What Does It Cost To Auction A House? The Definitive Breakdown
06Jan

What Does It Cost To Auction A House? The Definitive Breakdown

What Does It Cost To Auction A House? The Definitive Breakdown

You’re thinking of selling your house. You've heard of selling your home by private treaty where your preferred agent lists your property and markets it to achieve a sale. That's the most common method of sale used by agents.

Then there's an auction. A process where a property is marketed with a date on which the property will be auctioned; a live event either on site or in auction rooms, where prospective, registered buyers go toe to toe to reach a reserve price set by the owner, finalizing in a sale to the new owners.

Auctions can be very energetic and robust. You could consider putting your property to auction, but what does it cost?

To date such costs have been very secretive. But in this article, we break the real estate industry's code of silence and spell out the costs you could be up for if you were to auction a house.

Picking An Experienced Auction Agent And Agency

This may not seem to be a cost, but pick the wrong agent and their inexperience will cost you dearly. Inexperienced real estate agents do not know how to engage with potential buyers during the auction marketing period.

They rely on wishful thinking that interested parties will show up on auction day and bid on the property. That rarely happens.

Experienced agents keep interested parties informed with email updates, phone calls and news updates. They make sure the prospective purchaser is fully informed about the auction process and what they need to do prior to give themselves their best shot at securing the property.

Agents with auction experience also know how to get the best price for the seller on auction day. They are strong negotiators and can skilfully extract the best bid from a buyer, making it the best decision they'll make in the long run.

Cost of Marketing

Every property should be marketed if you want to sell it for a good price. Marketing is not exclusive for when you auction a house. It's just as applicable in a private treaty sale.

Auction campaigns typically run for 30 days. With this finite period to attract prospective purchasers, it's critical to have a marketing campaign to expose your home to the market.

Marketing campaigns (for auctions BUT can also apply for private treaty) typically involve:

  • Signage - $200 - $1000 depending on material, photos, size
 
  • Professional photos - $199 - $795 (may include video)

    Yes you can get the agent to shoot a few pics off his/her iPhone but no experienced auction agent would ever entertain that idea., even if the photos could be ethically touched up by companies like Box Brownie. Your major asset deserves to be seen in its best light.

    If your home warrants it, an agent can recommend a short 60-90 second video to be made. A videographer would charge around $595 - $1000 for their professional work including editing. Some videos can cost up to $30,000 if you want to auction a house with 'Hollywood' effects.
 
  • Real estate portal listing - $150 - $4000

    REA and Domain dominate the real estate listing portal market. It's where most buyers go to find a property. Uploading a property to such portals is not free.

    When uploading a property, the agency will offer you options like a standard listing, a highlighted property or a premier listing on the portals.

    Standard listings tend to get lost on 'page 63', thereby giving your auction property little or no exposure to buyers. Choose a highlighted or premier listing if you want to sell your house by auction day. Expect to pay $1000 - $4000 depending on where your property is located.
 
  • Window cards, letterbox drops and brochures - $100 - $500
    Print media is still valid in today's digital world. Younger buyers love instant recognition follow ups via sms thanking them for attending the open house or receiving property details by text or email, but a brochure or flyer that can be held in the hands of purchasers, is loved by all.
 
  • Newspaper Advertising - $300 - $20,000+
    Prestige properties usually appear in the real estate display section of a city's Saturday edition. Depending on the city or town, these can appear to be expensive. But with buyers coming not only local areas, interstate or overseas purchasers can be informed of a property being on the market via this media.

    You cannot assume that such buyers are familiar with agencies in your area. Do you know the names of New Zealand agencies, USA or China? A newspaper can quickly summarise well credentialed agencies.
 
  • Administrative fees - $200+. Under Section 19 of the Act, real estate agencies now have to get proof of who they are actually dealing with; both sellers and buyers. That usually requires the agent going beyond a photocopy of a driver's licence. Can you believe some people actually use fake licences?

Property searches, title inquiries and identity checks give protection to all parties but fees do apply.

  • A build and pest report BEFORE auction day - $400 - $700

    Organise for a build and pest inspector to come to the property that is going to auction and give it a thorough going over. Roofs, guttering, walls and floors need to be inspected as well as determining if any pests (termites, ants) are present.

