Why are auctioned houses priced so cheaply, is that just the start price?

ijrwe

Whenever I see houses on Rightmove that are to be sold at auction, the price given is extremely low. For instance one I'm looking at here is a mid-terrace 2-3 bedroom house in an area of many, many such houses. Typically they are up for £120-130k, pretty consistently. This one is for sale by auction and has £60k as the price on its details page.

It does mention that "this is an older style mid-terraced house in need of complete renovation, improvement and updating. The house has been tenanted for many years and is now to be sold vacant."

So it might need some work, but if it had tenants in then it can't be that bad, surely? Not 50%-discount bad.

What's the deal, are auction properties listed so cheap because that's a starting price rather than a guide price? Do they tend to go up just as high in the end?

Thanks,

Notmyrealname

That is the estimated price they think it will get. The prices for houses at auction on websites such as Rightmove are only a guide and usually quite wrong by several thousands.

So it might need some work, but if it had tenants in then it can't be that bad, surely?

My friend wrecked every house he rented...

JQ.

Auctioneers deliberately put low guide prices onto properties as it significantly increases interest in them - as you've aptly demonstrated. Would you have been so interested if they'd said that the guide price was £90,000?

What they hope is that it gets lots of people into the auction room who will bid each other up. Everyone gets excited and before you know it, you've agreed to pay £102,000, great result for the vendor and auctioneer, perhaps not for you.

Despite the above, auction prices are generally lower than EA prices for a number of reasons :

• Structural problems with the property
• un-mortgageable
• legal issues
• require siginificant capital expenditure
• completion required in 28 days, 14 in some cases
• restrictions placed on future use / refurbishment by vendor
• etc etc etc

Auction properties generally have "issues" (not all, but most), so you need to make sure you know exactly what you are doing doing placing any bids. In these times of financial restrictions just getting a mortgage in time can be the biggest hurdle to overcome.

FireWyrm

£60K is the 'guide price'. That means, its the price at which they can be fairly confident of an initial bid. The auctioneer will usually start at the 'guide' or a little below but watch carefully as the final price is often very much higher an more like the £120K you would expect to pay.

Also, auctions are not places for people with MIPs only since exchange happens when the gavel falls and completion is usually 14 to 28 days later. There is usually a 3% auction fee that the buyer should be aware of also. Auctions are for people with large wads of ready cash available and who are interested in a particular property that they have already spent time and money scoping.

slopemaster

I went to a few auctions when I was considering buying, and in general property went for around 50% more than the guide price.
There was a huge variation though, from just below the guide, to double!

Fire_Fox

Go and view a few auction properties, then attend the auctions and see what they go for. Also watch a series of 'Homes Under the Hammer'. Prices have to be reduced from market because some are unmortgageable, some are tenanted, some are to avoid repossession, some have been squatted or vandalised, you have to exchange contracts immediately. All this reduces the potential market substantially.

It can be that bad if the house has been tenanted long term, some mentally ill people live in squalor and won't let the landlord or his team in.

gayleanne

My Son has a married couple with three kids aged between 3 and 10, as friends, this family move house once or twice a year, in the same city, the reason why they move is because they will enter a property, which is spic and span, all nicely decorated, pay the deposit, and first months rent, the Husband has a few friends with there own businesses, so he gets references easily, these are mostly private landlords, they wouldn't be able to do the same with an agency, then after the first months rent, they pay nothing, the house is a pig sty, the kids are little B%s****s they wreck the house, the garden and attempt to do the same to the neighbours gardens, they move again as soon as they have an eviction notice, leaving the landlord with thousands of pounds worth of damage, so don't rely on the house being OK if there is tenants, they might have been like those above.

Or the owner might not have had the money to do any repairs, hence that is why it is going for auction.

caringa

Notmyrealname wrote: »

That is the estimated price they think it will get. The prices for houses at auction on websites such as Rightmove are only a guide and usually quite wrong by several thousands.


My friend wrecked every house he rented...

Glad your friend hasnt rented one of my houses then - or maybe he has?!

caringa

gayleanne wrote: »

My Son has a married couple with three kids aged between 3 and 10, as friends, this family move house once or twice a year, in the same city, the reason why they move is because they will enter a property, which is spic and span, all nicely decorated, pay the deposit, and first months rent, the Husband has a few friends with there own businesses, so he gets references easily, these are mostly private landlords, they wouldn't be able to do the same with an agency, then after the first months rent, they pay nothing, the house is a pig sty, the kids are little B%s****s they wreck the house, the garden and attempt to do the same to the neighbours gardens, they move again as soon as they have an eviction notice, leaving the landlord with thousands of pounds worth of damage, so don't rely on the house being OK if there is tenants, they might have been like those above.

Or the owner might not have had the money to do any repairs, hence that is why it is going for auction.

Its people like this give tenants a bad name.

ruggedtoast

I looked into buying at auction with a mortgage. It is possible, but unless you like living dangerously you have to get your mortgage offer and legals done in advance.

As the place may not even be listed on the day it seemed like a bit of a risk.

phoebe1989seb

You can sometimesget a *bargain* at auction though - or indeed afterwards if (as in my limited experience) the property doesn't sell.......

We were selling and looking to buy last year and saw a house that was up for auction. The guide was only £240k, which for a Georgian farmhouse (albeit in need of renovation and with only a third of an acre of its grounds remaining) in the South West seemed too good to be true. Unfortunately it went to auction the day we accepted an offer on our house so we were unable to bid. However, it didn't sell and we expressed our interest only to discover it had been sold shortly after the auction - for just over £200k

Another house we were interested in (offer accepted but later withdrawn) was originally on the open market for close to £400k, went to auction with a guide of £250k after we pulled out and later sold (after auction ended with no bids) for £200k.

The house we eventually bought had also been auctioned unsuccessfully (being unmortgageable) and failed to reach the reserve. It was re-marketed at a much reduced price and we picked it up for cash

So there are bargains to be had, although not sure I'd want to do this if I had to get a mortgage - or if we weren't experienced at restoring houses to their former glory