Auctions - how reliable are guide prices?

[IHeartDodo]

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).

It sounds like a money pit to me.
Mine was in much better condition than yours and I was reckoning on £15k

Mine never got to the auction room. I let it go at £6.5 k under guide price

Mine never got to the auction room. I let it go at £6.5 k under guide price

Sorry Dowser I'm not sure what you mean? 15k for repairs? Were you buying or selling?

I was selling and reckoned I need to spend £10 to £15k on it to bring it up to scratch.
A word with the lady in the auction house made me think again
I reckoned on new kitchen. Mine was tidy and ok, but I felt the house would have better potential if I made the dining room a kitchen and the little kitchen a utility room. A new bathroom upstairs.
All the paper stripped off, replastered and painted white. I the paper was painted white but some of it had come unstuck from the walls an dit just looked old fashioned...it would have all needed replastering.
Then some new flooring.
Some Windows needed replacing
This is before you uncover problems like damp and there was certainly a dodgy patch in the hall.
It had newish central heating ( 6 years ago) and same for rewiring

As we couldn't do any work ourselves , I bet it wouldn't have taken long for that £15k to start rising towards £20k

The house is in an area where the top prices are about .£75-£80k all done, so I could have been giving myself a lot of heartache and stress for nothing.
If it had cost me £20k and I decided to rent it it would have cost me a years council tax . Ours is 150 per cent after 6 months for an empty house.
Household insurance. Heating over winter. Any other repairs that might have come to light.

I cut my losses.
From what you say op £25k won't touch the surface and where I live I can get work done quite cheaply.

Retiring my good sized bungalow( 4 bedrooms, large lounge etc plus new outdoor lights and some internal lights) was £1800
Repainting it all throughout in white including fitted wardrobes, came to about £1000
All this work was done while we were away, so minor disruption to us.
Laminate flooring in five room came to about £1600 incl materials
New fence was about £700 to £800
New fascia and guttering, materials aren't terribly expensive probably another £800 maybe less.
New path, other one had broken up £800
This is the house I live in, not the one I've sold...somyou can imagine the one I live in was very good condition but I still have spent £10k
I was getting the outside decking strengthened in places and when the chap came.and lifted up a spar it was rotten. So there's another £2000 I have to spend. Making it £12k in all
Outwardly my house looked lovely. Sounds at the least you need a new roof. I would budget about £5-6k here, how much would it cost for you.

I'd get some prices in while you are thinking about it.

Forgot to say how long it would have taken to get that £20k back on house I've sold, I'd get £450 a month maybe £500 If very lucky would be three and a third years.
On top of that £20k would be tenants finding fee of £500, yearly accountant fee and tax on income, landlords insurance any repairs
So would more likely be 4 to five years before I'd see any profit. That's if the tenants stayed that length of time and I didn't have to pay another fee or had to wait several months without rent.
That would make me almost 70 years old. Too old. Sadly the house had to go.

Thanks Dowser.
Survey is happening today.

I told my parents all about it on Sunday night, half expecting them to try to talk me out of it, but they think it's a great idea (they have quite a bit of experience in this area!)
My mum wasn't even disappointed that we won't be able to afford a fancy wedding (when the time comes).
(I joked "It looks like our wedding'll be a registry office and a pub lunch" and she said "that's as it should be").
My dad said (and I think I agree) that "it's worth spending as much as you can on the size and location, because everything else you can fix".

I can't stop thinking about the bloody house. I'm definitely too involved. Thankfully DP is more rational. I was meant to be away on the auction date so I think I won't go... I trust him to bid sensibly and we'll decide a limit beforehand.

Sorry that's ambiguous, I mean I won't go to the auction.

They had another viewing yesterday so we went to see it again.
Lots of developer types there which is a bit disheartening.
But actually the house is in slightly better nick than we thought. it definitely needs the roof fixing, and new windows/doors/bathroom/kitchen. But there is actually some central heating, there are two radiators that look pretty new in the basement flat, and two on the ground floor.
A couple of floorboards were loose and under them we could see newish copper piping. So it might not need a whole re-plumb.

I wouldn't think that developers will pay over the odds. You're more at risk from someone like you, who falls in love with the property.

I also noticed that a lot of property at an auction a couple of days ago (Barnard Marcus) went unsold. Just bear in mind you are possibly buying at the top of the market.

