Auction

Tiganda

Hi

Does any one know much about homes that are sold at auction? Like when you have to pay and what happens in somthing turns up in a mortgage inspection?

Thanks for any advice

Gorgeous_George

IIRC it is 10% on fall of the hammer (non-refundable) and the remainder within a month.

I've never bought at auction but I'd like to. Must be such a buzz.

GG

Doozergirl

If something turns up in your mortgage survey you are stuck.

You really need to have the formal mortgage offer on the property beforehand or be very confident that the mortgage can be raised and take the risk. It's essential to have a solicitor look over the legal pack as well if you plan to buy at auction - as issues can be contained there not just in the structure of the property.

If you exchange contracts (which you do on the day of the auction) then if you can't raise the mortgage funds you lose your 10% deposit - the rules are the same for any house purchase it's just that you exchange immediately on auction property.

poppysarah

Read the T&C carefully before you go.

Ask a solicitor to look at the legal pack of the place you want to buy beforehand - could save you lots of money.

Check you know what fees to expect and how fast to complete.

PasturesNew

You should get the mortgage sorted before you go to the auction - and pay for a survey and mortgage fees etc.

Of course, once you get into the auction room, you don't know if people around you have a bigger budget than you. Most won't be buying with a mortgage.

If it's a regular UK auction, you have to hand over 10% of the auction price immediately, your 10% deposit - plus - some auction fees, say £400.

Then there's the legal pack, you'll have had to pay for this beforehand and give it to your solicitor for them to read through. That might throw up some oddities that make it unmortgageable too. e.g. there was one on telly where the seller had a charge over the property - but nobody could say how much - so the buyers bought it on the basis that there was a charge on the property that might mean they would have to make up the difference. Some legal packs will say you are to pay the legal fees of the seller, or pay other costs they incurred. e.g. they might slip into the legal pack that you have to reimburse them for things. Or it might say you must complete in 14 days, not the 28 you expected.

Then there's the new US-style mega-auctions ... completely different set of rules, quite evil. There you immediately pay the 10% deposit PLUS a 10% fee to the auctioneers PLUS VAT on that PLUS an admin fee of about £400. And I think there's even the chance that it's still not yours as I think (not seen the contract) that the seller can pull out.

It's a minefield really.

PasturesNew

What you can do if you don't want any of that, is to get a mortgage in principle and know get a solicitor on board .... tell them both and your mortgage broker you are going to auction and will need to complete quickly if you get a house ... then, don't bid.

IF the house doesn't reach the reserve, hold on to the end and go see them afterwards, see if you can cut a deal afterwards. Quite a few people do that. e.g. somebody who was after lot 40 might have bid for lot 20 if they'd known they'd lose lot 40... so people trot along afterwards.

Then you can lay out your financial position.

But make sure you have that 10% deposit with you still. Cash.

m_13

PasturesNew wrote: »

But make sure you have that 10% deposit with you still. Cash.

They can't accept cash for the deposit as the auctions are typically in hotels or conference suites and don't have any banking facilities. They are happy to accept a personal or company cheque but typically pay for special clearance so it goes out next working day. We bought from Harman Healy and this is from their terms and conditions:

We special-clear all cheques received. Please ensure that there are sufficient funds within the relevant account to cover the amount of the deposit. There is no defence in law against a "bounced" or "stopped" cheque.

As I've posted elsewhere we made an offer on a repossession property that was unsold at the auction. We had intended to go and bid but didn't have our finances sorted out in time.

Our offer was declined when a higher offer appeared but was then accepted when they withdrew. Most auction companies insist on auction terms even when buying after the auction so we were had to pay the same administration fees. We also had to pay towards the mortgagee in possessions costs and pay for all their searches in the HIP! We also had to pay the proportion of the ground rent, service charge and sinking fund that we have benefited from.

The property is an ex BTL so was never the residence of the person who it was repossessed from. The last tenant left wanting their deposit back and it is in good condition despite being empty for over a year. It's mainly needed a good clean as there were lots of cobwebs and all the water had been drained down including the toilet and pipework so the bathroom is open to the shared soil stack; not nice and has allowed thousands of tiny flies to get in.

We've been lucky. You'll find other posts on here where the properties have been badly damaged and boilers or kitchens removed.

We've previously bought probate properties as they are usually chain free and a reasonably good deal. Buying a repossession was definitely more stressful though. Unless you buy at the auction and see the hammer drop you have the worry of waiting to see if somebody offers more before exchange. At least at the auction you know you are going to exchange immediately. Of course that adds pressures as you then have to complete within the contract terms. However, some properties are 6 weeks completion not 4 as the properties have somebody living in them. These aren't usually repossessions, just people using the auctions to sell an unusual or unsold property.

Richard_Webster

A lot of sense in these posts - perhaps there ought to be a sticky for this - because this kind of question comes up quite frequently.

m_13

I'm happy to contribute towards a sticky. Anybody any idea of how you start? Just start a new post and see if it gets stickied?

poppysarah

Collate all the useful bits from the last 7000 posts on it