Buying at auction

Rachel183

Hi there
Apologies if this has been asked before.
I am considering buying at auction as I have a mortgage in place and no chain etc, I want to put down a 20% deposit for the mortgage.

my question is, when you put down the 10% deposit if you win at auction, do you then need the 20% mortgage deposit on top of the 10% paid at auction meaning you need 30% ?

Many thanks

anselld

Only another 10% for the mortgage, however there is sometimes a "buyers fee" payable on top on auction day.

You are presumably aware that as soon as the hammer comes down you have effectively exchanged contracts and failure to complete or obtain a mortgage in the required time has dire consequences.

Rachel183

Yes I was aware of that, I wasthinking of instructing a solicitor if I do decide to go to auction in order to ensure that the mortgage is all in place, although we do have an offer in principle.

eddddy

As you probably appreciate, you should have a firm mortgage offer before bidding at auction - not just an offer in principle. So you will have to pay mortgage application fees, valuation fees etc - which you will lose, if you are unsuccessful at auction.

Also bear in mind that many (most!) auction properties are not mortgageable. If a house/flat is mortgageable, the seller would typically sell it through a conventional EA and get a better price.

Properties tend to end up at auctions because their condition/problems makes them unmortgageable. So the typical process is that a developer buys them for cash, fixes the problems (which then makes them mortgageable) and then sells them through a conventional EA.

So your first thought should always be "why is this property being auctioned, instead of being sold though an EA - what's wrong with it?"

Rachel183

I asked the EA why it was being auctioned and she said it was just because the vendor wants a quick sale as he's bought another property already. The EA did say it was an unusual property to go o auction in the first place as its immaculate inside and in a desirable area.
We've made a offer to the vendor which he says he will accept on the condition that it stays listed to be sold at auction on the 27th June and will be sold on that date unless we can exchange Before that date, which gives us 3 weeks from Wednesday after the BH weekend, there would be no downward or upward chain so I'm thinking it might be better o go for this option and really push the solicitor??

GDB2222

Hi Rachel

you would need to push the solicitor in any case, because you need to do everything that you would do prior to exchange before going to the auction. In other words, when you go to the auction and bid you have to exchange contracts that day. So, you have to be in exactly the same position with all the legal work done as if you exchanged contracts privately the day before.

Consequently, the difference has nothing to do with the legal work. It is just a matter of price. If you go for a private exchange of contracts, you are not in an auction, and the price is whatever you agree with the vendors. Bear in mind, though, that the vendors will have a lot more information than you. They will continue to market the property, and they will have a good idea how many people have shown interest or attended open days. Consequently, if the vendors think that the property will reach more money at auction, they may well pull out of a private sale, anyway. Whilst, if the vendors continue with a private sale, you should be suspicious that you are paying too much. I very much fear that you put yourself in lose-lose situation.

GDB2222

business_man wrote: »

Hi

Where part of the country are you located?

Thanks

Why do you want to know where the property is? Are you trying to track down the vendors so that you can buy the property yourself? That is your line of business, isn't it? Or have I made a terrible mistake?

GDB2222

business_man wrote: »

I am trying to help people as normal Of course free of charge.

You are using this forum to promote your business interests.