Are you considering selling this year and are curious about the cost to auction a house? Below, we’ll talk you through auctioneer fees and the other costs involved in selling your house via auction.
What is a house auction?
An auction is a public sale of a property that occurs on a predetermined auction date and time. It’s usually held outside the selling property or in an auction room. There’s a reserve price the homeowner puts into writing, which the real estate agent will pass on to the professional auctioneer. This is essentially the minimum sale price you expect for your property. Then the auctioneer must disclose the conditions of sale before proceeding.
Interested buyers pre-register with your real estate agent or auctioneer so they can manage who’s bidding on the property. Prospective buyers bid for your home, and if the bidding exceeds your reserve price, the person with the highest bid enters into a contract to buy the property at the cost of their winning bid.
The auctioneer’s role is to ensure a lively atmosphere and convince buyers to outbid each other for your premium property. Feeding into people’s competitive natures is how they entice buyers to go over the reserve price and often reach a figure higher than the area’s median market value.
If you don’t reach your reserve price and don’t want to accept a lower price, your property is ‘passed in.’ This means you’re under no obligation to sign a contract. However, many homeowners will negotiate further with the highest bidder (with assistance from the auctioneer and their real estate agent) in the hopes of selling their property for a good price. Otherwise, most homeowners turn to private sales next.
How do you set a reserve price?
The key to nailing a realistic reserve price on auction day is to balance a decent profit while maintaining a fair price to encourage bidders. Your local real estate agent is essential to your reserve price strategy, as they can advise you on the following:
- The final selling price and interest in similar properties in the area.
- Pre-auction attention from interested parties.
Why should you auction your house?
Homeowners choose to sell at auction for many reasons. The main advantage of auctioning your home is the likelihood that you’ll sell for a higher price compared to selling privately. This is generally driven by a time limit on negotiations, creating an urgency to bid and increased competition between prospective buyers.
For example, in the booming Sydney and Melbourne property markets, it’s common to see homes sell quickly at auction and at prices $100,000 over the reserve, as interested buyers often enter into bidding wars.
It’s a good idea to talk to real estate agents in your area for auction advice before deciding on this selling process. Market conditions will affect your chances of auctioning your home successfully. A good real estate agent can advise you on the most suitable method to sell your property. They can also discuss clearance rates in your local area (the percentage of homes sold successfully at auction or before the auction) to help you decide on the best way to sell your property.
The advantages and disadvantages of house auctions
Here are the benefits and disadvantages of selling your home at auction rather than choosing the more popular private treaty option:
Advantages
- There’s a time limit on negotiations creating urgency, and it’s one way to easily motivate potential buyers!
- Depending on current property market conditions, an auction can deliver a higher sale price, especially if you work with an experienced auctioneer who can create a dynamic atmosphere on auction day.
- The competitive nature of bidding at auctions as people try to outbid other buyers to win the prize (a.k.a your home).
- You’re protected by a reserve price that you set, and you can always negotiate this price afterwards if it isn’t reached.
- Comprehensive marketing in the lead-up to auction.
- You have nothing to lose, as you can still sell your home prior to the auction.
- A quick sale. Once you exceed your reserve price, the sale is unconditional, and you don’t have to wait for financing or building inspections.
Disadvantages
- The intensity of the auction process can discourage potential buyers, and if it’s too much, they may decide not to bid.
- Marketing and advertising costs can be more expensive.
- Properties are often ‘passed in’, which can be disappointing as a seller as your property remains on the market.
- Slow bidding can send an incorrect message about the property value.
- There’s no guarantee that your property will sell at auction.
Take a detailed look at the pros and cons of selling via auction here.
The costs to auction a house
Now you’ve decided to auction your home; it’s time to discuss real estate auction fees. But it’s important to note that there’s no set auctioneer fee and both costs and regulations differ from state to state and city to city.
Auctioneer costs
A good auctioneer can cost anywhere between $200 and $1000, depending on your location, the auctioneer’s experience and your choice of real estate agency. It’s a fixed fee, regardless of whether or not the property sells.
