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Auctions - how reliable are guide prices?
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IHeartDodo · 20/07/2017 14:57

Long post sorry! DP and I have seen this house and fallen in love with it completely...
It's an auction property, guide price 120-140k.
It's a 4-bed Victorian town house, with a 1-bed flat underneath, previous owner moved into the flat in the 90s when her husband died and has done nothing since then, so the flat is in an alright state (bit dated and needs a new kitchen) but the house is terrible, there are holes/pigeons etc. needs new windows, roof fixing, guttering, wiring, boiler etc. and all the cosmetic stuff (carpets/lights etc). There is also no bathroom (no idea how they washed!).
We each own a property now, mine is rented and we live in DP's. The plan would be to remortgage both and use our savings to buy this house, first do up the flat, then move in there and rent DP's house too while we do up the main house, then eventually move in there and rent the flat.

So 2 questions:

  1. Are we mad to consider taking this on? We can afford the house and the basic fixes (would probably have about 25k to do the essential stuff like fixing the flat and making the house watertight). We're pretty handy so all the painting/sanding/flooring/tiling etc we'd do ourselves.
  2. How do we know what price it'd go for? My house 3 years ago was 120k in this area, but it's a tiny 2-bed terrace, and only needed the cosmetic stuff doing. We could afford to bid 250k (which would leave enough for legal fees, stamp duty, and leaving 25k ish to do up).
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IHeartDodo · 20/07/2017 14:58

Oh and we have no children, and DP works full time and I'm part time also doing a PhD part time. So he can save 2000 each month and me about 1500.

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QuiteLikely5 · 20/07/2017 15:04

Could you not just buy a house for 270k and save yourself the aggro?

Do you know if the foundations are ok?

25k is not a lot of money to do up a wreck

Have you got other money to spend on renovations each month?

Have you thought about new heating system? 10k

New electrics? 5-10k

Kitchen

Bathroom

Plastering

Flooring

Skirtings

Doors

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QuiteLikely5 · 20/07/2017 15:06

Roof

Gosh I sound negative!

These things can be a real labour of love but you do need to go in with your eyes wide open about the stress it can place upon your finances and the reward you get at the end which may not be anything until fifty years time!

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PickAChew · 20/07/2017 15:09

Given that you only have the funds to make the house watertight and no more, yes you probably are mad!

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MikeUniformMike · 20/07/2017 15:16

I think you'd need to take out a full structural survey.Victorian houses, neglected or otherwise, can have an awful lot wrong with them.
If you buy at auction you need to pay straight away.
This is a link I found from a quick search, other advice may be available:
hoa.org.uk/advice/guides-for-homeowners/i-am-buying/how-to-buy-a-house-at-auction/

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IHeartDodo · 20/07/2017 15:25

Yes we're planning to get a full survey - so if there's anything very majorly wrong with it (like foundations) we'd have to re-evaluate whether we could afford to fix it (probably not).
The £3500 we would currently save each month would then be renovation money, so we could do the worst stuff immediately then the rest as we go... Given how slow builders can be that might not slow us down very much!
Could you not just buy a house for 270k and save yourself the aggro?
Yes probably, but we love this one. Property is pretty expensive round here, so there's no way we'd get anything of a comparable size.

We are looking at this as a long term labour of love, not a quick turn around to sell on for a profit. We don't want to lose lots though.

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QuiteLikely5 · 20/07/2017 15:38

As long as you are getting a survey done and you have all that disposable cash then I don't see the issue.

Good luck!

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IHeartDodo · 20/07/2017 15:41

Thanks, my gut feeling is that it's an amazing opportunity, and I can see us spending our lives there.
We've costed it all out, but we're young (26/28) and I'm worried we're hopelessly naive and not aware of it, so don't want to be trapped by a money-pit!

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Ginorchoc · 20/07/2017 15:42

Some houses can be sold pre auction so it's worth asking the auctioneers if that is an option, I'm only saying that as you love the house so much. Agouti might need to have a deposit and complete the legals in 30 days.

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Ginorchoc · 20/07/2017 15:42

*Also

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IHeartDodo · 20/07/2017 15:45

Also we'd be fine mostly living in the flat for a year or so until the house is habitable.
It has an internal staircase linking them so we could spread out a little.

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IHeartDodo · 20/07/2017 15:47

Oh... didn't know that!
How does that work, do you just ring the auction house?
We have the deposit sorted, should be able to remortgage in time if we do it now, the auction is 2nd August.

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AndWhat · 20/07/2017 15:49

The house across the road from us was recently sold at auction it's guide was 140k which was very surprising as they don't go for less than 200 on our stretch, it was in a good condition though and actually sold for 220k on the day if that helps

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IHeartDodo · 20/07/2017 15:52

That's hopeful...
We reckon that all nice and done up it could be worth 450k (the whole thing).

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wowfudge · 20/07/2017 16:41

Guide prices are set to tempt people to the auction. Anything worth having usually goes for above the guide price on the actual day.

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lalalonglegs · 20/07/2017 19:36

Auction properties that are sold before the auction are usually being marketed by a conventional estate agency that manages to clinch a deal in the run-up to the auction. If the property belongs to a local authority/housing association/is a repo then it is likely to be sold at the auction as these bodies value transparency above getting the highest price possible.

I've bought a few properties at auction and I take the view that if I'm buying something in need of everything doing then having a survey isn't going to tell me much that I don't already know. The house sounds very substantial and it might be easier to work out a budget on a cost per square meter for restoring it - about £500 per sq m for a reasonable standard outside property hotspots and discounting extensions, luxury finishes.

