FTB - options to buy auction property..

FTB_manchester

My partner and I (both 24) are looking to buy a property within the next 6 months as FTBs. We are looking for a renovation project as my partner is a qualified joiner and has many friends still in the building trade.

One road we have been looking down is auction/repossession properties - ideal for us, as many properties need a lot of work doing and the price reflects this. However, I have been advised by a mortagage advisor that it is a massive risk to buy a property at auction through a mortgage as you need to complete within 28 days (risking losing a 10% deposit!).

My dad has advised that, if the right property (at the right price) came along at auction, he may be willing to buy the property outright - he received a lump sum for his retirement. However, this would only be a temporary loan, and he would want us to take out a mortgage on the property ASAP in order for him to get the money back. Is this a feasible option? Can we go to the bank and get a mortgage to buy the property direct from my dad? Would he lose out at all due to capital gains tax etc.? Could any losses be compensated for by us paying him slightly more than he paid at auction?

Any help at all would be much appreciated! Thanks!

chinup_3

you need to use bridging finance to buy the auction prop'. THEN get surveyor round if it is in ''mortgagable condition''. then get mortgage in your two's names and pay off bridging loan. your father pays for the bridging finance. job done.

Jowo_2

chinup wrote: »

... THEN get surveyor round if it is in ''mortgagable condition''.

Is that always possible? Properties up for auction in the popular area of my city always seem to vanish off the sales list before the day of the auction, presumably snapped beforehand. Others have tenants in who will presumably be quite averse to granting permission to have a surveyor in.

Is it quite quick and easy to get a survey done on an auction property?

Doozergirl

I don't see why they would need bridging finace if dad has cash?

OP, if dad buys it then it would be quicker and cheaper for him to purchase it in your names. Whether he trusts you is another thing.

If he did buy it in his name then he wouldn't be liable for CGT if no gain was made - ie. if he transfers it to you for the same price. But stamp duty etc becomes payable and there are some more costs associated with the transfer.

It would be advisable to obtain your own homebuyers survey at least on the house before the auction and to make sure that your solicitor runs all the checks needed to ensure that the property is mortgageable on that side as well.

If it isn't mortgageable, then you will need to make it so before you can take out that mortgage. As long as your dad realises that and is prepared to be patient.

We did the same thing a long time ago. And the house was unmortgageable for 10 months! We had a full retention and a mortgage with a balance of £0.00.

tyllwyd

One thing to watch out for - I have no idea if it applies in this situation - I thought that mortgage companies were funny about giving mortgages if the vendor had owned the property for less than six months. So if your dad buys it in his name he might be tied in for that long.

BTW have you considered what would happen if you bought a property at auction, and then when you had time to look at it properly it was a complete disaster? Would your dad be able to cope if you & your partner walked away and left him with the house? Or if the two of you split up and you had to pay for a builder to come and finish the renovations so that the house was ready to sell? Hopefully that would never happen, but your dad really does need to consider his own position in all of this.

Alan2020

It is totally irresponsible of you to accept such a loan from your dad, it's his retirement money, unless of course he has more than enough left to pay for the rest of his life. He is too old to speculate (gambling in other words) as he won't be able to earn to cover if you house say is a total disaster or something happens to both of you. I would strongly advice against it especially if you love your dad.

Doozergirl

Alan2020 wrote: »

It is totally irresponsible of you to accept such a loan from your dad, it's his retirement money, unless of course he has more than enough left to pay for the rest of his life. He is too old to speculate (gambling in other words) as he won't be able to earn to cover if you house say is a total disaster or something happens to both of you. I would strongly advice against it especially if you love your dad.

I would suggest life insurance for the OP and partner as soon as the property is bought. They will need it to satisfy their eventual lender.

It's dads money to do with as he pleases and it sounds like he is putting forward the idea, not being cajoled. I'd certainly do it for my kids if it meant them being able to afford the house they wanted. I will never be too old to speculate. Being retired doesn't mean being senile or having people take advantage of you.

You'd never lose everything on a house, you can put it back in the next auction but I would certainly recommend that every piece of homework possible is carried out - future values, the extent of any work required and plenty of budget available to cover it.

It's obviously not something you take lightly and you have to be sure that it's worth what you are paying.

SouthCoast

All parties should obtain independent legal advice in writing.

Lots of suitable properties in one of my local auction houses.

http://www.cliveemson.co.uk/listings.asp

Paul_the_Painter

Could not Dad do some paperwork with his solicitor, register his interest in the house on the Land Registry, but have the house in the OPs name?

Essentially is there anyhting to stop a private individual providing a secured loan (mortgage) to another?

Would you actually need a consumer credit license?

OR

Buy the house with dad's money, and a bit from the OP.
Register the property as Tenants in Common - (not Joint Tenants)
Draw up a document at the same time setting out the split of ownership (Dad 99% Son 1%)
When it comes time to get a mortgage Dad sells interest in house to son for what he paid, at the same time mortgage is completed, solicitor sends money to Dad.

Probably needs a good solicitor to have a close look, but may avoid both a "sold within 6 months problem" and Dad retains ownership if it all goes pearshaped, and can re-sell the house at auction again - thus minimizing his losses.

Alan2020

Doozergirl wrote: »

I would suggest life insurance for the OP and partner

Good point

Doozergirl wrote: »

I will never be too old to speculate. Being retired doesn't mean being senile or having people take advantage of you.

When I mean speculation it is a term used to what people commonly call gambling. An investment is different from speculation, the risk levels are different. People above 50 should invest not speculate for obvious reasons, it is not because they are senile, it is because if they loose the gamble they won't live long enough to fix it

Doozergirl wrote: »

You'd never lose everything on a house, you can put it back in the next auction

Yes, but I knew of a man who owned a massive mansion opposite a famous football manager, had ferraris, range rovers and nearly 100 properties in his portfolios. He lost all of that on houses, yes houses, and now lives in a bedsit he rents working as a tea boy for the builders who he once employed, he was a great guy so they gave him a job. Don't ever take house buying a 100% secure investment.

Doozergirl

Alan2020 wrote: »

Yes, but I knew of a man who owned a massive mansion opposite a famous football manager, had ferraris, range rovers and nearly 100 properties in his portfolios. He lost all of that on houses, yes houses, and now lives in a bedsit he rents working as a tea boy for the builders who he once employed, he was a great guy so they gave him a job. Don't ever take house buying a 100% secure investment.

Buying one house with cash will not see you living in a bedsit making tea. It will at least see you living in a house that you own outright making tea. Rent it out and you have an income even.

The guy you knew was an idiot. If you have cash in houses there is a finite amount you can lose. With 100 houses all owned outright he'd still be driving a range rover. If you have debt in houses then that is a different deal all together. You didn't have all that money in the first place and frankly you deserve what you get if your risks aren't properly calculated.

Research, research, research. Never assume you will make money simply because a house is broken. Buy cheap. Very cheap and dad will be absolutely fine. What a nice dad he is. It's the OPs responsibility to do him proud.