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: May 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.
In this guide
▷ Costs for selling your house at auction
▷ Passing your sale costs to buyer
▷ Negotiating commission with the auctioneer
▷ Auction legal pack costs
▷ Other costs for selling a house at auction
▷ Costs for not selling at auction
▷ Cost/benefit analysis
▷ Questions and answers
▷ Popular auction resources
► Next steps
▷ Property auctions update: COVID-19
Last updated by Mark Grantham on 22nd May 2020
3Selling 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.
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.
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.
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.
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.
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!
✅ 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. And during the lockdown open house viewings have been replaced by video tours. Obviously, this does impact on the success rates and prices achieved, but there are still buyers out there.
✅ 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.
With the end of the COVID-19 lockdown in sight, should I prepare to sell now, or should I wait?
The start of the year saw a big release of pent-up demand after 3 to 4 years of Brexit uncertainty; the property market was in full swing, with some very high sale prices achieved. But the frenzy came to an abrupt stop towards the end of March, with a sudden halt in transactions due to the COVD-19 lockdown. Property sellers are keen to know what happens next? Will the usual “spring bounce” help kickstart the market? Or are we set for more uncertainty?
When forecasting changes to the property market, there are 3 main factors economists typically consider: mortgages, employment and consumer sentiment.
Will lenders continue to offer mortgages with long, fixed-term rates? The Bank of England base rate is at a record low of 0.1 per cent. For as long as mortgage lenders continue to offer mortgages at low rates with low deposits then buyers will be able to access money and homeowners can afford to keep up with their mortgage repayments.
What will happen to employment levels as we emerge from the lockdown? It’s difficult to know how many furloughed workers will return to employment. With such a dramatic loss in momentum to trade, will businesses have the cash (and confidence) to retain staff?
Consumer sentiment is difficult to predict at the moment, there are no numbers to base it on because economic activity has come to a grinding halt. Concerns about job security and an increased sense of uncertainty won’t help, but Governments around the world will be doing their best to stimulate the economy.
In the worst-case scenario, for market commentators who use the theory of economic cycles as the basis of their forecasts, a downturn is long overdue. But if there is a downturn in the economy it won’t just happen overnight. These changes usually pick up pace over time. So if you’re considering selling within the next 5 to 10 years, now could be the best time to sell.
Why not test the market at auction and let buyers decide what your property is worth. Request a free auction sale price estimate.
BBC News – a short window of opportunity for property sellers:
Coronavirus: ‘Short-lived’ rebound in house hunter demand
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.