Reservation Fees vs Deposit: What’s the difference (and what are you actually paying for?)

If you’ve been exploring property auctions, you’ve probably come across the term Reservation Fee and thought: “Isn’t that just a deposit?”

It’s a fair question and one of the most common areas of confusion for buyers. Because while they might sound similar, Reservation Fees and Deposits serve very different purposes and understanding that difference is key to buying with confidence at auction.

Let’s simplify it:

• Reservation Fee – secures the property and covers the costs of the auction process
• Deposit – goes towards the purchase price of the property, just like a traditional house purchase

Both are important, but they happen at different stages and do very different jobs.

What is a Reservation Fee?

The Reservation Fee secures the property and gives you time to complete. Because when you win a property through the Modern Method of Auction, you don’t exchange contracts immediately.

Instead, you:

1. Pay a Reservation Fee
2. Sign a reservation agreement
3. Commit to complete – typically up to 56 days ¹

This gives you time to:

• Arrange your mortgage
• Complete legal work
• Finalise the purchase

What does the Reservation Fee actually cover?

The Reservation Fee helps cover the costs involved in running the auction process and progressing the transaction. This can include:

• Preparing the Buyer Information Pack
• Marketing and listing the property
• Estate Agent and Auctioneer fees
• Managing the bidding platform
• Compliance and ID checks
• Supporting both buyer and seller through to completion

It also:

• Reserves the property exclusively for the winning bidder
• Removes the property from the market
• Creates a defined timeframe to complete the purchase

In many cases, this structure allows sellers to choose a low or no-commission option ², with auction costs instead covered through the buyer paid Reservation Fee.

It’s not a payment towards the property price; it’s a fee that supports the auction process and secures the opportunity to purchase.

Is the Reservation Fee refundable?

Reservation fees are typically non-refundable, as they form part of the commitment to proceed within the agreed timeframe.

This helps:

• Encourage serious buyers
• Provide sellers with greater certainty
• Reduce the likelihood of fall-throughs

However, there are defined circumstances where refunds may be considered, for example, if the seller cannot proceed, or where key Material Information was incorrect or missing. These situations are outlined in the Reservation Terms and Policies.

All fees, terms and refund conditions are clearly explained before bidding, so buyers know exactly where they stand.

What is a Deposit?

The deposit comes later.

Once legal work is complete and you’re ready to exchange contracts, you’ll pay a deposit, just like in a traditional property purchase.

Typically:

• It’s a percentage of the purchase price (often around 10%)
• It forms part of the total amount you’re paying for the property

Why not just use a Deposit like traditional sales?

The Modern Method of Auction is a very different process to traditional home sales, with different types of activity and associated costs. The process brings big benefits of speed and security and offers more flexibility than traditional sales (Private Treaty).

Starting the process with the commitment of a Reservation Fee:

• Gives buyers time to finalise finance arrangements
• Provides sellers with commitment and structure
• Keeps the transaction moving much faster than Private Treaty with clear timelines and more information up front (e.g. the creation of the Buyer Information Pack).

Different roles, same goal.

Reservation Fees and Deposits aren’t interchangeable, they’re two separate parts of a structured modern process.

• The Reservation Fee secures the opportunity
• The Deposit secures the purchase

Together, they create a transaction that is more:

• Transparent
• Faster
• Structured
• Designed to reduce fall-throughs
• Supportive of both buyers and sellers

If you’re considering buying or selling via the Modern Method of Auction, you can do so with clarity, knowing exactly what you’re paying, and why.

¹ From receipt of draft contracts. Based on grade one standard properties.

² The buyer pays a Reservation Fee, so you pay no commission or auction fee. They will consider this as part of their total budget for the property.