Anyone know about property auctions?

[AbstractThought]

We are really curious about something local to a house my DH has inherited from his dad. He lived in what was once a decent area that has slowly gone downhill. The house next to it has been empty or disused for around 6 years. First it housed an illegal HMO, followed by a cannabis farm, then a long period of dereliction.

Tidy on the outside, the house is a shell within. There are only 2 walls left and no upstairs floors. Ancient electric cables dangling about, no plumbing and crumbling walls that were hacked into once the damage from the cannabis farm was ripped out. As you can imagine, it's an absolute mess.

It was eventually put on auction and quite a few people came to look at it at the weekends. After about 4 months of this it looked like someone had purchased it for around 70K with cash.
Houses in the area that are in decent condition tend to go for around 120K.

Since investors and 'flippers' usually take on stuff like this, we were surprised to find a young family had purchased it and were hoping to move in. Expecting workers to arrive soon, only one man (a jack of all trades) began work on it (he didn't even have a van) and spent about 2 weeks hammering at the old plaster remains. The owner looked perpetually nonplussed and told us that it was an absolute mess and seemed incredibly put out and surprised by it all. We came to the conclusion that he had not bargained on how bad it was and possibly regretted his purchase. The owner said he was struggling to fit a skip in the back area then hasn't returned for over a week now. Initially he and his family had been at the house at least daily, seemingly excited. We are wondering if something went wrong.

Could someone be ripped off via auction? Is it possible the buyers hadn't actually visited the house prior to purchase? My DH feels sorry for them and was going to offer to help in some way if he could, but the family have not been back. Would the buyer have any recourse to compensation or be able to sell it back to auction without much loss?

We were chuffed that a family were going to move in as the area is short of regular families. It seems like there are issues but we can't imagine what, really. Why might someone bid on a house that was gutted if they didn't check it thoroughly? We presume they were possibly struggling and thought they could fix it on a budget, I don't know.

It sounds as if they didn’t do their own due diligence. Maybe they didn’t view or read the legal pack. If you pay £70k for a house you can’t be surprised when it’s a bit of a mess. Homes Under the Hammer has a lot to answer for.

There's always those people on Homes under the Hammer who don't read the legal pack and haven't visited the property before bidding on it.

They have a slight disadvantage that they aren't fluently English speaking, and I wondered if someone had ripped them off. I am certainly not presuming they don't know what they're doing, but the guy looked so confused and shocked. We got the impression they maybe hadn't been inside it prior to purchase. They didn't even receive a full set of keys.
I asked here because we don't have much experience with auctions and haven't a clue how it might have gone wrong. We wanted to ask if they needed any info or help but it feels presumptuous and rude, I just don't know. Ultimately it's none of our business but they seemed so lovely.

Surely you'd need a dedicated team to fix that up rather than a handyman in a small car?

How do you know so much detail - including them not getting keys?
I'm wondering whether they'd been offered help, perhaps by family which hasn't materialised

My DH has been next door on and off since inheriting his dad's house, sorting and preparing it for sale.
The buyer (next door)has knocked a few times and chatted. Unfortunately when offered a key to have cut for the back public entry he didn't quite understand.
Obviously we know the history of the house as DH's dad lived joined on to it. It has suffered some rotten luck over the past decade. Currently we only know what the buyer has told us.
The buyer's family were very present in the first few weeks after DH's dad's passing so we were there quite a bit.

From what I recall (when we were looking to buy) you can only get recompense if there was fraud or misrepresentation.

Regarding selling it back - well if it took 4 months to sell the last time I doubt they're going to get even that.

BTW OP this isn't uncommon.
I viewed a house in a very desirable area that was similar. It didn't even have a bathroom.
They were asking for half the price of a fully done house. This was back during the post-COVID boom.
Apparently they'd had a buyer... An FTB who had pulled out a few months later when she saw the cost of works.

Now, I knew nothing about houses. But it was obvious to me that whatever needed fixing was going to need £££ , and because building works etc take a long time there was always a risk of costs spiralling.

Not everyone has common sense.

I think that house eventually went to auction. People were desperate to move as it was a grammar school area, but not THAT desperate.

For their asking price we got a bigger house in the nice bit of a more down market area. But our street is lovely, good transport etc. it's great!

They didn’t do their homework. I know of a woman who bought her ‘dream house’ via telephone auction. Property auction in the uk and she was in Australia at the time. She hadn’t read that it wasn’t accessible by a vehicle, no permissions or shares road access. It was access only on foot or by boat.

it was extremely clear from the photos and accompanying property details on the listing that this was the case, even google earth and a little digging into the history of the house would have shown this quite large access problem.

Yes, that's what I thought. It's an absolute mess.
It didn't make sense at all to have one workman and so much confusion. I could only imagine someone purchasing that house if they had a very firm plan. I fear they may have walked into a sunk cost

I have just been reading more at the MSE website. Apparently auctions are auctions for a reason - structural or other issues. This looks like a first time buyer family, not affluent, possibly didn't view or hire a surveyor.

I think it was the look of utter horror on the guy's face that made me post here. It seems inexplicable to me but sadly all too common.

I think many people just lack common sense OP. FTB or affluence doesn't come into it. In fact most buyers probably wouldn't be able to afford an auction because the reserve has to be paid in cash. You can get a bridging loan but they have very high interest rates.
I mean why would you buy something without at least a viewing. If you have 70K in cash then you can travel to view.

Auctions are most common for structural issues , but they're also used when a quick sale is required. In exchange the seller takes a hit on price.

Anyway If you and DH want to help suggest that they try to put it back to auction?

"In exchange the seller takes a hit on price."

Not always. I have seen any number of properties that have been put up for sale, not get sold, and then go on to achieve just as much at auction - in a couple of cases even more.

