Do You Pay To Go To Auction?
Property auctions offer an exhilarating fast-track route to purchase for experienced investors and ambitious first-time buyers alike. Tempting deals with huge money-saving potential compared to mainstream property outlets attract bidders readying to snap up bargain homes. However, in the rush to secure knockout hammer deals, hidden auction fees and event charges often get overlooked when budgeting overall purchase costs. So what exactly are the compulsory expenses needing allowance when bidding in heated auction room environments or modern online property auctions?
This comprehensive guide examines the array of essential fees requiring payment when buying properties via auction channels – from non-refundable administration charges to extra transaction taxes on winning deals. By understanding the true total costs of participating fully informed, buyers can leap confidently into accelerated auction purchases without nasty budget overruns derailing great investments.
What Is A Property Auction?
Before weighing the pay-to-play auction costs involved, it helps to understand the context of the unique auction process that sets this buying choice apart from traditional property transactions.
Property auctions allow buyers to bid competitively to purchase properties often at significant discounts or below market value. Auctioneers list properties unable to secure sale privately, then conduct fast-paced bidding wars between potential buyers to determine the highest winning offer.
Once the hammer falls confirming a winning bid, the exchange of contracts becomes legally binding on successful buyers. This introduces a risky non-retraction element once caught in auction bid fever! So it’s critical bidders budget diligently for all essential property costs before auction commitments become irreversibly binding!
Property Auction Costs Overview
Buying properties at auction accrues most of the same purchasing costs as typical conveyancing transactions like Stamp Duty taxes, legal fees for conveyancing contracts, survey costs and more. However several auction-specific fees also always apply needing careful budgeting. These include:
- Auction Administration/Entry Fees
- Buyers Premium Fees
- Auction Deposits
- Insurance Valuations
- Accelerated Legal Completion Costs
Now we’ll examine what each of these auction add-ons entail and what pricing levels prepare for.
Auction Administration Fees
Before even participating in property bidding wars, buyers first face Administration or Entry Fees just to register allowing auction access or website bidding rights. These fees cover auctioneer costs compiling legal packs, conducting marketing, facilitating remote bids etc.
Typical administration fees range from £150-£250 per auction property you hope to bid on. These prove dead costs for unsuccessful buyers but essential paying just handling buying attempts.
Buyers Premium Fees
On top of winning bid values, successful buyers also pay proportional Buyers Premium fees added automatically upon the hammer falling. These premiums calculated as a percentage of the winning bid essentially compensate auctioneers for marketing and closing the sales. Premiums typically range around 3-5% of purchase prices achieved.
Winning bidders immediately owe a 10% auction deposit payment based on the full purchase price to demonstrate commitment to securing deals. Unlike standard conveyancing where 10% deposits get paid on the completion date, auction environments require upfront earnest money paid days after winning deals. This chunks a hefty piece from overall property budgets needing availability to proceed further legally committing.
Insurance Valuation Checks
Mortgage lenders approving auction finance often demand proof properties hold suitable value to secure loans against. Valuation surveys by loss assessors or chartered surveyors formally value properties providing reports affirming actual builds match auction-marketed descriptions to mitigate risk. Typical valuation inspection fees range from £250-£500 needing allowance in budgets. If inaccuracies arise jeopardising lending, buyers lose these wasted valuation fees alongside other sunk auction costs further down the line.
Accelerated Legal Completion Costs
Standard conveyancing transactions allow ample time to find the best value legal representation for contract exchange. However, auction environments pressure faster completions legally formalising purchases around 28-56 days post-auction. This time constraint pushes buyers hastily appointing conveyancing which itself bears premium fees up to £500 above standard quotes to handle accelerated auction completions. Rushing legal tasks spikes costs!
Conclusion – Auction Buying Carries Big Upfront Risks
Buying property at auction involves steep upfront financial commitments even before winning dream home ownership. Between non-refundable administration fees, uncapped buyers’ premiums and immediate 10% deposit payments, backing out after auction room adrenaline proves extremely costly.
So it’s essential bidders budget diligently for all necessary purchasing costs before ever entering auction bidding wars. With hundreds or thousands needing allocation before even knowing if you’ve won big or wasted money fruitlessly, auctions certainly don’t offer low-cost and low-risk propositions! Deep pockets are required!
That said, for buyers thoroughly prepped to meet all auction costs and risks head-on, gigantic savings unlocking below-market value property gems make the auction gamble hugely worthwhile if lady luck shines smiling on your sealed bids! Just ensure sufficient financial resources are available to manage best-case and worst-case budget scenarios before proceeding – or else disastrous overstretching could cost you your home!