The stereotypical perception of an auction is that it is the respite for the exceedingly rich, and selling your property at an auction isn’t worth your time, but selling a property at auction costs less than you think. In fact, the cost is almost the same as paying a traditional high street estate agent. But before you jump into this, there are some things to consider:
The Auction Costs
There are three costs you need to consider when selling a property at auction:
The commission, which is around 2% + VAT of the final sale price. For example, if a property sells for £200,000, the commission the auctioneer gets would be £4,000 + VAT. But if a low-value property sells for a lower amount, the 2% commission rate won’t apply, and the auctioneer would charge the minimum selling fee instead. This is not something you pay for upfront; it is only when the property successfully sells that you part with this money.
The auction entry fee. The upfront catalogue/entry fee for most auctioneers is approximately £300 + VAT. If you don’t have this money to hand, it can be possible to postpone payment until after the property has been sold.
The auction legal pack. When selling a property, your solicitor is expected to prepare an auction legal pack. This costs around £200, sometimes more, and is payable prior to the auction.
As such, it is worth considering these “hidden” fees before putting your home up for auction. But there is a way for you to bypass these fees, albeit indirectly…
How To Pass The Auction Sale Costs Onto The Buyer
Due to the complete control you have over the contract of sale, and with no input from the buyer, you can dictate specific terms. For example, the completion date, duties of the buyer after the exchange, as well as stating any extra costs should be paid by the buyer are all things you can legally put into your contract of sale. Adding a clause to the contract can help you bypass all or part of your auction costs and legal fees to the buyer. While savvier buyers at auctions won’t bid as highly if they see the clause in the legal pack, other people won’t give this a second thought.
Other Costs To Consider
When selling a property, there are other costs to consider. Remember, there will be legal fees, moving costs, as well as taxes like Capital Gains Tax (CGT) or inheritance taxes. Your solicitor can help you calculate these when figuring out your reserve price. But if the property doesn’t
sell, there are usually no costs or obligations to the seller unless any are stated in the auction terms.
Selling a property at auction can be lucrative, especially for “property flippers.” But while some properties are well-suited to auction sales, such as fixer-uppers, properties with limited potential sell for more by an estate agency. Another great benefit is that the legal exchange of contracts can take place quickly; usually within 3 to 4 weeks, and the sale is completed around 4 weeks after, but timings are flexible for sellers.
