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: October 2020
Home: Auction Link » Cost of Selling Property at Auction (October 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 1st October 2020
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.
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.
✅ 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.
Selling your house in 2020?
Looking back to this time last year, the big question was Brexit – would we be leaving with “no deal” and how severely would that affect the economy? Apart from that, most of us were out and about freely enjoying the last days of summer!
One big-coronavirus-bump in the road later, with everyone now being encouraged to get back to work and school, we hope things can get back to a more normal way of life. And despite being firmly in the early part of a recession, there’s still a strong sense of optimism in the property market. The “mini boom” is in full flow for most parts of the country.
The final four months of 2020 will be an interesting time for the property market. There’s still a lot up in the air. All we can accurately predict is more uncertainty. Even if furlough schemes are extended to hold off an increase in unemployment, and if mortgage borrowers are given some grace if they miss repayments, are we just delaying the inevitable?
If you’re planning to sell your own home, a buy-to-let investment, or an inherited property in late 2020 / early 2021, should you put your plans on hold, or would it be wiser to sell now?
If you’re ready to sell now, we think the final few months of 2020 will be a good time to do so. Prices are still holding up at reasonable levels in most parts of the UK.
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.