Is the “Hammer Price” All You Pay When Buying a Property at Auctions?

Visiting property auctions are thrilling! You can walk around a furnished property and easily envision your family living in it. However, while you are busy daydreaming, be mindful of the complete picture before the hammer drops. Auctions are more layered than one would assume them to be. Hence, if you intend to shop a plot or ready-to-move property, it is always advisable to do individual research first and consult a real estate auctioneer.

This article will cover different financial aspects of buying auctioned property. The most obvious payment is the hammer price. Hammer price refers to the bid which wins the auction. Many may not be aware that hammer price is just one to a series of payments you would need to make. Let’s unveil some of those unapparent fees one can expect.

Stamp Duty

Also known as Transfer Duty, Stamp Duty is the tax due on new owners of the house. The amount qualified for the duty depends on the price agreed and state laws. The percentage of stamp duty is decided by the state and would differ according to the territory.

You might pay less stamp duty for a property in Albury, New South Wales than in Wodonga, Victoria. Do also check if the occasional exemption applies in your case or not. For example, first home buyers and pensioners do not need to pay stamp duty on homes under a particular price in some states.

Administration Fee

This Fee or Charge covers the auctioneer’s cost for services in making the auction available. The amount can be a percentage of the agreed price or a fixed fee. In both scenarios, it will be included in the auctioneer’s guide. The administration fee is required to be paid at the time of contract exchange or when the bidder pays the first deposit.

Buyer’s Premium

In simple words, it is a standard fee charged by the auction house over the hammer price. The additional charge is a straight percentage, of around 10%. Auction houses might disguise it as “Service Fee” or “Commission”, but it serves the same purpose.

Premiums help provide auction houses to run ongoing auctions and other miscellaneous costs. While few do not charge this fee, Buyer’s Premium model has gained strong popularity worldwide. Trends reveal that auction houses will accept entries of houses where the buyer will be required to pay the full premium. Resulting in a significant increase in the cost of the property.

Special Sale Conditions

These are exclusive conditions set in the contract as onerous clauses. Hence, one should read the contract diligently and identify these clauses which may inflate the cost of buying a property. However, these special conditions are revealed at the end of the pre-auction cycle. Making them stand out from the norm. These can be masked as:

• Compensation to Local Authorities for previous dues

• Compensation for the Marketing Cost

• Paying Seller’s Auction Entry Fee

• Contribution to Seller’s Legal Fee