If you’re paying $1000, you’d expect the auctioneer to have a record of receiving high bids that surpass the reserve price. But you don’t necessarily want to pay the most affordable fixed fee. A great auctioneer can be the difference between not selling your property and exceeding your desired sale price. An energetic auctioneer will create a lively atmosphere and a sense of urgency to entice potential buyers to bid and bid high. They’re also experienced negotiators who can skillfuly entice buyers to put their best price forward.
Besides a fixed price, an auctioneer’s cost can also be marketed as ‘free’. This generally means the cost will come out of the commission amount paid to your agent when they sell your property. As they’re a separate entity, the fee is exclusively for their service and expertise and is usually up to 5%. It’s a good idea to get some clarity on auctioneer costs before you choose which real estate agency you’d like to appoint to sell your home.
Our comparison tool allows you to compare costs like real estate agent marketing fees, commission rates and more all in one place.
It’s important to note that the auctioneer fee isn’t the only cost you’ll encounter when auctioning your home, as you’ll find out below. You’ll need to pay for marketing to attract buyers and let people know your property is going up for auction.
Marketing costs
When you sell your house via auction, there are costs involved to advertise your property and the auction day itself. However, the more buyers that attend your auction, the more lively and competitive it will be, and the greater the chance you’ll get the highest price possible. The bigger the crowd, the bigger the hype and the higher the price (if all goes to plan). Therefore, it’s always worthwhile investing the money to market your property extensively.
An auction campaign usually lasts for 30 days, so the marketing activity you’d expect leading up to the auction includes:
- Signage (e.g. a signboard and auction flags).
- Online listings on real estate websites like realestate.com.au and domain.com.au.
- Listings in print media, like local newspapers and magazines.
- Social media campaigns.
- Flyers and brochures.
- Community notice boards.
- Personal invitations your real estate agent sends to their database.
- Professional photos and video for that added ‘it’ factor.
You can expect to pay between $500 and $2500 for your marketing campaign. However, an extensive campaign and a higher selling price will increase marketing costs. For example, real estate agents say it isn’t surprising to pay $7000 in advertising for a $700,000 home.
The reason auction marketing generally costs more is because there’s a specific auction date involved, and real estate agents need to advertise far in advance. They also need to reach the widest market of people possible, so they cover all marketing strategies.
A successful advertising strategy will highlight the enticing reasons people want to pencil your auction date in their diary. Ensure all listings emphasise your home’s most unique selling points. Marketing can essentially add tens of thousands of dollars to your sale price, as you’re giving your property the maximum amount of exposure possible to prospective buyers.
Marketing costs are commonly included in the agent commission rate. So, it’s best to clarify this detail before appointing an agent.
Related: Marketing When Selling Your Property
Hidden costs
The auctioneer cost and the marketing cost are the two most significant factors, but there are some hidden fees to take into account:
- Renting an auction room. This depends on the property type, environmental factors, privacy concerns and whether there are tenants. But an in-room auction event eliminates all disruptions.
- Staging your home. Hiring a professional staging expert to declutter and stage your home can lead to a higher price in some circumstances.
- Building and pest report before auction day.
So, how much does an auction cost?
Cumulatively, you can expect to pay anywhere from $700 to $3500 for both the marketing campaigns and auctioneer fees. But this price depends on location, marketing budget and the auctioneer’s experience.
Compare local real estate agents
To discover the cost of auctioning your house, the first place to start is to compare real estate agents online and find the top agents in your area. You can compare agents here, including commission information, marketing strategies, sales history and independent homeowner reviews.
Remember, the right agent can be the difference between a successful sale and an unsuccessful auction. Discuss your state or territory’s regulations with them to better understand the real estate auction fees you’re expected to pay. Then ensure they keep you informed of any developments leading up to the big auction day.
Next, head to our Selling Costs Calculator to estimate the cost of selling your property. This includes auction costs.