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Auction finance: what you need to know about fees

12.03.2018 Site Manager

The world of auction finance has an unfair reputation of being both expensive and complicated. However, whilst property transactions via auction do differ from traditional routes, the fees and finances involved are actually quite straightforward. In this guide to auction finance, we’ve got some top tips to help you navigate the various fees involved in buying and selling at a property auction.

Auction fees for buying property

When it comes to fees for buyers at auction, there are a few things to bear in mind when working out your overall budget. As with traditional property transactions, the price of the property isn’t the only thing you need to budget for and the cost of the purchase is more than the lot’s face value. Usually the fees for buyers will include:

  • An administration fee to the auction house. This is normally between £600 and £1,000.
  • Solicitor’s or conveyancer’s fees. There are a number of variables that can affect the conveyancing costs and legal fees can cost anywhere from £1,000 to £5,000.
  • Stamp duty. There are two points worth bearing in mind when it comes to stamp duty. You are not liable to pay stamp duty if you are purchasing a property worth £125,000 (£150,000 for commercial property) or less, or if you are a first-time buyer purchasing a residential property worth £300,000 or less. If you do not fall into one of these two categories, you’ll be charged at different rates depending on the price of your property. Bear in mind though the rates differ between residential property and commercial property.
  • Insurance costs. Because the auction world moves so much faster than the traditional method of selling it’s important to leave aside enough money for insurance when purchasing at auction. As soon as you sign the contract you’ll be liable for the insurance of the property so organising the funds as soon as possible is beneficial.

For buyers, the most important thing to do is to make sure your finances are all in order before you place a bid. Typically, you’ll need to pay 10% of the final property price on the day of the auction, and then completion is usually one month later when you must pay the remaining 90%. If you can’t make the final payments, you’ll risk losing your 10% as well as be liable for reselling costs.

Financing an auction purchase

Auction finance has evolved considerably over the past few years. There are now many more options available to buyers who want to fund a purchase either in the short-term, or for the duration of their planned ownership. The interest rates on short-term, bridging loans are now very competitive and some lenders will even lend 100% of a purchase price if the right level of security can be provided. Specialist lenders, such as Together Money, will work with buyers to establish the best product for their needs.

The world of property auction finance does not need to be a confusing one. Our expert team are always on hand to answer any questions about the auction process and we’re more than happy to help. Don’t hesitate to get in touch with your local Sussex property experts to find out more about what we do.