Auction house purchase and paying seller's fees...
Discussion
Is it normal for the legal pack to contain a clause stating that the auction buyer must pay the seller's fees?
I've been doing my homework on a house to flip near where I live. Legal pack just released and there's what seems a pretty shocking clause in it stating...
"15 - On or before completion the Buyer is liable to pay the Seller higher of two point seven five per cent plus value added tax of the purchase price or four thousand seven hundred pounds plus value added tax in relation to the Seller’s legal and agents costs associated with the sale of the property."
Even that fact they have only used text and not numbers to write the wmounts is sly IMO. Elsewhere in the document they have figures written using £123 typeface.....
I've checked a few other propertys for sale (Savills Auction this Thursday) and there are some that state the buyer pays 1% plus vat, but I've not found one that is this high.
The property has a guide of £110k. The buyer has to pay the following...
£1250+vat for buyers premium.
£600+vat sellers solicitors fees
£650+vat sellers search and survey fees
£4700+vat sellers selling fee.
I'd then have to add....
3% stamp - £3750 (assuming a buy at £125k)
£720 ish - conveyancing fees
TOTAL = £13,050 in fees, to buy a £125k flipper that needs £25k spending on it.
It just seems nuts and is a huge shame as I was keen to try to pick up the house until I read that!
As they say on "that" program.....ALWAYS READ THE LEGAL PACK!!
https://auctions.savills.co.uk/index.php?option=co...
I've been doing my homework on a house to flip near where I live. Legal pack just released and there's what seems a pretty shocking clause in it stating...
"15 - On or before completion the Buyer is liable to pay the Seller higher of two point seven five per cent plus value added tax of the purchase price or four thousand seven hundred pounds plus value added tax in relation to the Seller’s legal and agents costs associated with the sale of the property."
Even that fact they have only used text and not numbers to write the wmounts is sly IMO. Elsewhere in the document they have figures written using £123 typeface.....
I've checked a few other propertys for sale (Savills Auction this Thursday) and there are some that state the buyer pays 1% plus vat, but I've not found one that is this high.
The property has a guide of £110k. The buyer has to pay the following...
£1250+vat for buyers premium.
£600+vat sellers solicitors fees
£650+vat sellers search and survey fees
£4700+vat sellers selling fee.
I'd then have to add....
3% stamp - £3750 (assuming a buy at £125k)
£720 ish - conveyancing fees
TOTAL = £13,050 in fees, to buy a £125k flipper that needs £25k spending on it.
It just seems nuts and is a huge shame as I was keen to try to pick up the house until I read that!
As they say on "that" program.....ALWAYS READ THE LEGAL PACK!!
https://auctions.savills.co.uk/index.php?option=co...
Mr Noble said:
It just seems nuts and is a huge shame as I was keen to try to pick up the house until I read that!
Yes, always read the legal pack. These sorts of conditions are not particularly unusual.Your comment about the words being typed as opposed to figures may be nothing more than the fact the special condition was typed by a different person or added later to a standard form.
However, none of this should affect your willingness to bid on the property. Just make sure that, as at any other auction, you make sure your bidding takes account of all fees, stamp duty etc. It can be useful to jot a few notes beforehand listing out some "my bid" vs "actual cost" figures.
It's pretty typical right across the auction industry - trying to get punters excited with a low headline price in the catalogue.
As above... If the deal stacks then it stacks. Doesn't so much matter where the money goes - just make sure you account for it and if you can still make the deal work then happy days.
If you've not done it before (either auction or a flip) might be worth pinging over to someone who has so you can be doubly safe on your first one.
Good luck!
If you've not done it before (either auction or a flip) might be worth pinging over to someone who has so you can be doubly safe on your first one.
Good luck!
Thank you chaps.
I agree that one would just need to add the fees into the overall GDV numbers.
My query was more about the outrageous sellers premium.
It seems common for a sellers fee of 1% to be added to the buyers costs, but this one would work out at over 5% If the property sells for £150k. Seems like a dodgy scheme to me.
I agree that one would just need to add the fees into the overall GDV numbers.
My query was more about the outrageous sellers premium.
