With the increasing popularity of property auctions, many clients are finding them an appealing option due to the competitive pricing often available. However, it’s important to be aware of several additional costs involved when purchasing properties at auction:

  1. Auctioneer’s Fees
    After a property is sold at auction, buyers are typically required to pay extra fees to the auctioneer, in addition to the deposit. This is commonly referred to as a buyer’s premium. The buyer’s premium is often calculated as a percentage of the purchase price, though some auction houses may impose a fixed minimum fee. In some cases, this fee can exceed the deposit or even a portion of the purchase price.
  2. Seller’s Costs
    In addition to your own legal fees, auction terms often stipulate that the buyer must cover the seller’s legal costs and disbursements. These may include fees for title documents, Land Registry fees, and the costs of property searches. As a result, the total amount required to complete the transaction may be higher than initially expected once all these extra costs are factored in.
  3. Lender’s Costs
    If you are financing the purchase through a lender, you may also be responsible for paying the lender’s legal fees, which should be considered as part of your overall budget.
  4. Stamp Duty Land Tax (SDLT)
    According to HMRC guidelines, any costs incurred as part of the property purchase, known as the chargeable consideration, must be included when calculating SDLT. The following scenarios determine whether additional costs count toward the SDLT total:
    • If paying the fee is a condition of the contract.
    • If the transaction can only proceed once the fee is paid.
    • If the fee is triggered by the completion of the transaction.

SDLT is payable on both the purchase price and any additional fees. For example, if a property is bought for £250,000, and the buyer’s premium is £6,000 with the seller’s costs totalling £500 (inclusive of VAT), SDLT would be calculated on the total amount of £256,500.

  1. Notice to Complete Costs
    If the purchase isn’t completed by the agreed contractual completion date, the seller’s solicitor can charge additional legal fees and interest, which is calculated daily until completion. Your own solicitor’s fees may also increase due to the delay. To avoid these penalties, it’s crucial that you provide your solicitor with all the necessary documentation to allow them to complete their ID and funds checks, and ensures all documents are signed and returned before the contractual deadline.

Failing to complete an auction purchase on time could lead to serious consequences, including:

  • Losing your deposit.
  • Being liable for both the seller’s and your legal costs.
  • Paying the difference in price if the property is resold for less.
  • Being liable for any damages.

At BHW, we have extensive experience handling residential auction sales and purchases. For a personalised fee estimate, contact our Residential Property team at 0116 402 9000.