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This guide will break down the true costs of buying at auction, helping you budget correctly and avoid unexpected expenses.
The hammer price is the amount you bid for a property. However, this doesn’t include additional costs, which can add thousands to your total purchase price.
Tip: Always budget beyond the hammer price to cover stamp duty, fees, and finance charges.
From £100,000 to £10 million, catering to projects of all sizes.
Some auction houses charge a buyer’s premium (typically 1%-5% of the property price).
This fee goes to the auction house and is non-refundable.
Example: If you buy a property for £250,000 with a 2% buyer’s premium, you’ll pay an extra £5,000.
If using the modern method of auction, you may need to pay a reservation fee (usually 3%-5%). Unlike the buyer’s premium, this doesn’t count towards the purchase price. Tip: Always check the terms and conditions of the auction before bidding.
Stamp Duty Land Tax (SDLT) is a major cost when buying at auction. The amount depends on:
Use our SDLT Calculator to check what you’ll pay.
Tip: Some auction properties classed as uninhabitable may be exempt from SDLT—but you must pass HMRC’s test.
Tip: Have a solicitor check for hidden legal issues such as restrictive covenants or outstanding debts. battles.
Example: If you skip legal checks and later find an issue (e.g., a disputed boundary), you could face costly legal battles.
Bridging Loan Costs
Example:
If you hold the loan for 6 months, you’ll pay £9,000 in interest + £1,500 arrangement fee = £10,500 total finance cost.
Tip: Have a clear exit strategy (e.g., refinancing or selling) to avoid costly interest payments.
Common Renovation Costs:
New Roof: £5,000 – £15,000
Tip: Get a surveyor’s report before bidding to avoid unexpected repair costs.
If the property isn’t occupied immediately, you’ll need to budget for:
Council tax (some councils offer exemptions for unoccupied properties).
Insurance (vacant property insurance is more expensive).
Utility standing charges.
Tip: The longer you hold an unoccupied property, the higher your ongoing costs.
Investor Profile:
Cost Breakdown:
Hammer Price: £200,000
Buyer’s Premium (2%): £4,000
SDLT (3% for investors): £6,000
Legal Fees & Searches: £1,500
Bridging Loan Interest (6 months @ 1%): £9,000
Refurbishment Costs: £20,000
Total Cost: £240,500
Lesson: Always budget beyond the hammer price to avoid financial strain.
Buying at auction can be profitable, but only if you plan for the true costs beyond the hammer price.
Ans: Many buyers forget about buyer’s premiums, bridging loan interest, and refurbishment costs.
Ans: Yes, if the property is deemed uninhabitable by HMRC, SDLT may not apply. However, you must meet strict criteria.
Ans: Typically 10% on the day of auction.
Ans: Yes, bridging loans have higher rates but allow you to complete purchases quickly.
Ans: Yes, but only if the property is in mortgageable condition (e.g., has a working kitchen & bathroom).
(C) 2025 Auction Finance is a trading name of Mortgage Knight Ltd