Costs for Selling a House at Auction

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 or flat at auction, and how the sale costs compare to an estate agency sale.

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.

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.

We’re occasionally asked whether the seller needs to include a survey report for their property in the auction legal pack. The survey report is not the responsibility of seller. There is no expectation for a survey report to be included in the auction legal pack.

Many of the buyers at auction are cash buyers, so will not require a survey. However, if the buyer does require a survey, they will need to have sorted that out (and seen the report) before bid on auction day. With an unconditional auction sale, the buyer is bidding to buy – full stop! They’re not bidding to buy subject to contract or survey.

It’s worth noting that if you signed the auctioneers’ terms remotely (i.e. not in the auctioneers office) there will usually be a 14 day cooling off period. However, since the timescales for selling at auction are very quick, the auctioneer might ask you to tick a box on the auction contract that waives your right to cancel, in order for them to commence their service immediately, and begin marketing your property as soon as possible.

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.

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? The answer 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 around 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!

PROPERTY AUCTIONS UPDATE:
July & August 2022

Two years ago, it would have been impossible to predict the level of house price inflation the UK property market has experienced. Most property market commentators expected property prices to fall or remain flat as the pandemic took hold. But the opposite has happened. There’s been a trend in property owners looking for bigger properties – the “race for space” – pushing up prices in most areas of the UK; the lifestyle changes of working from home and commuting less often has been a big driving force.

A shortage of properties on the market for sale, low interest rates and the temporary stamp duty holiday (ending in September 2021) have only helped fuel house price inflation further.

The spring months (virtually every year) tend to be the busiest time for the property market. If you’re looking to sell your home by auction in the spring and summer of 2022, we think there’s likely to be a continuation of the same trend the market experienced in 2021 and the first few months of 2022.