Yeah I had thought that, but then there were loads of them there.
I reckon our main competition would be people like us (young, lots of energy to do it, can't afford a similar thing in better nick, no kids, steady income), but slightly better off...

Had the survey results, some good some bad!
Some stuff we already knew, like the rotten window frames.
Good news is the roof is in better condition than we thought, so it needs repairing rather than replacing.
Bad news is some of the lintels and joists need replacing. And there may be bugs of some kind (we noticed a little bit of woodworm). So we'd need to get that treated, but that's not too bad.

Finally got the legal pack yesterday too, as of we've got a solicitor to look over it. They promised we'd get the results on Tuesday!

I'm not entirely happy about this as the fees are extortionate,

Hi OP, can I be terribly cheeky and ask what your bridging finance rate is? I see it mentioned so often and know it can be about 15%+ for commercial property development but I don't really know what the going rate is for residential.

I hope it goes OK...I submitted a postal bid from overseas on a UK property once (was not allowed to phone in and couldn't attend in person). It was sold prior to auction and I was gutted but I can still remember the thrill of the process with happy memories!

It's a 2% flat fee and 0.8% per month.
So borrowing 150k it's 3k fee plus £1200 per month.
I think this is actually a pretty good rate for a bridging loan, but feels like a waste.

Well if anyone is still reading this we didn't get the house, it went for 270!! We decided our max was 185.
Not sure if it was worth that, we found out a couple of days ago that the seller had lost the title deeds and it was unregistered, so it would have been pretty much un-mortgageable and un-sellable until that was sorted (and it takes 12 years to upgrade possessory deeds to absolute deeds).
So the buyer either didn't care or didn't read the legal pack as carefully as we did!

Hi @IHeartDodo I am still reading and sorry to read your news, I hope you are ok it can be very disappointing.

Oh the other hand, I (also) was beaten (albeit pre-auction) by a buyer who was spending several 10Ks more than me so at least neither of us was "pipped at the post".

I'm sure the issues you listed are exactly why this went to auction (and if i remember correctly, why the legals were uploaded late).

There will be better properties coming your way, I'm sure...and one which has far fewer headaches accompanying it. And on a personal level, I know that the experience I gained from the process was invaluable in buying any house, auction or otherwise, so all it not wasted.

Thank you for updating and best of luck

It sounds like you had a lucky escape really.

We've only bought once at auction. But I've also researched one or two properties that we haven't bid on, because there have been issues in the legal pack. However, this hasn't deterred other bidders, and I suspect they haven't done as much research. I noticed one was entered in an auction quite last minute, and went for an exorbitant price. However, it must not have completed, because it went into the next auction as well!

It's disappointing, but at least you weren't that buyer who lost their deposit.

DividedKingdom yeah at least we were beaten by lots... Apparently the bidding slowed down around 185,they had started going up in 5k steps, then 2k... But then 2 new bidders started and it shot up!
QuiteUnfitBit I'm still disappointed, all the legal stuff was actually not a problem for us, so I had hoped it would just put other people off...
I must admit I'm hoping it'll come round again! I'll keep an eye on the auction catalogues...

Anyway it has been a learning experience! I've certainly learned a lot about deeds lol!
We've decided to keep looking, and go to a few more auctions.

Can't stop thinking about the bloody house... I'm dreaming about it! Really hoping it comes round again...
It's pathetic I know

Not at all, I still dream about the one I lost and that was 3 years ago

Ooh we've seen another now, and I think I might love it even more!
(wondering if we've just been really lucky or if there's something wrong with me!)
It's not an auction house, just normal sale, needs quite a bit of work but I don't think anything structural, so we'd get a mortgage. Lovely big completely overgrown garden etc...
Costs a lot more though lol

How exciting! May the force be with you. We lost a house four months into the sale just as we thought we were about to move in and we ended up in a much better bigger money pit house which we still can't believe our luck to live in.

Well the offer is in!
They're doing it a bit oddly, asked for all the offers by lunchtime today, then they're going to sit down with the old man and talk through it...
(Yes it's another old person's house, seems to be what we're drawn to!)

Eugh I wish I hadn't called the agent now... (my DP put the offer in so I called and withheld my number, and asked if they were still doing viewings and how many offers they've had...)
Apparently they've had 5 offers for the whole property (it was marketed as 2 lots, the house and a building plot, but we can't afford the whole lot).
And she said the old man would rather keep it together...
I'm sure if someone buys the whole lot they'll sell off the plot later anyway, once they have planning permission... AArgh