Costs and Finance Issues of Auction Buying

Buying and selling at auction is not for the faint hearted or those with an empty pocket. The costs involved in buying a property at auction will not generally outweigh the costs of buying a property in the conventional way though.

It is important that you factor in any extra costs involved in the auction into your bidding price. You might only have £150,000 to spend, but once you have accounted for all of your other costs this could fall to £140,000.

Costs Before The Auction

Before the auction starts you will need to visit the auctioneer’s office and obtain a copy of the brochure which includes all of the properties for sale.

If you want to avoid any nasty surprises it is a good idea to go and view the properties before making a bid. If you plan to bid on one you should organise a viewing and for a survey to be carried out on the property. This can cost anything between £150-£400.

The information pack that comes with the brochure will have a survey in but you should still carry out your own. You should also think about employing the services of a solicitor to look over the legal deeds of the property and make sure everything is OK, this should cost between £150-£300.

Before attending the auction you will also need to have your mortgage in place, or at least an offer in principle. If you want to seek professional advice from a mortgage broker, this could cost around £200.

There will also be the costs involved in getting your mortgage, such as legal, administrative and arrangement fees, all of which can set you back about between £400 to £2,000.

If you are selling your property at auction the auction house might ask you to stump up advertising costs before they show your property. They will advertise all of the properties in the brochure beforehand and they might ask you to pay up to £100 to cover the costs of this.

Costs At The Auction

Either before the auction or when you arrive on the day you will be expected to pay the auctioneer a fee for his or her services, this normally ranges between £150 and £300. Even if your property does not sell, you will still be expected to still pay this.If your property does sell the auctioneer may also ask you for what is known as an auctioneer’s premium which will be around 1.5-3% of the price the property sold for at auction.

If you are travelling from afar you will also have to work travel costs into your budget.

Costs After The Auction

Depending on how much your property is worth you will have to pay Stamp Duty costs when buying your auction property. You will be expected to pay Stamp Duty on properties valued at £125,000 or more - or £250,000 for first-time buyers.

If you bought a property for the purpose of renovating it then this will be one of your biggest costs associated with the auction. Before you purchase the property you should invite a builder to the property to give you an estimation of how much it would cost to renovate the property.

There might seem like there are a lot of costs to pay at an auction house, but they are all relatively small if you make a good profit on your property and sell it on the day. A lot of the costs will be upfront and no more than you would normally pay when buying through an estate agent, so you should not let them out you off.