FTB - Buying at auction? Possible?

billymadbiker

Hi,
we are first time buyers,
There is a local property we like but it is to be sold at auction. The guide price is within our budget.
Spoke to the bank about a mortadge but we can't get a confirmed offer of mortadge without having a valuation & survy carried out.
Now, as most of the auctions I have attended have sold for well over the guide price I am very recluctant to pay to have the valuation etc done.
Also spoke to the estate agent, they say they will require a 10% deposit at the fall of the hammer or they will simply sell it to the next bidder (on the same night)

So, my problem is: I don't really want to pay money to find it gets bid out of our budget. On the other hand, if it does go for the guide price and we win it I don't want to write a cheque for 10% of the value only to find we then get turned down for the mortage?

How do people normally go about buying at an auction?
I have allready offered the EA the full guide price for an outright sell but they were not intrested and refused to provide me contact details for the owner..

cattie

You would normally need to have your mortgage offer before bidding on the property, unless you were a cash buyer of course.

Buying at auction does carry risks & if you are not willing to lose the cost of a valuation or survey on the property, it's probably best that you buy in the normal fashion.

G_M

You need to read all about how auctions work.

Yes, when the hammer falls
1) you are commited (even if your mortgage or other finance later falls through)
2) you have to pay 10%

Before bidding, you must
1) be sure you can get the money in the timeframe specified
2) have checked out the legals - ie via your solicitor
3) have checked the building (ie survey)
4) etc etc
5) etc!

So yes - you have to spend money up front, before even bidding - and knowing there is a good chance you won't win the auction and the £ will be lost.

Auctions are for investors, experienced property people, those with cash to 'risk' in the hope of a bargain - they are not generally suitable for BTBs.

gwernybwch

It's a while since I've attended a property auction, but buying at auction tends to be domain of the cash buyer or those with personal or business loans which aren't directly linked to the purchase of that property; although I have heard of some people with buying at auctions using mortgages.

Regarding paying the deposit on the day of the auction - this payment used to be by cheque. It wasn't unheard of cheques not being cashable, cheques being cancelled etc, all to buy the purchaser some more time to sort out finance before fully committing themselves (although opening themselves up to a breach of contract claim)........ Also it's not unheard of the underbidders actually pulling out when offered the property at the price that they bid at.

There are a few posts on here regarding the risks of buying at auction, essentially you got to remember that not only is there the risk that you won't get a mortgage but there is the possibility that you won't be able to get the surveys, searchs etc and mortgage application processed in time for the 28 day deadline.

I would suggest that you have a blunt conversation with the auctioneer of the 'what price would it take to sell it before the auction' conversation. Even if you agree a price, you are probably bound to complete within 28 days.

Good luck!

geoffky

Go to a few to get a feel..And beware of auction fever..good luck

billymadbiker

We have been to a few auctions, pretty much every property that we have been watching has exceeded the guide price by at least 25% though!

This would be 20% over our budget hence why I am very reluctant to put the money up front for the survy etc..

I would also think that if the guide price is realistic and it went 25% over it then we would still get turned down when we put the mortadge through as the banks valuation would not agree with what we wanted to borrow?

Not sure why they keep selling for well over the guide prices though? I have been told that the EA's put a low guide price to intreset people and get more people to attend the auction, this might explain why they would not consider an offer of the guide price to sell before the auction

gwernybwch

billymadbiker wrote: »

Not sure why they keep selling for well over the guide prices though? I have been told that the EA's put a low guide price to intreset people and get more people to attend the auction, this might explain why they would not consider an offer of the guide price to sell before the auction

Thats pretty much the reason why they sell above guide price. The other reason is that some people lose their heads in the heat of an auction and continue to bid above the market price, another reason is that if it is a unique property, it is hard for the EA to actually value it and it is 'worth what someone will pay for it'.

That is why I would suggest that you have a blunt conversation with the auctioneer of the 'what price would it take to sell it before the auction' conversation.

theGrinch

yes possible. but you must be well organised and understand the process as the timescales are unforgiving