how can I minimise pre auction costs ?

pricedout_1

Thanks for the info ....

clutton wrote:

i researched two adjoining properties at auction extremely thoroughly, and even bought copies of relevant victorian leases from the council'e legal department. I arranged a phone bid. I pulled the plug hours before the auction, as i discoverd that onen of the the gardens was not owned by anyone, and therefore one property would have no legal access to its own garden. The other property's garden looked as if it was ripe for development (planning had no objection in principle to building new block of 6 flats) - but at the very last minute i discovered that the land was categoriesed as "amenity land" and the local council would have charged me thousands to transfer its status to development land - thus wiping out a big chunk of the profit. .

The vendor (a Building society in this case as it was a repo) is under no obligation WHATSOEVER to give you all the necessary legal information - its Caveat Emptor - Buyer Beware - if you get yoru researches wrong and you have not had a lawyer looking over the legal pack, you could well be up the creek without a paddle.

Are you saying that this information was not made apparent by either the auctioneers information OR the legal pack provided by the vendors solicitor?
I believe this is now a criminal offence after the Property Misdescriptions act 1991 which includes auctioneers under the term Estate Agents. This would give you grounds to cancel the contract.

clutton wrote:

RE a surveyor - you could visit the property with a friendly builder if you know one. But, he might then want to go and buy it himself !!

Many auction investment houses are also tenanted and you will not be allowed to inspect the inside to the property - so unless you are very skilled in assessing property - don't go down this route.

So do you survey all your prospective auction properties ?

clutton wrote:

Buying at auction is definitely not a strategy for the faint-hearted - once the hammer has gone down you then sign the contract and pay your 10% deposit and you have then exchanged contracts. If you cannot get funds within the next 28 days you lose your deposit - and it happens every week of the year.

In that case it sounds like I will be better off buying cash in year or two which I should be in a strong enough financial position to do. Does this cahnge the legal process if buying by cash ? ....no mortgage company to worry about ?

Richard_Webster

As a Conveyancing Solicitor (http://www.rwco.co.uk0 can I make some comments?

1. Do you need a mortgage? If so, the mortgage lender will use a solicitor whatever you do, so you might as well use one. Also, there could be legal matters that mean that the lender will not lend. Just because you get a mortgage offer doesn't mean it will go ahead as it is always subject to the solicitor checking that all the legal stuff is acceptable. So you could be stuck having become committed to buy with no actual funds available! Even if YOU don't need a mortgage, a future buyer of the proeprty may well do.

2. A major reason why a flat is sold at auction is that there is some legal or other point that makes the property difficult to sell to someone who employs a solicitor beforehand to check everything, so they hope a mug doesn't spot the problems and buys it. There could be a property company from hell owning the freehold, or a missing freeholder. There might not be adequate arrangements for the maintenance, repair and insurance of the building as a whole.

3. Some savvy investors will buy flats at auction cheaply, but they do this on the basis that if they buy cheaply enough they can profit from the rentals and the eventual disposal value is not so important - so they will be quite keen on the price they bid and would walk away if they see the price going too high.

clutton_2

i have just looked up the documents i still have on that one - the lender did not provide all the title plans from LR - (i bought the rest myself) - the fact that they had done so, made me suspicious initially.

I have been into enough houses and bought enough property to know pretty well what i am looking for. I no longer pay a surveyor for a survey (unless there is a particular problem which i am not sure about) pre-auction - but it has taken me a long time to build up this level of experience.

If you are a true cash buyer, you will be in a brilliant position to buy - especially if you not in a chain as you will be able to haggle the price down. You will still need a solicitor for all the excellent reasons Richard explains.

