How Is the Property Auction Price Calculated?

Lots of cash changes hands at property auctions up and down the UK. Figures include everything from the agreed sale price determined by a buyer’s bid to the auction charges covered by both parties.

There is also the guide price and the reserve price. These are two figures that in some way dictate the amount for which a property finally sells.

But how do online and “live” auction houses calculate these amounts? In this article, the team at Property Solvers – specialists in buying and selling homes – answer this question.

What is a Property Auction “Guide Price”?

The auctioneers use the “guide price” at a property auction to market a particular lot. It is calculated by to give a good indication of the property’s market value and the amount for which it is likely to sell. This helps buyers to understand what they’re getting into.

Usually, the guide price is calculated in a similar manner to a typical home valuation for purposes of accuracy. The auctioneers take recent sale prices of similar local properties, as well as the building’s location, features and kerb appeal.

An auction surveyor will also look at any damage to the property or renovations required, and any ongoing legal disputes relating to the lot.

Of course, the guide price is rarely the final figure for which an auction property sells. While bidding may start around that amount, popular properties may be the subject of bidding wars – pushing the final sale price much higher.

Alternatively, if there is little interest during the period of time for which a lot is available, an auctioneer may drop the starting bid amount to below the guide price to encourage bidding.

What is the “Reserve Price”?

The seller decides upon the reserve price, with assistance from the auctioneer. This amount represents a minimum threshold. If potential buyers bid below this amount, it will not be accepted.

The auctioneer and the seller keep the reserve price private between themselves. It is not available to the public. This amount can be up to 10% higher than the guide price, and sometimes falls below it.

How Do you Find out the Price Sold at Property Auction?

If you’re curious to know how much an auction property has sold for, and to compare it with the initial guide price, you can often find out on the auctioneer’s website. There will usually be a section called “Sold Auction Lots” or you can see via the listings themselves.

How Much Does an Auction House Charge the Seller?

So, how much commission do auction houses charge, and are there any additional costs?

Auction charges payable by the seller often amount to a commission fee of between 1.5 and 2.5% of the final sale amount. There may also be advertising charges payable. If you’re a seller, it’s important to determine exactly how much you’ll need to be paying in the form of additional fees before your property goes to auction.

This amount is usually charged just after the exchange of contracts. Most commonly, the auction house deducts it from the buyer’s deposit before passing the rest on to the seller.

How Much Does an Auction House Charge the Buyer?

As well as the 10% deposit payable to the seller – and the eventual payment of the remainder of the sale price – there is also a “buyer’s premium”. This is an amount payable directly to the auction house. So how much do auction houses charge the buyer?

This amount may differ between auctioneers, but usually falls between 2% and 10% of the property sale price, plus VAT.

Why Do Auction Houses Charge a Buyer’s Premium?

This amount is charged to cover administrative costs and aid in the running of the auction house and the payment of additional expenses. It helps it to keep running to a high standard, to pay its staff and to support future sales.

A buyer must factor this amount into their budget when bidding on a property. It is usually possible to find information on this via the auction house’ s website, but you can also get in touch by phone to ask directly.

It is worth noting that sometimes there is no administrative fee charged to the seller, and this may instead be covered by this premium. Alternatively, there may instead be a “buyer’s fee”, which is often a fixed amount, often falling between £195 and £1200.

For these reasons, both the buyer and the seller must budget carefully before deciding to enter into a transaction at auction.

If you want to sell property fast, but auction looks too costly or complex for your needs, get in touch with Property Solvers today. We’ll buy your house in as few as seven days. You’ll receive an up front no-obligation cash offer worth up to 75% (or more) of your property’s market value. You’ll also have no estate agency or solicitor’s fees to pay.

You can also buy property via our simple and straightforward estate agency system. We offer a no sale, no fee guarantee – and there are no tie-in contracts to worry about.

For further information, contact our friendly specialists today.