    If you are selling a home that's been tenanted you may want to get the property tested for the presence of methamphetamine (meth, ice) or any other prohibitive drug.

    Should such a drug be found, your property is not able to be tenanted or sold until such effects are removed.

It's not untypical for costs to range from $8000 - $15000 to clean the property, replacing carpets, ceilings and painting walls.

While these cost of getting a build and pest report done will be borne by the existing owner, it can give comfort and security to a prospective purchaser arming them with valuable information about the property they wish to bid for.

  • Cost of staging your home - $500+

    Want to present your home in its best light? Maybe your fifteen-year-old sofa with broken springs and stained arm rests doesn't do your home justice?

    Then it's time to bring in a professional home staging expert. Somebody who knows how to make your home shine with the right furniture, accessories, wall paintings; even down to the right towels in the bathroom.

At the very least a staging consultant will help you declutter your home so it spotlights the spaciousness to the viewing purchaser.

  • Cost of an auction venue - $200 - $500+

    Auctions can occur on site or in rooms. Onsite auctions are popular as there is very little cost associated with them except for cleaning and property maintenance.

    In room auctions are generally held at an agency's office or in a public venue like a town hall, meeting venue or corporate address. Such venues usually attract a room hire fee and can require a light refreshment catering charge.

Cost to Hire An Auctioneer

Costs range from $440 - $770. The average is around $550 but larger auction specialists can be at the higher end of the spectrum.

Interview the agency's recommended auctioneer to gauge they have the experience to sell your prime asset on the day and confirm the hire will suit your needs.

Cost of Commission - 2.5% - 3.5%

Agent’s commissions in most States have been deregulated. That means any rate is on the table.

But beware of the low charging agent. They are either:

  • inexperienced in sales or the area.
  • are not operating a financially viable business and are seeking a quick sale
  • do not have a database of buyers (your advertising spend will be high)
  • baiting you with a low fee only to tack on expensive products or services. eg Tiger Air?

No matter if one or all of the above apply, your big cost is usually a lower selling price. Don't give away your home; use a professional agent to maximise your sale price.

A real estate agency only earns commission IF the property is sold and settles. Imagine if the agent achieves an extra $100,000 above your expectations on auction day. Would you be happy to exchange that for an additional $3000 commission? You bet you would.

Up until this point, our focus has been on a seller's coast to auction a house. What about a real estate agent or agency? What cost's do they bare?

Cost of professional development

Opportunities to improve their skills through training, courses, industry updates, affiliations with professional bodies, newsletters or magazine subscriptions, is available to all real estate agents.

But not every agent takes their career seriously. Go with the professional business which invests in professional development; they'll get you the best result.

Cost of running a business

Leasing costs, staff wages, insurance costs, government regulations charges are just a few that can have an agency owner shelving out tens of not hundreds of thousands of dollars per month just to open the doors. 

Yes, these are necessary expenses to be in business, but they are a cost. Buyers demand smart, attractive offices of negotiating their home at the Coffee Club.

Cost of a database

A well 'oiled' database of buyers that's regularly kept updated on the real estate market is a goldmine for sellers.

Not only is there a huge cost in acquiring such a database with years of labour to grow and maintain that list can run into the tens of thousands.

Housing the database and running effective email campaigns to buyers is a software charge usually borne by the agency. However, with growing regulations around contacting people, the value of an agency having a solid database is growing. Perhaps an agent should charge a seller to expose their property to such a database of buyers?

Conclusion

The cost to auction a house is varied depending on location, type of property, marketing budget and the choice of choosing the right agent and agency.

Done right though, an auction gives a seller a planned marketing programme finalising hopefully in a sale.

Auction campaigns which usually run for 30 days, have a much higher sale rate even if the hammer is not knocked down on auction day. Negotiations following the auction day generally result in a sale occurring.

If you are considering to auction a house, perhaps you should not think of the costs associated but look at such a programme as an investment to give your home a better chance of being sold quickly and at a higher price.

Speak to First National Hills Direct for the right auction advice.

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