Costs for Selling a House at Auction

How much does it cost to sell a property at auction? Find out about the costs for selling your house at auction and how to save money by passing some of your costs to the buyer.
Updated: August 2020

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Home: Auction Link » Cost of Selling Property at Auction (August 2020)

How much does it cost to sell a property at auction?  A guide for UK property owners. Find out how much it costs to sell your house at auction and how the sale costs compare to an estate agency sale.

Last updated by Mark Grantham on 3rd August 2020

How much are property auction fees?

Selling a property at auction costs less than most people think. The total cost is about the same you would expect to pay a traditional high street estate agent. There are 3 costs to consider when selling a property at auction:

(1) COMMISSION – The auctioneers commission is around 2% + VAT of the final sale price and that’s only paid when the property successfully sells.

(2) ENTRY FEE – Most auctioneers request an upfront catalogue/entry fee of around £300 + VAT or more, but it may be possible to postpone payment until after the property has successfully sold.

(3) AUCTION LEGAL PACK – The seller’s solicitor is responsible for preparing the auction legal pack at the cost of £200 or more, which is payable before the auction.

Costs for Selling a House at Auction

Passing your auction sale costs to the buyer

A key benefit of selling at auction is the complete control the seller has over the contract of sale, there’s no input from the buyer. This means the seller can dictate terms like the completion date, responsibilities of the buyer after exchange and any extra costs to be paid by the buyer.

By adding a simple clause to the contract of sale it’s possible to pass all (or part) of your auction costs and legal fees to the buyer, in fact it’s standard practice for regular auction sellers (e.g. property traders, banks and local authorities).  Some buyers will not bid as high for the property if they spot the clause in the legal pack, but others will not worry.

Negotiating sales commission with the auctioneer

Negotiating commission with the auctioneer

The starting rate for an auctioneer’s commission will usually be around 2% + VAT or more  and that’s only paid when the property successfully sells. So if a property sells for £200,000 the commission payable to the auctioneer would be £4,000 + VAT.

The costs for selling a house at auction include a commission of 2%+VAT of the final sale price, only paid upon successful sale. Plus an entry fee, although some auctioneers don’t charge for this.  Your solicitor will need to prepare an auction legal pack costing upwards of £200.
You can save money by passing some costs to the buyer.

For higher value or particularly saleable properties the auctioneer might be prepared to reduce their commission, but there is a lot of organising and marketing that takes place for the auctioneer to be able to justify their fee.

Auctioneers usually charge a minimum selling fee of anything from £1,500 upwards – so if a low value property (such as a garage) sells for £10,000 the 2% commission rate will not apply, otherwise the fee would only be £200. Instead the auctioneer will charge the minimum selling fee.

TIP: Compared to some of the newer methods of selling, such as paying an online estate agent a fixed fee, selling a property at auction may seem relatively expensive. So it’s worth a quick cost benefit analysis to see if auction will pay off for you.

How much does it cost to prepare the auction legal pack?

Cost of the auction legal pack
The auction legal pack is a crucial for the successful sale of a property at auction, it contains all the legal information (e.g. land registry documents, deeds, searches, property information questionnaires, lease documents, tenancy agreements etc) relating to the property. So the more information there is in the legal pack the more confident prospective buyers will be when bidding on auction day. It’s therefore important not to cut costs when preparing the legal pack as it may adversely affect the final sale price. Costs for preparing an auction legal pack for a freehold property can be anything from £200 upwards. For a leasehold property the cost of obtaining the management information pack from the freeholder/landlord will add another £200 or more.

Most of these legal costs are not unique 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. It’s only the searches (local authority search, water search etc) that are obtained by the buyer in the case of an estate agency sale, but by the seller in the case of an auciton sale.

Other costs to consider when selling a property at auction

Other costs when selling at auction
As with selling a property through an estate agent or privately, there are other costs to be considered when selling a property, they include; legal fees, moving costs and taxes that might be due. For example capital gains tax on buy-to-let properties and inheritance taxes for probate sale. Also consider whether any early redemption penalties might be due on your mortgage or secured loans. These are all payments your solicitor will be able to help you calculate when determining your bottom line sale price i.e. your reserve price.

If the property doesn’t sell at auction there will usually not be any costs or obligations to the seller, unless stated in the auction terms.

Are there any costs to pay if a property fails to sell at auction?

Cost of NOT selling at auction
Just like selling through a traditional high street estate agent, the auctioneers commission works on a “no sale no fee basis”. So the sales commission is only payable when the property is sold and contacts are exchanged, without that happening the auctioneer won’t charge their fee. If a property fails to sell the only costs incurred by the seller would be their legal fees (for preparation of the auction legal pack) and any entry/catalogue fee that may have been paid before the auction.

Cost benefit analysis – is it worth selling at auction?

