been charged if your property had been sold.
It’s important to note that if you signed the auctioneer’s terms remotely (not at their office), you will usually have a 14-day cooling-off period.
However, the auction process is often very quick, so the auctioneer may ask you to waive your right to cancel by ticking a box on the auction contract. This allows them to begin their service and start marketing your property right away.
Other costs to consider when selling a property at auction
When selling a property, costs such as legal fees, moving costs, and taxes must be taken into account. For example, capital gains tax may be due on buy-to-let properties and inheritance tax for a probate sale.
Early redemption penalties may be due on mortgages or secured loans. Your solicitor can help you work out your redemption figure.
If the property does not sell at auction, with the exception of upfront fees, no other costs are incurred by the seller unless stated otherwise in the auctioneer’s terms.
Are there any costs to pay if a property fails to sell at auction?
Selling through a traditional high street estate agent works on a “no sale no fee basis.” This means that the sales commission is only paid when the property is sold, and contracts are exchanged.
If a property does not sell, the only costs incurred by the seller are their legal fees (for preparing the auction legal pack) and any entry/catalogue fee that may have been paid before the auction. The auctioneer charges no fee in these cases.
Cost benefit analysis – is it worth selling at auction?
With so many low-cost online estate agents to choose from, is an auction sale worth the money? Apart from its speed and reliability, is a financial benefit to be had? Is it possible to achieve a higher sale price at auction compared to other methods of sale?
It largely depends on the type of property being sold, as some properties can fetch considerably more at auction due to the two main features of the process: competition and transparency.
Not all types of properties are suitable for auction; for example:
- Nice houses that are ready to move in.
- Vacant commercial properties.
Competition
Competition drives prices up, as property developers, amateur DIYers and ambitious owner occupiers will all compete to buy the property in the knowledge that they can refurbish it cost-effectively and either sell it for a profit or keep it for themselves.
However, while competition can be fierce in a rising property market, in an uncertain property market, the opposite is true as buyers are nervous due to higher interest rate payments, fear of house prices falling and inflationary cost of materials.
Transparency
Transparency is an issue in closed or private sales, such as those conducted through estate agents (known as “private treaty” sales). In such a situation, the estate agent holds a lot of sway over negotiations, and if they tell the seller that a certain price is fair, the seller will likely accept an offer close to that level.
By keeping the property in the hands of one or two estate agents, the sale lacks transparency. Whilst transparency is a great feature of property auctions, you’d have to put in a low guide price to get buyers excited.
Property traders who purchase “problem” properties through auctions, renovate them and sell them for a profit via an estate agency.
Why not sell for cash instead?
If you need certainty of a cash sale without any of the fees or delays, get in touch with Property Saviour today.
Here’s why seller’s get in touch with us:
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
