Many of our potential buyers ask ‘how much does it cost to buy a house at auction? In this article, we've compiled a comprehensive list of all potential costs to include in your budget, noting that additional work conducted by your solicitor or any tax considerations may also be an expense to factor into your plans.
Buying a house is one of the most economical ways to buy a property - whether you’re looking to add to your portfolio, or buying to renovate and live in.
Just as purchasing a property through any other method will incur legal expenses and administration fees, auction transactions have varied potential additional outgoings.
Clarity is essential whether you are keen to bid on a specific lot in an upcoming Clive Emson property auction, want to gauge the amount of borrowing you should apply for from your preferred lender, or need to ascertain the total cost of buying at auction.
Understanding Buyer’s Fees at a Property Auction
Before moving onto our list of fees and costs, it is important to point out that exact expenses and charges will vary depending on the auction structure, the auctioneer you choose to purchase a property through, and the nature of the property and seller.
In every case, a reputable auctioneer will include full details of all property-specific costs and expenses in the terms of sale; you’ll find these in the downloadable legal pack.
This information ensures that prospective buyers have full oversight of the cost of purchasing their selected auction property.
They can use this information to organise financing, set their highest value bid, or choose which houses to bid on.
As a rough guide, the typical cost of buying a house at auction includes the winning bid.
For some auctioneers, you’ll a % of the property price. Clive Emson Land and Property Auctioneers charge a buyer admin fee from £750 to £5,000 inclusive of VAT depending on the price of the property. These are the majority of the fees, however you will need to read the special conditions of sale.
Typical Fees for an auction purchase of £100,000 include:
The auctioneer admin fee: £1,750
Stamp duty: £0 for a first time purchase or £3000 for an additional property
Conveyancing: £1,500
Mortgage arrangement fee: £350
Potential total: £6,600
Paying the Deposit and Balance for a House Purchased at Auction
The largest costs associated with buying a home at auction are the initial deposit and balancing payment, which equates to the final amount you bid during the auction process.
The buyer pays a 10% deposit on the day, plus any payable admin charges and buyer's premiums; we'll discuss these expenses shortly. The balance is paid through your solicitor normally within 28 working days to avoid any penalties or fees.
To reiterate, you should be aware of any special conditions or costs rolled up into the property price before bidding or paying a deposit, with all the relevant details included in the legal pack.
Property Auction Admin Fees
Administration fees are normally paid directly to the auctioneer, with an outline of the relevant admin charges shown in the auction catalogue or online marketing information and within the individual property listing.
As we mentioned, our administration fee depends on the cost of the property as below:
When the contracts are exchanged, the buyer pays an admin fee separately from the deposit.
While admin fees depend on the price paid for the property, they are also fixed and should include VAT based on the anticipated sale value of the home.
Reservation Charges for Property Purchases at Modern Method of Auction
Some auctioneer's properties are sold with a conditional sales contract, meaning the bidder secures the right to buy the house at the agreed price for a defined period. The buyer has exclusivity and is given space to finalise their financing arrangements before exchanging contracts, normally within 56 days.
In this situation, a reservation fee is paid as a non-refundable expense to guarantee the exclusivity period and duration. During this period, the buyer must verify their mortgage or other financing arrangements before proceeding, these fees may also attract stamp duty.
Paying a Buyer’s Premium on a House Bought at Auction
Across the property auction sector, some auctioneers charge the seller a commission and entry fee without any additional buyer’s premium. These fees are usually a percentage of the property's final sale price.
If you find that an auction property carries a buyer's premium, you should ensure this remains within your budget since this charge ranges from 1% to 3.5% of the sale price, including VAT. There may also be a minimum threshold that will apply regardless of the amount you end up purchasing the home for.
Stamp Duty on Properties Bought at Auction
Alongside the typical buyer’s costs, including your solicitor's fees and any mortgage application charges, you must ensure you understand the payable Stamp Duty liability – and include any buyer’s premiums since these might be included when calculating your tax obligation.
Depending on whether you are a commercial or residential auction buyer, you will pay the standard rates to HMRC - these do not vary for properties bought and sold at auction.
As it stands, the government levies Stamp Duty on properties purchased for over £250,000, with a 5% levy on any value from £250,001 to £925,000 and a 10% rate on the proportion of the value paid from there up to £1.5 million.
Higher thresholds and exemptions apply for first-time buyers, but this may be subject to change. It is worth revisiting the latest government guidance to check you are working out your auction budget based on the latest available information.
You can read more about paying stamp duty on auction property here.
If you’re purchasing your second property, you’ll pay 3% of the purchase price additional to the standard rate.
The Stamp Duty is calculated based on the hammer price plus any additional amounts specified in the contract that attract stamp duty, such as contributions towards the seller's legal costs. The buyer must pay the Stamp Duty within 14 days of the "effective date" of the transaction, which is usually the date of completion.
It's essential for buyers to factor in the potential Stamp Duty costs when budgeting for an auction purchase, as failure to pay on time can result in penalties and interest charges.
Conveyancing fees
When buying a property, it is important for buyers to budget for conveyancing fees, as they will need to engage a solicitor or licensed conveyancer to manage the legal aspects of the purchase. This process typically includes reviewing local authority searches, verifying the property's title, reviewing contracts, and ensuring all necessary checks are completed before the sale is finalised.With Auction however, all the searches and paperwork is provided by the Seller’s Solicitor in advance.
Conveyancing fees for buyers can vary widely depending on factors such as the property's location, its type (freehold or leasehold), and any complexities associated with the transaction, such as buying a listed building or a property in a conservation area. At Auction, there are however some specialist conveyancers who will do it at a fixed price.
Buyers should request a detailed breakdown of conveyancing fees and any potential extra costs early in the process to avoid surprises and ensure they are fully prepared for all financial commitments associated with purchasing a property.
Auction Properties With Special Conditions of Sale
Finally, all lots have special conditions, which comprise part of the purchase contract and are normally prepared by the seller's solicitor. These details will also be included in the legal pack, and you may need to instruct your solicitor to review..
Although it is rare to find any significant cost included in the special conditions, it is essential to check since these could relate to the following:
Obligations to contribute to the seller's legal fees as a fixed value or percentage of the final purchase price.
Commitments to contribute to the seller’s property marketing costs.
An agreement to cover the auction fees and commissions payable to the auctioneer on behalf of the seller.
Requirements to pay for the searches conducted by the local authority – normally around £300.
Likewise, some auction properties have specific fees related to the purchase, the use of the house, or maintaining particular aspects, especially for non-standard structures and those of historical importance.
If you have any queries about the total cost of purchasing a house at auction, would like further information about the particulars and conditions within a legal pack, or need guidance about understanding the overall price of a property listed through Clive Emson Auctioneers, you are welcome to get in touch to learn more.
