Mortgages for Auction

Lionel_Thinkbag

Hope this is the right place for this.

We're looking to buy a house, and as we're not afraid of DIY we've started to think that buying at auction might be a good option for us. We've been saving up, but we are not cash buyers, so we would have to get a mortgage arranged prior to auction.

We've done a bit of research and we're aware we would need 10% deposit available on the day should we sucessfully bid. Most mortgage companies also require 10% deposit. Does this mean we would in effect need a 20% deposit? If that is the case then we can draw a line through auction as a possibility for the time being.!

I just want clarification as I havent been able to find any info on the net.

Thanks

Richard_Webster

The deposit is paid to the auctioneers, not to the lender!

More of an issue is the risk that you win the bid for a property and you r lender fails it on survey or there are legal problems with i t that means that they won't lend.

Really not recommended to buy at auction if you are getting a mortgage unless you have the offer in place and legal stuff all checked before you bid.

ognum

You will be expected to settle the bill for the property within 28 days of your auction bid, how will you guarantee you will do this?

eddddy

Lionel_Thinkbag wrote: »

Hope this is the right place for this.

We're looking to buy a house, and as we're not afraid of DIY we've started to think that buying at auction might be a good option for us. We've been saving up, but we are not cash buyers, so we would have to get a mortgage arranged prior to auction.

We've done a bit of research and we're aware we would need 10% deposit available on the day should we sucessfully bid. Most mortgage companies also require 10% deposit. Does this mean we would in effect need a 20% deposit? If that is the case then we can draw a line through auction as a possibility for the time being.!

I just want clarification as I havent been able to find any info on the net.

Thanks

Hi Lionel

It sounds like you are looking for an auction property and hoping to get a 90% LTV mortgage on it.

That doesn't really happen. 99% of auction properties are problem properties.

If a seller has a property that is acceptable for a 90% LTV mortgage, they would sell it conventionally through an EA to get a good price, rather than getting a reduced price at auction.

Your only real option would be something like borrowing the purchase money from family, then fixing any problems after you've purchased it, and then applying for a mortgage in order to pay the family back. (But there can be massive risks with buying auction properties - it could all go terribly wrong if you don't know what you're doing, or you don't get good advice.)

kingstreet

Ensure your solicitor visits the auctioneer's office and studies the legal pack, clearing it before the day of the auction.

You also need to apply for a mortgage for an amount you are prepared to bid upto and have the references, status checks, valuation done and offer issued before the day of the auction.

Bidding on a property without such precautions could leave you in considerable legal and financial trouble if there's a defect in the property and/or its title.

eddddy

kingstreet wrote: »

Ensure your solicitor visits the auctioneer's office and studies the legal pack, clearing it before the day of the auction.

You also need to apply for a mortgage for an amount you are prepared to bid upto and have the references, status checks, valuation done and offer issued before the day of the auction.

Bidding on a property without such precautions could leave you in considerable legal and financial trouble if there's a defect in the property and/or its title.

Hi kingstreet

I'd be interested to know... as a mortgage advisor, how often do you arrange mortgages for prospective auction buyers?

I know it's possible in theory, but the practicalities seem so difficult.

Catalogues are normally published 2 weeks before the sale. So I guess you would need to get the AIP before a catalogue is even published, and then wait and hope that a suitable property turns up in an auction in the near future. Then it's a mad rush to decide on the property, and get the confirmed mortgage offer within the 2 weeks.

Then you may end up being outbid, and lose some/all of your fees.

(Incidentally, the legal packs are almost always available electronically. So they can be e-mailed to the solicitor. No visit to the auctioneers office should be necessary.)

kingstreet

TBH I haven't done one for ages.

Last time was when I was an advisor for an EA with an auction division back in the mid 90s. It doesn't surprise me things have moved on since then. I'll change my wording for this slightly in future, but the emphasis on ensuring the solicitor studies the legal pack remains essential.

It's true you do have to be ready and waiting for the catalogue to be published, but once you have decided on a lender and got a DIP (15 mins) I can have an application submitted and supporting documentation uploaded within half an hour, so the only issue is how long it takes the lender to instruct the surveyor and for the surveyor to arrange access with the auctioneer.