It seems common for a sellers fee of 1% to be added to the buyers costs, but this one would work out at over 5% If the property sells for £150k. Seems like a dodgy scheme to me.
Ps.
I’ve not bought at auction before though I have been to one with a friend who was buying.
I have done 5 renovation jobs (one major one splitting a 4 storey Victorian terrace into two flats) over the last few years, so am comfortable doing the work and assessing the condition and costs.
I’ve not bought at auction before though I have been to one with a friend who was buying.
I have done 5 renovation jobs (one major one splitting a 4 storey Victorian terrace into two flats) over the last few years, so am comfortable doing the work and assessing the condition and costs.
I just bought some land via auction house that had sellers fees added, only 900 quid which wasnt the end of the world.
The one thing that did sting me was VAT was added to the purchase cost, again hidden amongst the legal pack. That's the sort of thing which should be places directly after the guide price to make it a bit clearer.
The one thing that did sting me was VAT was added to the purchase cost, again hidden amongst the legal pack. That's the sort of thing which should be places directly after the guide price to make it a bit clearer.
Mr Noble said:
Thank you chaps.
I agree that one would just need to add the fees into the overall GDV numbers.
My query was more about the outrageous sellers premium.
It seems common for a sellers fee of 1% to be added to the buyers costs, but this one would work out at over 5% If the property sells for £150k. Seems like a dodgy scheme to me.
It's not dodgy if it's in the legal pack. That's why buyers should read it.I agree that one would just need to add the fees into the overall GDV numbers.
My query was more about the outrageous sellers premium.
It seems common for a sellers fee of 1% to be added to the buyers costs, but this one would work out at over 5% If the property sells for £150k. Seems like a dodgy scheme to me.
I've seen all sorts of stuff in legal packs that put a really different slant on the sale. Last time I sold a flat at action there were some potential huge bills in the pipeline from the freeholder due to various building defects. This was all in the legal pack, but I suspect the person who bought it had no idea as they paid way over what I thought it was reasonably worth.
Yep, I also found found this with properties at auction. Easy over £10k fees, even on £60k houses. It was common that buyer was also responsible for all sellers’ fees, legal and sale commission. Although this is covered in the legal pack. I’ve even seen this added to the legal pack just before the auction.
There is also the fees when you sell it...another set of legals fees & more estate agent fees.
I suspect those that win properties at sub £100k at auction have not calculated the total fees they will pay. As the prices they sell for dont appear to have any profit left in them.
If you cant work out whats wrong with a property at auction and the reason why its at auction.....then walk away as you must be missing something! hahaa
There is also the fees when you sell it...another set of legals fees & more estate agent fees.
I suspect those that win properties at sub £100k at auction have not calculated the total fees they will pay. As the prices they sell for dont appear to have any profit left in them.
If you cant work out whats wrong with a property at auction and the reason why its at auction.....then walk away as you must be missing something! hahaa
Mr Noble said:
Is it standard construction?The external wall breeze block construction at the rear & the way next door has either external wall insulation or a "repair" makes me suspect its not?
Edited by Mortgage_tom on Tuesday 22 September 17:20
Mortgage_tom said:
Yep, I also found found this with properties at auction. Easy over £10k fees, even on £60k houses. It was common that buyer was also responsible for all sellers’ fees, legal and sale commission. Although this is covered in the legal pack. I’ve even seen this added to the legal pack just before the auction.
Assuming that most buyers are aware of these massive extra costs, then all they will do is drive the hammer price down.Never heard of an auction where the buyer pays the seller's fee though. So if you're a seller do you receive the full hammer price?
Simpo Two said:
Mortgage_tom said:
Yep, I also found found this with properties at auction. Easy over £10k fees, even on £60k houses. It was common that buyer was also responsible for all sellers’ fees, legal and sale commission. Although this is covered in the legal pack. I’ve even seen this added to the legal pack just before the auction.
Assuming that most buyers are aware of these massive extra costs, then all they will do is drive the hammer price down.Never heard of an auction where the buyer pays the seller's fee though. So if you're a seller do you receive the full hammer price?
Much like eBay, you factor costs into the hammer price you're prepared to pay.
The advantage to the seller is where people haven't read the legal pack, and bid on a "cheap" property.
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