Because auctioneers literature is so full of disclaimers, getting money back from an auctioneers would be as likely as Baldrick having a bath !!

pricedout_1

Richard_Webster wrote:

1. Do you need a mortgage? If so, the mortgage lender will use a solicitor whatever you do, so you might as well use one. Also, there could be legal matters that mean that the lender will not lend. Just because you get a mortgage offer doesn't mean it will go ahead as it is always subject to the solicitor checking that all the legal stuff is acceptable. So you could be stuck having become committed to buy with no actual funds available! Even if YOU don't need a mortgage, a future buyer of the proeprty may well do.
.

ok ... how much would a solicitor charge to give the go ahead to bid after checking out a legal pack on a flat at auction ?

Richard_Webster wrote:

2. A major reason why a flat is sold at auction is that there is some legal or other point that makes the property difficult to sell to someone who employs a solicitor beforehand to check everything, so they hope a mug doesn't spot the problems and buys it. There could be a property company from hell owning the freehold, or a missing freeholder. There might not be adequate arrangements for the maintenance, repair and insurance of the building as a whole.
.

Are you saying that MOST flats at auction have some kind of legal difficulty ?
A basic reposession will be just that won't it ? A property that had a mortgage on it (so no problems there) where the owner just overstretched the mark or lost job etc etc and the lenders reposessed. What legal difficulties would there be on such a property ?

Richard_Webster wrote:

3. Some savvy investors will buy flats at auction cheaply, but they do this on the basis that if they buy cheaply enough they can profit from the rentals and the eventual disposal value is not so important - so they will be quite keen on the price they bid and would walk away if they see the price going too high.

Well, that sounds good.... us lonf suffering FTB's with a bit if cash to blow should be in a strong position when it comes to auction then ?

Doozergirl

I think you would be crazy to go and buy at auction as a FTB without having done your preliminary checks properly. Why would you cut corners like that when you have absolutely no experience of what can go wrong?

If you can find someone that knows property well - a builder for example, they can help point you in the right direction of what needs doing, but you really need to be able to trust that person. We don't bother with surveys either but, like clutton, we know exactly what we're looking for and we ensure our bid is low enough to cover other potential problems.

We always get our solicitor to look over the legals if there is something we're particularly interested in. I can read a lease, but she can read it better!

pricedout_1

Doozergirl wrote:

I think you would be crazy to go and buy at auction as a FTB without having done your preliminary checks properly. Why would you cut corners like that when you have absolutely no experience of what can go wrong?!

Yes ok ... good point but the prelim checks are basically the local search and title deeds. Local searches can't be that hard to decipher. Are the title deeds difficult to interpret ? (Current owners plus any covenants/restrictions/easements) Is it really a completely different language ? Presumably you're saying the lease is also tricky to understand ?

Doozergirl wrote:

We don't bother with surveys either but, like clutton, we know exactly what we're looking for and we ensure our bid is low enough to cover other potential problems.

what tell tale signs do you look out for ? I suppose subsidence is the main risk as this is the most expensive issue to correct. Internbal and external cracks ?

Doozergirl

It generally is a different language! There won't be any leases winning any Crytal Clear marks for plain English, I can tell you that! Would you be sure you knew what a defective lease was when you saw it? Maybe now I might know what appeared to be out of the norm compared to other properties I'd bought, but I still wouldn't feel very sure. My solicitor, I think, would pick it up in a second.

What am I looking at? I'm looking for cracks, I'm looking for signs of rot, infestation and damp. I'm looking at the condition of the windows, the roof, the guttering and fascias. I'm looking at the type of plug sockets and switches, the fuse box and the boiler... Is that enough? I'm sure there's more! Many houses have cracks and nothing wrong with them. Would you know how to interpret them or would you walk away from a house because it had a crack in it?

Ultimately, you are looking at spending probably £200k on a property. Pre auction costs will be less than 0.5% of that cost and can save you making the biggest mistake of your life. There's big difference between being a MoneySaver and being just plain tight.

