Buying at auction - have you, would you ?

[MrsBobDylan]

We are considering bidding at auction on a house for us to live in (so not to flip or rent).

A family member could loan us the money while we put our current property on the market so logistically it's possible.

I have no idea what prices are like at auction especially post lockdown/recession. Everything I know about auctions is from Homes Under The Hammer so bugger all basically.

The house is in a great area with good schools and a garden - all of which we lack currently.

I probably need a reality check, so here are the costs:

Guide price: £250,000
House likely worth £400,000 on open market - needs modernisation, downstairs bathroom etc
We would be comfortable at £300,000 but could stretch to £330,000 £350,000 absolute tops.

Am I being ridiculous in even thinking we may have a chance? I am a ridiculous optimist so if the cold, hard truth is out there, I need to hear it please 😁

Please make sure you get a solicitor to check the legal pack for you before bidding! I'm a solicitor and there can be some real nasties lurking in them.

Also physically inspect the property very carefully before bidding, it's too late afterwards to pull out as you will have exchanged contracts. Make sure that you definitely have the money available to complete on time (usually 28 days after the auction).

Bear in mind higher rate SDLT if you currently own a property (the surcharge is still payable despite the current stamp duty break).

Check the T&Cs and the contract in the legal pack very carefully so you know all of the fees you're responsible for - you may have to reimburse the seller for their legal costs etc.

Thanks @Jujuball - the legal pack isn't available yet but I will get a solicitor to check it out. Neither dh or I are particularly good at the details.

I have booked a viewing and will endeavour to stay as level headed as possible. DH is the sensible one so I will instruct him to rein me in if I get carried away

I did, it was very much a doer upper and 7 years later it's now done up and on the market. Everything @Jujuball said above is invaluable and echoes my experience. I had a solicitor go through the legal pack and talk me through it in detail and I took my dad with me to view as he is a surveyor and the house had some very obvious issues. I also let him do the bidding at the auction as I had never been to one before and he buys a lot of antiques at auctions - I believe it was his tactics on the bidding that got me the house in the end plus he wasn't emotionally invested so would have stopped at the top of my budget and not gone beyond what I could afford.

I had to pay 10% of the hammer price plus auctioneers fees on the day, you need to make sure you have the money accessible to do that before you go in. I then had 28 days to complete which I didn't think would be an issue as I had an agreement in principle but in between getting it and putting the application in, the bank changed their lending criteria and they refused the mortgage and didn't tell me, I chased them with 10 days to go and that's when I found out. I managed to arrange a new mortgage but completed 3 days late and incurred additional costs as a result. It worked out ok in the end but I would never buy at auction again unless I was a cash buyer. The deposit was my life savings and I stood to lose the whole lot if I couldn't complete on time, it was so stressful I don't know how I got through it.

The auction was one of the most fun days I've ever had though, I loved it! (Which is why you need someone with a level head to do the bidding so you don't get carried away!)

Forgot to say, the guide price was £130k, I offered £128k a couple of days before the auction and it wa rejected. On the day there were loads of bidders (10+) but all bar 3 dropped out when it went above the sdlt threshold. I paid £144k

I haven’t bought anything at auction (yet) but I do like to scroll through sold prices sometimes. Sometimes buyers get ridiculous bargains and sometimes properties go for more than I’d expect.

It’s good that you know how much you’re prepared to pay. You’ll have an edge over a developer as you don’t need the same profit margins. Best of luck!