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.
How much does it cost to sell a property at auction? A guide for property owners.
Last updated by Mark Grantham on 29th November 2019
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 £200 + 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.
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 total cost for selling a house at auction includes a commission of 2% plus an entry fee of between £200 to £500 and the auction legal pack costing upwards of £200. Some costs can be passed to the buyer.
For higher value or particularly saleable properties the auctioneer might be prepared to come down a bit, but there is a lot of organising and marketing that takes place for the auctioneer to be able to justify their fee.
There will usually be 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!
WARNING TO PROPERTY SELLERS: BE CAUTIOUS OF “WE BUY ANY HOME” COMPANIES.
Under current market conditions, an offer from a “we buy any home” company can seem like a very appealing option for a motivated property seller. Be careful. We’re seeing a big increase in the number of cases where offers from property buying companies are being drastically reduced or sales falling through completely, sometimes several months after a price was originally agreed.
When comparing offers and sale costs it’s important to bear this in mind; although the service of a property buying company might be “free”, the final sale price offered will almost always be considerably lower compared to an auction sale price. There are certain checks you should make before accepting an offer from a direct buyer / we buy any home company. Contact us for check list if you’re considering selling to a “we by any home” company.
If you require a quick property sale we recommend auction as the best option. With an auction sale, you sell on the day. The buyer exchanges contracts for a legally binding sale and pays a 10% deposit on auction day. Completion of sale (when you receive funds) is 28 days later, or earlier by mutual agreement between you and buyer. And you have the option of accepting an offer to sell before the auction, which some sellers prefer.
Find an auctioneer
Need help choosing a local property auctioneer? Call 0800 862 0206 or send us an enquiry online.