Why do you think others go through the correct processes? Do you think it's because they are stupid or because they are simply covering their backs for the time when it does go horribly wrong?

pricedout_1

Doozergirl wrote:

It generally is a different language! There won't be any leases winning any Crytal Clear marks for plain English, I can tell you that! Would you be sure you knew what a defective lease was when you saw it? Maybe now I might know what appeared to be out of the norm compared to other properties I'd bought, but I still wouldn't feel very sure. My solicitor, I think, would pick it up in a second.

Yeh ok, solicitor needed (already asked how much that would cost in reply to Richard Webster) .... no harm in trying to be a whizz at it yourself though.... maybe I just ask too many questions (isn't that what forums are all about?) ..... speaking of which ... are defective leases a common problem with auction properties ?

Doozergirl wrote:

What am I looking at? I'm looking for cracks, I'm looking for signs of rot, infestation and damp. I'm looking at the condition of the windows, the roof, the guttering and fascias. I'm looking at the type of plug sockets and switches, the fuse box and the boiler... Is that enough? I'm sure there's more! Many houses have cracks and nothing wrong with them. Would you know how to interpret them or would you walk away from a house because it had a crack in it?

Yeh I would probably walk away ... For a first auction purchase I would probably be scared off by it .... even if it wasn't subsidence.

Doozergirl wrote:

Ultimately, you are looking at spending probably £200k on a property. Pre auction costs will be less than 0.5% of that cost and can save you making the biggest mistake of your life. There's big difference between being a MoneySaver and being just plain tight.

Steady on Doozergirl! :mad: .... The original post was about minimising the pain of setting yourself up for being gazumped in the auction room. I didn't see the point in it so I'm fishing for some insider knowledge ... not being tight! Geez!
(£200k on a 1 bed flat ? You can buy on the open market for less than that.)

Doozergirl wrote:

Why do you think others go through the correct processes? Do you think it's because they are stupid or because they are simply covering their backs for the time when it does go horribly wrong?

Yeh ok, maybe a bit of the old 'grandmother sucking eggs going on here' but don't go all serious on me Doozergirl .... i am just a cheeky chappy from west london but at least i got a reaction from you didn't I x

clutton_2

i spend 3 times as much time looking at the outside of the house as i do the inside, and looking at nearby properties - are the windows/doors/lintels parallel with each other ? parallel with the top row of bricks ? is the roof sagging ? are walls bulging out ? have nearby properties had wall-tie repairs done ? is it rendered and every other house is brick - if so, what is the render hiding ? is it a gable end house (far more maintainance costs) ? What is the pointing like ? What are water goods like ? are damp courses being bridged ? the back of houses are often in a much worse state than the front - check that out much more thoroughly; what are chimney stacks/pots like; are there any slates missing/slipped.

inside - have a darn good SMELL in each room ( this will tell you if it is damp - take asthmatic friend with you - they will soon know !!); do all doors shut; tap each wall, does it sound hollow anywhere; new laminate floors - what is underneath ? wooden windows, stick a key/pen in the woodwork if you can; new woodchip wallpaper will inevitably hide poor plasterwork; open every window - does it shut properly; open every door including cupboards (you are spending tens of thousands/hundreds of thousands of pounds here, not just a few quid - OPEN the doors - sod it if the vendor does not like it - do it with a smile !!!); ask questions all the time - how long since house rewired, how long since windows replace, how long since kitchen built, how old is bathroom; please can i see the gas/electric meters; use the loo whilst there - make notes, you will not remember once you have got into the car.

Before you start all these questions, compliment the vendor on their home, it will make them more willing to answer quesetions (even if you think it is awful)


Be ruthless but kind, this is the most risky thing you will do - never mind how the vendor feels.

but, dont buy your first house at auction without a lot of research alongside someone else who has done it all several times before.

Doozergirl

I'm sorry Hugh. I shouldn't have a go. You carry on being a cheeky chappy, I've no objection to that!

Sometimes I get the impression that people just want to be backed up on what they're feeling and will argue to the contrary even when the answers are quite clear. Then it doesn't feel like I'm offering advice, it feels like fighting a battle. No guessing what I've felt on this one!