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Original poster

Why would a house be sold at auction?

23 replies

Mumof1fun · 21/12/2020 21:32

DH and I are looking at a house that was bought in March for £540k and is now for sale for 930k!! The purchaser in March was a ltd company run by two individuals who set it up to buy and develop the property.

The estate agent told me that it had been up for sale at 800k but then sold at auction but didn't know why. I've found the previous listing details that showed the old photos, but didn't have price on, and all they've done to the house since is whitewash it, add some new fireplaces and replace a conservatory with a small brick extension with bi-folds.
We really like the house but I begrudge paying anywhere near asking given that they've spend maybe 50k on it and got it for such a bargain. That said, what I'm confused about it why the house would have been sold at auction. It was in a good state in a good area and should have easily sold for 800k.

we're wondering if it means there is a huge problem they've disguised or if the property is unmortgageable.

any thoughts?

OP posts:

PresentingPercy · 21/12/2020 21:45

Yes your hunch might be right. The company might be bankrupt and it’s being sold by the liquidator via an auction. If it’s not sold it’s too expensive.

Original poster

Mumof1fun · 21/12/2020 21:55

Sorry I should make clear, it was bought at auction in March for 540k by the developers' company. The developers are now selling it via an estate agent for 930k which will be a huge profit for them.

I'm suspicious about how they managed to buy it for so cheap in March given the property was in a good state then and should have sold for 800k. why would it go for sale at auction for 260k less than the market value?

OP posts:

lastqueenofscotland · 21/12/2020 21:56

Often it’s an absolutely desperate seller who’s got a bank breathing down the back of their necks about a repossession.

SpaceRaiders · 21/12/2020 22:07

It’s likely a repossession. Anyone can buy a property cheap from auction you’re able stump up the cash in 28 days. And I’d imagine not many people have half a mil sitting in the bank and or are willing or able to get a bridge for that amount for 6- 12 months. Absolutely nothing dodgy about it.

Smallgoon · 21/12/2020 22:20

Take away what you know about the property and its history - do you feel the £900k is market value? If the answer is yes, it's not really any of your concern what they paid for it. The benefit of purchasing at auction is that there are bargains to be had, but only for those that are cash rich.

Sounds to me like it was a repo, in which case the bank just wants what's outstanding on the mortgage, and perhaps that was the £540k.

Smallgoon · 21/12/2020 22:23

Is this in London out of interest? A friend of the family recently purchased a 3 bed property in London at auction, and they felt they got it for circa £150k cheaper than market value. He's a cash buyer and will prob do it up and sell it on.

There's no point in questioning the morality of property developers. Business is business.

kittenpeak · 21/12/2020 22:24

Likely to be a repossession or just desperate sellers. Unlikely there is something hugely wrong with it as these things are so easy to find out and it would be a waste of their time . If it’s worth £930k now (according to your research of similar properties) it’s irrelevant what they bought it for.

You could ask the agents why it went to auction - if they don’t know, and don’t bother finding out I would call them out on it.

Must be hard to come to terms with giving the developers a small fortune, but if it’s worth £930 according to the area/demand etc what they paid is irrelevant - they’re not going to put it on for anything under the going rate just because they got a good deal.

We nearly bought a house which before us had been probate, it sold for about 40% less than what it should because the sellers just wanted rid of their parents’ property. What someone previously sold it for doesnt set the price for the future

BarryGlendenning · 21/12/2020 22:25

I sold my grandad's house at auction when he moved into a care home, needed a quick sale.

Smallgoon · 21/12/2020 22:27

The purchaser in March was a ltd company run by two individuals who set it up to buy and develop the property.

Curious to know how you know this?

olderthanyouthink · 21/12/2020 22:31

Repo houses go to auction

My parents bought a house that was bought cheap (probably at auction because it wasn't a house at the time) and some a*hole glossed over it cheaply and solid one and rent out the out and it was a massive dangerous bodge - tbh next door still is because unless you pull up all the floors you can't see wtf is going on (we have warned the tenants)

Check deeply and tread lightly. It's better to buy a house someone lived it than flipped in my opinion/experience.

