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. Try our free auction sale price calculator now…

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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

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 £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.

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 fees and legal cost 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 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.

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!

More auction help

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 MARKET UPDATE:
December 2019

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.

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 if the property actually sells.
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.

Find an auctioneer
Need help choosing a local property auctioneer? Call 0800 862 0206 or send us an enquiry online.

🔍 Also see
💬 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.“