Cost/benefit of an auction sale
With so many low-cost online estate agents to choose from, does an auction sale provide value for money? Apart from the speed and reliability an auction sale offers, from a purely financial perspective, is it worth it? Can you achieve a higher sale price at auction compared to any other method of sale? It depends on the type of property being sold – some properties sell for considerably more at auction compared to estate agency sales due to two key features of auction; competition and transparency.

Competition – Property developers, amateur diyer’s and ambitious owner occupiers will compete to buy a property at auction in the knowledge they’ll be able to refurbish it cost-effectively and either sell on for a profit or live there themselves. The key word being compete. In an auction environment, where the price can only go one way (up) it’s the competitive bidding environment that drives the price up.

Transparency – In a closed/private sale environment, such as an estate agent sale (also known as a “private treaty” sale) the estate agent has a high level of influence over negotiations. If after a few months of marketing a property the estate agent tells the seller that £100,000 is a fair price, the seller will probably be inclined to accept an offer aroud that level. By keeping the property in the hands of one or two estate agents the the sale lacks transparency.

In fact, a highly lucrative market exists for property traders who purchase problem properties through estate agents one week and flip them at auction the next week – the properties are sold for considerably higher prices as “properties with potential” in the the transparent and competitive bidding environment that’s found at public auction!

Questions and Answers

Do properties sell for lower prices at auction?

Some types of property are particularly well suited to sale by auction; properties in need of modernisation or with potential are ideal for auction and will achieve a higher sale price at auction compared to an estate agency sale. But properties with their potential exhausted will usually sell for more by private treaty (estate agency) sale, unless the property is unique or in a very good location, in which case the top price may be found through competitive bidding at auction.

How is COVID-19 affecting property auction sales?

Despite the disruption of coronavirus, property auctions in the UK are still going ahead. For the time being they are held online only. Prospective buyers must bid by phone, internet or place a proxy bid.

What happens if an auction property doesn’t sell?

Most properties do successfully sell at auction, it’s considered the most reliable method of sale. If bidding doesn’t reach the reserve price on auction day your property will be made available as an unsold lot. The auction company will contact all interested buyers and ask for their best and final offers. If a property doesn’t sell first time around it can be entered into a subsequent auction, that might be 4 or 6 weeks later.

What costs are paid upfront and after an auction sale?

The costs for selling at auction works out to be about the same as using a good high street estate agent. Commission at around 2% + VAT if the final sale price is only payable on successful sale. Some auctioneers charge an upfront entry fee of £200 to £500, but this can be negotiable and only payable after sale.

How quickly can a property be sold at auction?

Legal exchange of contracts can take place within 3 to 4 weeks, with completion of sale a further 4 weeks later. Timings are flexible; if a seller needs to complete sooner or later, they can ask their solicitor to shorten or extend the completion date.

How do you find a good local property auctioneer?

There are hundreds of property auctioneers in the UK. The best suited auctioneer for your property will depend on the property type and location. Looking at the past auction results (usually available on the auctioneer’s website) can be a good starting point to short list a suitable auctioneer.

Popular auction resources

Next steps…

Why not request a free pre-auction appraisal for your property? It only takes a few seconds. Or feel free to call us on 0800 862 0206 if you have any questions.

PROPERTY AUCTIONS UPDATE:
July & August 2020

What prices are houses selling for at auction?

With almost all property market commentators predicting a crash in global property prices, you would think property buyers would wait for prices to fall before buying? But they’re not!

We’ve been trying to work out why buying activity is at such high levels after lockdown.

You’ll see for yourself; if you look at auction sale results in May and June, the success rates have been surprisingly good, typically in the region of 80%. Whilst there have been some areas of the country struggling, the overall sales activity is surprisingly high. And the prices being achieved are not too bad either.

Keeping our ear to the ground and listening to theories from those in the property and finance industry, the only explanation that seems to make any sense is that the massive amount of “free money” being doled out by the government in the form of grants and interest free loans, is making its way to the property market.

People and businesses that are still not trading after lockdown (and some that have no intention of trading again) have received tens of thousands, sometime hundreds of thousands of pounds from the government bounce back loan scheme. They have to spend the money somewhere!

Perhaps there’s another explanation? We’ll see what the coming months bring, and for how long the spending spree lasts. And maybe we’ll be surprised again!

Auction cost example
If a property sells at auction for £200,000 the commission due to the auctioneer would typically be 2% + VAT which would be £4,000 + VAT only payable after the sale.

Prefer to talk?
Need help deciding if auction is right for you? Call 0800 862 0206 or request a call back for later.

ℹ Top auction tip
If the auctioneer asks for an “entry fee” payment of £300 or so, ask if the amount can be paid after the auction and only if the property successfully sells.
🔍 Also see
Auction versus estate agent sale prices
💬 Auction talk
“A real advantage of selling at auction is the competitive effect of having multiple bidders fighting it out for your property, bidding up the price within the space of a few minutes.“
Property Ombudsman Member