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mrmonk · 20/07/2017 20:58

What an exciting opportunity and the perfect time in your lives to take it on! I was pretty naive at that age too, but you learn as you go and come out wiser and with an amazing house at the end of it

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Jayfee · 20/07/2017 23:02

London auction prices can be horrendous and much dodgy bidding imo..unlike ebay where it is forbidden, sellers in property auctions can bid their own properties up. Other areas are very different and properties can go close to guide price.

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GoldenMalicious · 20/07/2017 23:26

We bid on a house at auction but ended up losing out as it went too high for us. You really need to set a price in your head that is your limit and DO NOT GO OVER IT!!! It's easy to get carried away and pay too much, particularly when you say that you've fallen in love with the house - love has no place in the auction room!!!

Make sure you've read the legal pack carefully, and in particular look out for clauses about any additional costs involved, and the timescales for completion. For example, if there are any outstanding debts associated with the property (unpaid bills spring to mind), then who will be liable to pay those? If you fail to complete within the specified timescale, then there are likely to be punitive charges, so you really need to have all your ducks in a row financially. And as mentioned upthread, you need to be in a position to pay the deposit immediately - you've effectively exchanged contracts as part of the auction process, so your deposit is payable there and then.

You should also check out the fees payable to the auction house, as well as legal costs etc. Some auction properties require you to pay legal fees for the sellers as well as your own.

You mention getting a survey done - good idea! But you have to be prepared to lose that money if you don't win the auction.

It's quite scary, but hugely exciting to consider buying at auction, but a clear head is vital. Good luck!

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Pradaqueen · 21/07/2017 03:46

Great advice from Golden above. Veteran auction buyer here. I love your ambitious plan but I think the main flaw is that if the property has no bathroom it may be considered unmortagable. Therefore if you cannot complete 28 days after exchange (auction day) you will lose your 10% plus any buyers fees.

Re pricing: it depends what area you are in ultimately and whether or not it is a local property in a local auction. My experience is that I have bought properties at guide, below guide and over guide. I have gone to buy properties that have ended up at 3x guide and more (and they were all £165k+) so I have walked away...generally a local property auction generates more interest and ime the guides are usually beaten by a significant margin but a local property in a national auction (not a London property I hasten to add) tends to go for guide to just above. Reserves are usually set around guide+ 10% and the seller an legally 'Run you up' to the reserve I.e bid against you.

I'd advise visiting a local property auction before the one your property is at to get a feel of how it works.

Finally always check it is being offered with vacant possession and any auction addendums on the day.

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kingjofferyworksintescos · 21/07/2017 06:08

Another veteran auction property buyer here ,
Firstly great advice by the two previous posters regarding the actual auction
I would add
Read the catalogue from start to finish , get the legal pack and read it thoroughly , engage a solicitor to work on your legals , look at the property as many times as you can ( and eavesdrop other viewers conversations - some know more what they are talking about than others but it's always useful / interesting) be aware that properties with missing kitchens / bathrooms are usually un mortgageable
Be aware that you must have insurance in place from exchange which in the case of auction is the drop of the hammer
I have to admit here I've only bought using cash not a mortgage so not sure how that works at an auction
It's always difficult to estimate how much more a property will fetch over the guide , look at previous results from that auction house and it's often a better indication of how much more % over the guide you will have to pay but it comes down to who's in the room on the day bidding against you and who wants it most !
Its important not to under estimate the cost of renovating , it's often more expensive per m2 than a new build but imo much nicer as a finished property - recent properties ( big old wrecks ) I have renovated of similar size to your one have cost 150k + (old large properties always = money pits ).
Check it's not listed / in a conservation area as this will limit your options on work and usually costs are a bit higher

Don't forget you will also have to pay the extra stamp duty as you already own property .

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IHeartDodo · 21/07/2017 11:10

Thanks everyone for your advice!
We've had another go through our finances last night and reckon 205-210k is our maximum.

RE mortgages etc: We are unlikely to be able to get mortgages etc set up in time, and also, if you want a buy-to-let you have to be an owner-occupier (be on the deeds of the house you live in), which I'm not, so we're looking at a bridging loan to pay the auction house immediately (within 28 days), then we'd get the mortgages to pay off the bridging loan.
I'm not entirely happy about this as the fees are extortionate, but we know we'd be able to pay it off in a month or so, so there's no danger there, and I think it's the only way we'd get in done in time.

We aren't planning to mortgage the new house (yet) - mortgaging the houses we own will give us enough to be cash buyers (albeit with a delay - hence bridging). We would possibly mortgage it in the future to pay for work on it, but we're not banking on it IYSWIM.

We will get a solicitor definitely! And a survey - possibly structural only, as we can see the obvious stuff. Fully prepared to lose that money if we're outbid, or to back out if it reveals something awful.

The legal pack is not yet available, which is weird, as it's just under 2 weeks away! We wanted to get a solicitor to look through it to check for anything dodgy.

Auction prices: we've looked at the previous auction prices for this agent (they're online), and almost all of them in the last few months have gone for within the guide price... DP has bet me a fiver it'll be under 190...

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IHeartDodo · 21/07/2017 11:11

Will send DP a link to this thread btw

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Cassimin · 21/07/2017 14:58

I've just bought a house from agents that was due to go to auction next month. I put offer in and it was accepted but had to do all paperwork within a day.
Don't know if it is normal, our solicitor said it was but we had to pay sellers fee of £900 with 10% deposit. Sale to be complete within 28 days.
I also have to pay 3% of sale price as it is not my only home.

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Pradaqueen · 21/07/2017 18:25

Beware of 3 weeks to go and no auction pack. There is a delay for a reason... Usually probate issue or not enough 'arse in gear' by the vendor (may be reluctance to accept the situation esp if it is a repo) the auction house is unlikely to accept a pack with less than a week to go so double check everything...good luck!

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