Understanding the Costs Involved in Selling Real Estate at Auction

This is the third in a series intended to answer some of the common questions potential sellers may have about the sale of real estate at auction. 

Understanding the Costs Involved in Selling Real Estate at Auction

Selling real estate at auction can be an effective and efficient way to achieve a competitive sale price, but it’s important to understand the costs involved. Knowing these costs upfront will help you plan and maximize your returns. Here’s a breakdown of the key expenses you need to consider:

Types of Costs Associated with Selling Real Estate at Auction

1. Commission Fees: Typically, you will need to pay a commission fee to the marketing professional selling your property. This fee is usually a percentage of the final sale price and can range from 5% to 10%. It compensates the professionals who handle the auction process and market your property.

2. Marketing Expenses: Effective marketing is crucial to attract potential buyers to your auction. Marketing expenses can include online listings, social media campaigns, email marketing, printed brochures, and advertisements in local media. The scope and scale of your marketing efforts will influence the total cost. In many cases, we cover these expenses during the marketing process.

3. Auction Fees: These fees cover the auctioneer’s services and administrative costs. Auction fees can be a flat rate or a percentage of the sale price. They cover everything from organizing the auction event to handling the logistics and paperwork.

How Are These Costs Calculated?

- Commission Fees: Calculated as a percentage of the sale price. For example, if your property sells for $300,000 and the commission rate is 6%, the commission fee would be $18,000. We generally do not charge any seller's commission fees and instead pass those costs on to the buyer in the buyer's premium. Obviously the buyer is conscious of this when bidding. 
- Marketing Expenses: Vary depending on the marketing plan you choose. A comprehensive marketing campaign will cost more but can attract more bidders.
- Auction Fees: Either a flat fee or a percentage of the sale price. It’s important to clarify these fees with your auction house beforehand.

Ways to Minimize Costs and Maximize Returns

1. Effective Marketing: Target your marketing efforts to reach the right audience. Quality over quantity can often yield better results.
2. DIY Preparations: Handle some aspects of property preparation yourself, such as staging and minor repairs, to save on costs.

Disclosure of Costs to Potential Bidders

Transparency is key to a successful auction. Ensure all potential bidders are aware of any additional costs they might incur, such as buyer premiums or closing costs. We track marketing costs and can typically predict with great accuracy seller and buyer costs when using our preferred closing agent. 

By understanding and managing these costs, you can effectively plan your auction strategy and aim for the best possible outcome. Stay tuned for our next blog post, where we will discuss how to prepare your property for auction, including staging, repairs, and marketing tips.