I think if someone was new to the country they might have been given the money by family, inherited it or used life savings, and perhaps seen this as a great way to avoid a mortgage. That's all I can think of. Whether there's a cultural element to this is just pure speculation, I know.

Now, I knew nothing about houses. But it was obvious to me that whatever needed fixing was going to need £££ , and because building works etc take a long time there was always a risk of costs spiralling.

This is the impression I get from the buyer. He does look really troubled.
If it sold 4 yrs previously for £100K he has basically bought a total dereliction now for only 30K less that will likely cost far, far more to repair than if he'd purchased something already complete.

I've been wondering about auctions too. I've seen what look like completely normal houses, just appearing to need a cosmetic overhaul up for auction. Why do people choose to sell an ordinary house by auction?

@Neveralonewithaclone I wonder this too. My personal reasoning is that it’s sold to them by the estate agent as something that will be zero cost to themselves and will be much quicker to completion that a traditional sale. It seems to me that all the (extortionate) costs are on the buyers side to pay. From a sellers point of view that must look attractive, especially as they may not have the money for on going costs of being responsible for the property.

We just skip straight past all properties that are on as auction as I don’t want to be paying what seems to be £6k just to the estate agent (before my other legal costs etc) nor do I want to rely on a sellers pack which may not answer questions relevant to me, and hasn’t been done with my best interests at heart. If someone else is commissioning that sellers pack then the surveyor etc are working for them, not me!

This was previously used as a drug farm for several years so was totally gutted after the police broke in. A group of 'rough' people came to pull the carpets, floorboards, plumbing and fittings out and then removed plaster from most of the walls. It sat like that for months until going to auction. There is also a mountain of discarded stuff in the bins at the back which the new buyer seems perplexed about.
None of this looks good.

If they have been left to a charity they are often sold at auction. That's why you quite often see houses with dated decor at auction

@ChampagneCommunist that makes sense!

It depends what you mean by auction though. If you are talking about eg houses on Rightmove that are advertised as being sold by the "Modern Method of Auction" then, yes, that is a total rip off and I would never touch one of those.

"...it’s sold to them by the estate agent as something that will be zero cost to themselves and will be much quicker to completion that a traditional sale."

In contrast though, if you go to an actual auction then that is something that I would do.

A couple of big names in (real) property auctions are Barnard Marcus and Savills.

I just had a look at the upcoming Barnard Marcus auction and, just as an example, this property here which is currently for sale in Hull on Rightmove at offers over £70k having been reduced about 10 weeks ago.

https://www.rightmove.co.uk/properties/140875598#/?channel=RES_BUY

Is also up for auction on 21st May with a guide price of £60k (properties often go for more than the guide price)

Next auctions:

https://www.barnardmarcusauctions.co.uk/auctions/21-may-2024/

https://auctions.savills.co.uk/auctions/8--9-may-2024-149

As per 'Homes Under The Hammer ' - don't be too surprised if some people can totally refurb a house to a good, modern, very nice stand for 20k - of these people are builders, part-time builders and or experienced DiY'ers etc

A relative of ours refurbed their kitchen which was similar size to ours with similar kitchen inc white goods for 20k. It cost us 30k and we shopped around and the demolishing of the old kitchen ourselves

How can refurbing a whole house cost 20K, when that was the price of your kitchen?
I do think for this house the amount of electrical and plumbing work needed will add £££.

Or here is a property on Rightmove in Harpenden Herts for £490k that is going to auction on 8th May

https://www.rightmove.co.uk/properties/147199247#/?channel=RES_BUY

Can anyone predict the cost of a total refurb of the house in my OP?

It is a three bed terrace in a northern ex mill town, depressed area. Completely gutted and possibly structurally unsound.
'Flipped' houses that are refurbished sell here for 100K to 130K usually, nothing fancy.
Spending 70K for a shell at auction seems unhinged unless you couldn't get a mortgage?

Having asked DH he doesn't think the buyer has had it surveyed or any building quotes at all. The most he has done in six weeks is hire some tools form a local firm and the house looks in a worse state now than before he sstarted.

@MaseratiIsYellow it is possible. But only for someone with a trade, very experienced and competent DIYer or professional developer. It involves doing around 90% of the work yourself and having contacts/ knowledge of the industry.

For example, almost all tradies have business accounts and trade accounts with businesses like screwfix (which offer discounts on materials). They know about liquidation and end of line sales where things like bathrooms and kitchens that are end of line, ex showroom or belong to companies that have gone into administration happen. They know how their tools work and know techniques. They will know someone in the skip trade/ digger hire so will be able to get a skip/ digger easily.

Many tradies and very experienced DIYers are multi disciplined to an own home improvement standard but not selling the service to a customer standard, for example they can plumb water (but not gas), can do most chippie work, can do basic electrical stuff but not a first fix or massive upgrade you need the correct paperwork to do that (unless an electrician by trade), basic bricklaying ect. Most of the huge savings are labour costs.

We did our bathroom a few years ago, we bought a bathroom suite (double shower tray, rainfall shower and taps, large pane of anti fog glass, large bath with taps , sink and taps, toilet) in a liquidation sale for £300. We got the vanity unit, backlit anti fog mirror, vinyl flooring and towel radiator whilst attending the sale and got all 4 for another £150. Family member is an electrician and can plumb so installed the electrics and plumbed it in. Family member bought us a pump with his trade account. We bought tiles and tiled ourselves. We put our own plywood down and laid the vinyl ourselves. Our friends did their bathroom to a similar speck the year before us and paid around £6k. Ours cost around 1k but we had to do all the labour ourselves and dispose of our old bathroom and it took us a month as we were doing it around work. Friends had plumber come and he ordered and took care of everything and done in a week.