There’s two ways of selling by auction and in both cases there are costs involved.
I find that it can be quite expensive because a lot of auction houses, especially in the North East, charge the buyer a Buyer’s Premium (“BP”).
Now that’s usually a minimum of 5% subject to a minimum of 5,000 pound plus VAT
So that’s a minimum £6,000.
Now, it doesn’t happen on every property, but it does happen on the majority of property auction sales.
What happens in that case
In a lot of these auction houses, they have partnerships with estate agents and they usually go 50/50 on the fees. If there’s a buyer’s premium of £6,000, the auction houses will take half and the estate agent will take half.
Now, that money has to come from somewhere. Where it’s coming is off your property’s price. That’s quite a hefty amount of money. If you imagine, if it’s a £50,000 property, it’s 10% of the value, so quite high. Think twice about doing that.
Now another thing with auctions …
Is that sometimes you can just pay to enter an auction and set your own price. Now, that can cost a minimum of £500 to £600. It varies from auction house to auction house, but generally in the North East, they operate on the Buyer’s Premium if they can get away with it, because that is a very lucrative source of income for them.
You need to be very, very careful because you can be locked into these agreements. If you don’t sell at the first auction and you really need to sell it, it could go on to the next one. You’ll find that the auction houses will not drop the buyer’s premium rate, they’ll come back to you and say,
“Oh, you better drop the value if this hasn’t sold.”
Just be very aware of how this works.
Auctions can be a good way to get your property sold quickly, maybe not the fastest in the world because sometimes it’s every month or every two months when they have one, but there are pitfalls with the cost.
Please be aware of how they operate.
Please feel free to give me a call if you want to have a chat about an auction, because I have quite an extensive knowledge of how they work and the costs involved. I am not trying to sell you anything, but there might be different options out there where you can sell your house quickly and in less time and at less expense. Feel free to call me for a no obligation chat on 0191 486 2386.