Property Auction - newbies, self-employed mortgage, do we have a chance?

[petrolbluevelvet]

Hi

Looking for a bit of impartial advice from you knowledgeable lot :)

We have seen a house we really like, but unfortunately it is up for auction and we aren't cash buyers. Grade II listed. Guide price £500-600K, which EA (also auctioneer) seemed to intimate was realistic when asked if it had been undervalued to generate interest, but he also said there was lots of interest. House itself appears completely sound, has kitchen and bathroom. Outbuildings, some of which attached to house are in a state.

We put an offer in for £530K which was rejected (after 5 days) by 2 of the 3 vendors who according to EA want it to go to auction. I'm not sure who they are, perhaps distant relatives? The person living in the house died with no children. Auction isn't for another 2 months.

Can anyone advise me:

Should we bother putting a higher offer in? Or is there an incentive for the vendors to go to auction other than the obvious i.e. bidding war?

If we do end up going to auction, can anyone spell out for me what exactly we should have in place? Our mortgage broker hasn't been too explanatory, would it be the usual steps, get survey, apply, get approved?

I should add it will be a Self Employed mortgage, although this doesn't seem to have been too problematic as we did get approved mortgage for another house which annoyingly fell through at the last minute when the lady left until agreeing sale to tell her kids, who promptly threw a wobbler at her selling their falling down, never visited childhood home.

My partner worries the auction route is going to be too risky and we should wait til nearer the time to put a higher offer in. I'm worried that by that point we won't have time to arrange a mortgage in advance of the auction itself...

Any advice very much welcomed!

My understanding is that you have to complete 28 days from the hammer falling.

You will need to have your solicitor check the legal pack before the auction and a survey done too (if you are having one). I would assume you would bearing in mind the type of property and the fact that you will need to know whether there is any likelihood of there being any retention by the lender.

I would also suggest that you get a mortgage in principle agreed before the auction otherwise you will end up losing your 10% deposit (payable at the auction) if you cannot complete.

Make sure the mortgage company knows it is an auction property and that the property is mortgagable. We almost lost out on our auction property because the mortgage company withdrew our offer in principal. Also you are likely to need 10% deposit in cash/cheque either before or at the auction.

Also grade 2 listed could be a money pit so beware. Google the property thoroughly and check with local council to see if there is any enforcement notices on it.

Thanks for your replies all. Yes, aware of the money pit potential, but will follow up your suggestions Geneticsbunny, thanks.

I concur on the mortgage in principle front Allthebest but googling seems to suggest it isn't worth much (as involves a cursory credit check which we know is excellent and passed last time). Would there be any other benefit?

Must admit I'm a bit confused if it is best to go to auction with mortgage in principle / mortgage approved (if you can?) / nothing except 10% and the ill deserved confidence of past success in getting mortgage offer.

I guess there are no positive opinions re. putting a higher offer in?

Thanks again both

Do bear in mind it'll be a 28 day exchange and that is extremely tight with any mortgage never mind self employed. Your mortgage lender will usually still want searches carrying out which can take several weeks depending on local authority. I recommend speaking with a local solicitor asap.

You could ask the agent what price the vendors would accept to stop the auction, although it is likely to be higher than the expected price at auction. I would assume if you offered over 600k they might let you buy it.

I buy at auction regularly. There are several reasons why a property will go to auction; 1. It is a repossession. The finance company/bank/lender are under a legal obligation to ensure that the best price in an open environment is achieved. Generally this is achieved through an auction process. Beware though as repo's tend to be the most likely to be sold without vacant possession. If this is the case, run for the hills! 2. Probate- family or crown estates wants the best price achieved 3. It hadn't sold despite being marketed extensively and the vendor has run out of options to get his/her money out of the property 4. It is unmortgageable - no working kitchen/bathroom/ JK/ subsidence etc.

You absolutely need to get a survey on a listed house before purchasing and get a solicitor to check the legal pack. This is dead money if you don't win the property or it is withdrawn before the sale.

On the day you will need 10% of the sale price on a cheque as you will exchange there and then. You'll also need additional monies for buyers fees etc. You will have to produce the remaining money on or before 28 days or you will forfeit your deposit so I'd make sure that your mortgage is in place. You also need to insure it after the exchange has taken place so get your quotes now. If the lot details say 'cash buyers only' you know it is unmortgageable. Hope that helps, good luck.

Thanks again all.

Prada it is option 2.

I think our only chance is to put another offer in in advance as we can't take the risk of losing the £50k if things fall through

Is there anything we can say that might improve our chances of having an offer accepted?

Hi OP, I think a swift exchange might temp them - try maybe not 28 days but 40? It might not sell at auction (many don't esp. listed) so don't panic - you might get lucky and buy it afterwards! Good luck!

Make sure you have 3 years accounts if you're self employed. Anything less than this you'd need a specialist broker and it gets a bit complicated. I had one year accounts, doable but only a few lenders would consider you that too through a broker. I couldn't just rock up to a high st lender and ask for a dip.

Thanks all. Think we'll possibly try a higher offer with quick completion as suggested, and if not, keep fingers x'd that it doesn't sell and make a lower offer after.

I actually started to get concerned that it had been put up for auction rather than sale as it may be unmortgageable. Several outbuildings attached to the house are crumbling and roof exposed. Additionally the kitchen is in a pretty dire state plumbing-wise...but I think the EA might have advised that in the sales brochure if the case...