What Is A Reservation Fee When Buying Property?​

A lot of us probably know that feeling when you find a home on the market that you would pay anything for. It suits your needs, it’s aesthetically stunning, and it has all the amenities nearby; yet, you know a lot of people will be looking at this property and thinking the same. 

What if there were a way to reserve that property so you could make sure it’s yours? Well, this is where reservation fees come in, so here’s everything you need to know about reservation fees and what types there are for different properties.

There has definitely been an increase in reservation fees across the UK, so let’s get into what you need to look out for.

Reservation Fees Explained for Buying a Property

In simple terms, a reservation fee when buying a house is simply just you paying the seller to take the property you want to buy off the market so it’s reserved for you. This is known as a reservation agreement, and the legal contract can potentially stop the seller from accepting another offer in the meantime. 

Now, everything is not black and white with a reservation agreement because it can change for different circumstances, but the general gist is that it works in the following manner:

Therefore, if you have some spare cash and you see a property you really want, it may be a good idea to reserve it in this way, but there are definitely some things you need to know first.

The Different Types of Reservation Fees When Buying a Property

Reservation fees don’t all look the same—of course, the general premise is the same—but it can look different for:

1. You’re Buying a New Build
2. You’re Buying as Part of the Shared Ownership Scheme
3. You’re Buying Through the Modern Method of Auction
4. You’re Making an Offer on a Property

#1 You’re Buying a New Build

The typical cost you can expect from a reservation fee if you’re looking to purchase a new build property is anywhere between £500 and 2000. For how long that reserves your property will be in the legally binding contract, but the traditional reservation period is 28 days (keeping it off the market).

Remember, if it’s not a refundable reservation fee, it must be deducted from the final sale price of the property for what you’re paying.

What to check beforehand:

• The price is clearly stated in the contract
• Whether it’s a refundable reservation fee or not
• Check all the specification details on the new build to make sure they meet your standards
• You’re given a 14-day cooling-off period (if you change your mind on reserving the property)
• It should clearly state that you have the right to cancel the contract

Before purchasing a new build house, looking into the New Homes Quality Board (NHQB) will be a great idea to make sure everything is in the correct condition before buying the place.

#2 You’re Buying as Part of the Shared Ownership Scheme

As part of the shared ownership scheme, reservation fees work slightly differently, and typically, the most you’ll pay will be £500, which will be taken off the final purchase price of the property. However, if you do change your mind and decide you don’t want to live there, most reservation agreements state that you won’t get a refund.

What to check beforehand:

• You know what percentage of the property you’ll actually own (usually ranges from 25-75%)
• You need to ask whether it’s refundable or deductible from your final costs
• You need to ask how long the reservation agreement will last before someone else can buy
• Find out whether or not there is a cooling-off period (typically 14 days)

#3 You’re Buying Through the Modern Method of Auction

As for the modern method of auction, this is probably the most common out of them all, as you’re basically using a platform such as Rightmove or Zoopla to bid on (with the filter ‘Modern Method of Auction’) a property and the highest bid at the end has the rights to the reservation agreement. The reservation fee can be up to 5% of the final sale price of the property.

However, with the Modern Method of Auction, this is often a non-refundable reservation fee, so if you don’t make the purchase of the property in 56 days (or you pull out), you’ll be at risk of losing your initial reservation fee unless the seller agrees to an extension of days due to certain circumstances.

What to check beforehand:

• Check that you know what the reservation fee is (whether it be a fixed fee or %)
• You  must exchange contracts within 56 days in most cases (unless the seller says otherwise)
• Check what happens if you cannot secure a mortgage 
• You may have to pay legal and auction fees, so make sure your finances are in order
• Make sure your solicitor is present in reading the legal documents
• It’s the exact property you want to live in

#4 You’re Making an Offer on a Property

Sometimes (not very often), an estate agent may ask you for a reservation fee when buying the home you want, usually between £500 and £2000, similar to buying a new build. Once you’ve done this, the estate agent will then take this property off any websites where they’re marketing the property.

At Liam Gretton, we’re seeing this more and more due to the increase in demand for property, especially in the new build market, meaning that more and more home buyers need to secure their properties. 

What to check beforehand:

• Is the fee refundable or not in this case? (What are the circumstances?)
• Is there a cooling-off period?
• Is there a formal agreement to sign or not?
• What happens if the seller (estate agent) pulls out of the agreement?
• Who holds the money? (It should be held by a solicitor, estate agent, or a secure third party)

What to Be Careful of With Reservation Fees?

There are two specific words that you need to get to grips with and make sure, to the best of your ability, with all the people and resources surrounding you, that don’t happen, and these are: ‘Gazundering’ and ‘Gazumping’. Yes, they sound a bit odd, but they could both happen to you if you’re not paying attention—here’s what they both mean:

As a buyer or seller, these are both morally wrong, and unfortunately, sometimes, there’s nothing we can do to stop them from happening, but if you’re at least aware of what they both are, you’re not surprised, and you can take appropriate action.

Unfortunately, they can’t be completely eliminated until contracts are formally exchanged, and that’s just how the legal system works in England and Wales at this moment in time, as we say this in April 2025. The best you can do at that point (when contracts are exchanged) is to have a reservation agreement that discourages or penalises this heavily.