buying a house at auction

[dietstartsmonday]

has any one done this?

been looking for ages but nothing suitable for sale. one has come up this morning but auction. so after some guidance

Haven't done it but did look at a few houses up for auction. Have you ever watched Homes under the Hammer? Should give you a good impression on what happens at auctions. They always feature so many people who bought the house without seeing it from the inside and without reading the legal pack. I think the process is a lot easier when you're cash buyer as the process is so quick that there often isn't enough time to sort out a mortgage.

no never seen it, will have to look on catch up tv!!

we will need a mortgage but have 50% deposit

You definitely should! There are loads of episodes on iplayer!

Yes you must watch Homes under the hammer. From the episodes I have seen, the big mistakes that are made are as follows.

1 They don't have the money ready in the short time frame to complete in time and loose the deposit.

2 They don't read the legal pack.

3 They don't get a survey done before the auction.

4 They don't account for ceiling price for property in the area.

5 They pay too much and get carried away at auction.

The one's who do best are bought by people who are in the building trade themselves.

You need to be prepared and do a lot of work before the auction. If you are outbid all that work and expense goes down the drain.

Register with the auctioneers. They will tell you what they need in terms of evidence about you and your ability to pay the deposit on the day of the auction. They will also give you guidance on price, albeit not unbiased guidance! Get your survey and mortgage valuation done before the auction. You won't have time to get the mortgage sorted before completion unless you are pretty ready on auction day. Get your solictor to read the legal pack and do any missing searches etc, all before the auction.

Offer to buy it before the auction to get rid of all the stress.

I am a lawyer and have bought and sold properties for clients at auctions, and bid for them too. Never needed a mortgage to complete though, and I think that will be your main issue.

Find out why it is an auction sale too, not going through agents. We were desperate to sell our own house at one stage and tried auctions. None of the auction houses would take it - it was too "normal" a home with no possible angle to make it attractive to the auction goers.

We tried. we didn't get the house and it went to someone who was a renovator.

The big thing is to read the legal pack and also check it again on the day of the auction as extra information can be added then - it was for the house we were bidding on and it turned out it didn't own the land at the side that was used as a drive and to access the garden. Hence it being up for auction and also a potential issue for getting a mortgage. Our solicitor was recommended by the auction house and was there on the day of the auction so was able to give updated advice.

The big question you need to answer is why is it up for auction? Don't just assume it's because it needs a lot of work doing, as we did to start with. Might be more than cosmetic or it could be legal issues.

I've done it a few times. There str two main reasons that properties sre sold at suction..1) transparency: the property is being sold by a council/housing association, bank etc and they want to avoid an accusation of doing a back-room deal. 2) there is something wrong wth the property. This is much more common - a dodgy lease/short lease/flying freehold/absent freeholder/unconfirmed registry title/non-standard construction etc. Most of these problems are solvable BUT they often make the property unmortgageable until they are sorted out do, unless you are a csdh buyer, you are stuffed. Even if you buy a property in the first cstegory and need a mortgage, it is cutting it very fine sorting finance in the 4-week window between exchange st the auction and completion.

thank you for the advice.

will the estate agents have to tell us about any issues?

No. They may not be aware of them themselves.

I only buy dumps so I always assume everything needs doing and don't have a survey (risky, I know) but I do make my solicitor cast an eye over the legal pack so that I'm not surprised by any of tbe issues that lurk therein.

You will need to complete four weeks after the auction so you will need to have all your finances available to buy it by then.

is it even possible to compkete in 4 weeks if I need a mortgage?

we have an agreement in principle but I know most of the work is done after that

You will need to complete within 28 days, so ideally you'll have a mortgage offer, will have done a survey and started your searches before the auction takes place.

Then there's a chance that after shelling out fir survey and searches, you're outbid on the day, but that's the chance you take when buying an auction property.

I'm not saying it's impossible but you do need a VERY strong wind behind you. You can get a bridging loan until your mortgage comes though but they're very expensive.

ok thank you. will do sone more research and chat with mortgage broker I think. sounds risky but been looking so long I might be up for the risk!

A few more questions please if anyone is still reading this thread. Does the mortgage part of the process work as normal - ie it is for that particular property, the mortgage company needs to approve that address first? I am in same boat but would be 90% cash 10% mortgage.

Also does anyone have a feel for whether the price goes above or below the guide (in general, v broad question, I know)

THanks in advance

What are red flags in the Legal pack to watch for?
I find the idea of a house from an Auction to be fascinating.
I've seen one locally that has a very low price on.
Is there more costs than the winning bidder is responsible for financially other than the final price that it goes for?

hanette - I buy in London and the property either doesn't sell (occasional) or is significantly above the guide price. Most auction houses have their past results online so you can see what properties did sell for in a particular sale to give you an idea.

Yes, the mortgage process would be the same as usual which is the problem: buying in the "normal" way usually takes more than 4 weeks to get everything ready but that is all you've got when you buy at auction. There are usually clauses about not completing in time - the seller can levy all sorts of charges and interest several points above bank's lending rate etc - but I'm not sure it would be wise to rely on these kicking in: the vendor is entitled to say that he's keeping the deposit and remarketing. In an emergency (and with only 10% to cover) you could consider a bridging loan while you get everything sorted but they are very expensive.

You also have to be pretty damn sure that the place will be mortgageable - as noted above, often properties are sold because they're not so, even if you get your mortgage together, are the lenders going to lend for that particular property?

I've been looking through an auction legal pack today and it is really worth studying the special conditions - I was horrified to see that a flat I am interested in will have a 3% levy on top of the sale price which, when I factor in 3% stamp duty, makes it much less attractive. These sorts of hidden costs (albeit not usually this greedy) are quite common.

thanks lala that's very useful to know.