Buying a House at an auction

Cognito

apologies if there's a guide for this too, I didn't find it...

so, how does buying a house at an auction work?

am i supposed to have the survey done before the day of the auction? how about the lawyer's research?

the agent's info says "completion in 28 days"...

thanks for any replies

Errata

You're not 'supposed' to do anything other than have the purchase price ready and waiting. You may chose to have a property surveyed, instruct a solicitor etc, but there's no legal requirement to do so.

Cognito

so how do I know what state the property's in, or if there are legal issues?

Grumpysally

I don't know where in the country you are, but this is a link to one of our local estate agents who do auctions. There is a FAQ for buyers and sellers some of it is specific to them but it might give you more of an idea..
There's also a link to a fact sheet from the Royal Institute of Chartered Surveyors.

I think you can buy a house with out getting a survey etc done but you would be crazy to do so.

Daytime TV property shows love filming the discomfort of people who have bought 'blind' in a housing auction, only to find the property is damp / falling down/ cannot get planning permission etc...

We are thinking about selling a property by auction so have been looking into it quite a bit recently

Good luck.

http://www.cornerstoneea.co.uk/auctions.html

Thrugelmir

Prior to the auction obtain the legal pack and have this reviewed by a solicitor. Also have the property surveyed.

Buying at auction does incur upfront costs. Unless you want to take a punt that nothing untoward will come out of the woodwork.

Are you buying for cash or do you require a mortgage?

PasturesNew

As has been said, but I'll repeat it:

- you need to KNOW you can get the money - and that the property is OK to borrow against. The way you do this is to apply for a mortgage and get the valuation done BEFORE you go to auction. This will cost you money up front.
- you need to have 10% (Minimum) cash available on the auction date to hand over if you win it.
- you will have 28 days to complete after auction. To achieve this your solicitor must be in the loop, they must have read the auction pack and seen the mortgage offer and have half the paperwork done before you walk into the auction room. This will cost you money up front.

If you do not complete in 28 days you might lose your whole deposit -or- you might be given more time, at a cost of several £000s to do so.

Alternatives:
- remortgage your existing house to complete the purchase.
- get an expensive bridging loan and hope you can afford to repay that while arranging to mortgage the house.

If the house is unmortgageable, you need to know why and how much to fix it and be able to borrow enough money to buy the house and make those repairs/changes so it becomes mortgageable, then you can get a mortgage on it "the usual way".

Lord_Baltimore

Cognito wrote: »

apologies if there's a guide for this too, I didn't find it...

so, how does buying a house at an auction work?

am i supposed to have the survey done before the day of the auction? how about the lawyer's research?

the agent's info says "completion in 28 days"...

thanks for any replies

To be blunt, if you have to ask this question, you'd best not get involved. Despite what you see on TV, auctions are for people with a few bob to lose if needs be and quite a bit of property know-how.

There ought to be a 'Hammered under by my Home' programme too for all those hapless people who think they can just pick up an auction bargain, splash some paint around and make £00000's when in reality it nearly sucks every last penny out of them due to structural faults, mineshafts, radon, dry rot etc.

There may be the good deal to be had but it takes a sharp eye and some gambling. When the hammer goes down, the property is yours. It's not for the feint-hearted.

ruggedtoast

You don't want to end up like this guy:

https://forums.moneysavingexpert.com/discussion/4825231

We had a look at buying at auction but didn't get very far. Unless you do want to end up like that guy, you basically have to be ready to push the button the moment the hammer falls. i.e. the survey the mortgage, all the searches completed, everything.

Even if you get a solicitor that does no sale no fee, and just have the valuation survey and application fee you are still looking at £400 odd in set up costs. Then the house you have looked at may not even make it to auction (many don't apparently), or may just bid out of your price range.

That said people do buy at auction with mortgages. Just bear in mind that the 'guide price' is not any indication of what the property will sell for. It is usually many thousands of pounds below the reserve.

G_M

1) do not bid unless
a) you have the money to pay - for definate
b) you know you want to buy - whatever the condition
c) you know there are no legal issues to surprise you

2) read lots of guidance- google 'property auctions' for lots of online guides

3) go to some auctions and leave your chequebook/cashcard at home,and keep your hands in your pockets - just watch, and learn

Cognito

thanks to all for your replies that Cowboy thread started sad/worryingly, but he said all is well in the end, so that gives me hope.

Lord Baltimore, you are probably right. but the lure is still there, and I am asking if there's a crash course in buying at an auction. I have the financial side more or less sorted, I am asking about the particulars of surveying and legal matters.

so, basically I have to pay up front for the survey and the lawyer, and then (if they okay everything) hope I am the winning bidder? as in, the property goes for a price within my margin?
and if I'm not, all the money I spent on surveying the property and checking the legal side is down the drain?
that's what I am/was asking...

eddddy

Cognito wrote: »

...
so, basically I have to pay up front for the survey and the lawyer, and then (if they okay everything) hope I am the winning bidder? as in, the property goes for a price within my margin?
and if I'm not, all the money I spent on surveying the property and checking the legal side is down the drain?
that's what I am/was asking...

Yes - that's correct. And realistically, before the auction, you should either have the full buying price in cash, or a completed offer for a mortgage for the specific property you are bidding on. (So you stand to lose mortgage application fees as well, if you don't buy.)

And remember that vendors put their properties in an auction for a reason (and the reason is normally something bad). If somebody could sell a house through an EA for say £250k, why would they sell it through auction at say £200k?