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Property Auctions can be an exciting and potentially rewarding way to buy and sell property. Get it wrong however and instead of ending up with your dream home, you could end up with an expensive nightmare.
Fridaysmove strongly advocate that potential bidders at auction conduct thorough due diligence on the property before bidding. This should include at the very least a Home Buyers Survey and Solicitors Pre Auction Report before even thinking about placing a bid.
Also critical, for both buyers and sellers, is to get a proper understanding of the real costs of buying and selling including all associated Property Auction Fees.
There has always been significant variation in Property Auction Fees charged by auction houses. However this has recently broadened somewhat, particularly with the advent of new auction models including Online Property Auctions. As such these new models have introduced different and sometimes innovative new ways of charging Property Auction Fees.
The golden rule is READ THE SMALL PRINT. Remember the small print looks like an uninviting read for a reason!
Typically auction houses charge an ‘Entry Fee’ which can range from £500 - £3000.
These fees may be the thin end of a wedge as supplementary fees may also be proposed for advertising and promotional costs. These Property Auction Fees are also usually non refundable
If the property is successfully sold, most auctions will make a commission from the seller, although there are a few around that seek to make their revenue from buyers and some even from both. Typically this commission will be between 1% and 3% of the final sale price.
Sellers may also face penalty Property Auction Fees if they fail to complete after exchange or if they withdraw the properly before the day of auction.
Sellers are advised to be aware of this as it is common practice to advertise a property elsewhere in the run up to the auction.
Most auctioneers consider the auction arrangement in a similar fashion to an estate agency sole agent agreement.
Also most auctioneers have the right to deduct their fees from the deposit paid by the buyer.
It surprises some people, but increasingly Buyers can be liable to pay Property Auction Fees if, and sometimes even if they are not, successful bidders. Registration fees, subscription fees and administration fees are all increasingly common.
There are also a number of Online Property Auctions that do not charge the seller anything and take a commission from the buyer on successful completion.
This is contrary to the way standard agency works where the seller pays a commission to the agent based on an agreed percentage of the final sale price. Usually there is no fee or commission payable unless the agent is successful in achieving a sale.
If you are considering buying or selling at auction make sure you know what you are getting into. Property Auction Fees are just one part of the overall costs facing buyers and sellers. Stamp Duty, legal fees, agency fees and must all be factored in to the overall equation also.