PresentingPercy · 21/12/2020 23:17

You say it’s not had much done to it. So no new kitchen? Bathrooms? Garden improved? Did it have structural problems the vendor could not fix? Eg not insured? Could be a repossession of course. You should have bought it at action! Buyers fees are at least 10% though. Would you have had time for a full survey before buying? It’s very risky hence lower prices.

PresentingPercy · 21/12/2020 23:17

action: auction.

Strawberrypancakes · 21/12/2020 23:19

This reply has been deleted

Message withdrawn at poster's request.

Original poster

Mumof1fun · 21/12/2020 23:20

@smallgoon I know because the ad says it has submitted a planning application for a loft conversion so I looked up the application.

@olderthanyouthink I think I'm cautious as before we bought our current house we had an offer accepted on another house which looked perfect but the survey revealed it was basically falling apart and the owners had just skimmed over it and decorated to make it seem OK when it wasn't.

OP posts:

Yesbutisittouching · 22/12/2020 00:04

I buy a lot of properties at auction. Main reasons they tend to be in an auction is a finance repossession. In these cases the finance house has to show that they have achieved fair market value. Easiest way to test this is by auction. Auction prices have to be set within 10% of reserve price. It could be that the finance house set the reserve very near the outstanding amount of finance (they only have an obligation to achieve that not to try and achieve best possible price for the person who has defaulted) and this comes way after the house has had the opportunity to be marketed for sale in the normal manner. If this is the case and the property co is the only/highest bidder then they will have been successful. You exchange on the day at auction with 10% non-refundable deposit and complete anywhere from 14-30 days after the auction date. No negotiation and no changes to contract. Or it could be that there were no bids at a higher price at auction and the property co put a cheeky bid in afterwards which got accepted. Either way, it is fair and above board? Other reasons for auction: unmortagable owing to no kitchen or bathroom/structural issues; probate; or a seller that needs certainty of sale in a quick time - often financially related.

Yesbutisittouching · 22/12/2020 00:11

I’d also add check the title/conveyancing carefully. This could be another reason it was sold below perceived market value. If there is an issue to be resolved, check it has been. Ditto if it was sold with a protected tenancy.

cabbageking · 22/12/2020 02:22

Local development plans fell through
Seller needed money asap
cash offer in place.
Buyer adjusted rights of way or boundary dispute/ other settled.
Probate in place.

notangelinajolie · 22/12/2020 02:36

If it is leasehold, check the lease isn't about to end.

PresentingPercy · 22/12/2020 07:39

If there was a cash offer in place you wouldn’t necessarily need the expense of an auction. You’d just take the cash.

Bioprepper · 22/12/2020 11:24

A family friend sold his mother’s house via auction because he needed fees for her care. Nothing wrong with the house and sold for 20k less than market value he just needed money quick.

We also know someone who was moving overseas and again needed a quick sale so sold house via auction. Took a loss on the house but they bought a house much cheaper in the country they were moving to so was ok for them.

Smallgoon · 22/12/2020 12:10

@notangelinajolie

If it is leasehold, check the lease isn't about to end.

Perhaps those that bought it cheap have had to fork out on getting the lease extended

safariboot · 22/12/2020 12:15

Potential buyers just might have been put off in March.

Honeyroar · 22/12/2020 12:25

A lot of big/expensive houses around here have been for sale for years. Literally years. A few big houses have gone to auction and sold for fairly decent amounts. I’d definitely sell our house by auction if we ever decided to move. My friend did it. There’s no haggling or being let down (people bidding at the auction had to put a £20k deposit down that they lost if the pulled out). It seemed very easy. Another local farm was broken into parcels and sold at auction and the parcels were quite substantial when added up. Not far from what estate agents had (over) valued other farms at. It seems a pretty easy way to sell.

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