Buying at auction to renovate and sell

joerama

Hi guys,

Been thinking about doing this a lot lately.

I have a few questions on the subject which are as follows:

(1) If i buy a house for £45,000 at auction with the sole purpose of getting it sorted and selling for profit, do i mortgage it with a normal mortgage and a 10% deposit say £4,500 or is there some other mortgage i need if i am going to do this without the full balance to purchase the property?
(2) What type of fee's would i be looking at paying on a house with the value of £45,000 roughly if i win it at auction?

Thanks guys!

:beer:

eddddy

Hi joerama

You will find it very difficult to buy at auction if you need a mortgage.

You will usually only have two weeks before the auction to instruct a solicitor, apply for a mortgage, get it valued, and get a firm mortgage offer.

You should not bid at auction unless you have a firm mortgage offer.

Then, if you are outbid, you still have to pay your solicitor, your mortgage application fee, your valuation fee (and perhaps other fees) - that might amount to say £1k with nothing to show for it.


As an alternative, you could try googling 'auction finance' - but I suspect they will be asking for your business plan, your credentials, your track record, and the shirt off your back. It's not really for novices.

G_M

and of course many properties at auction (especially the 'bargains' that need renovation) are unmortgaeable - that's why they get put into aucions!

Now - given that you appear to have a minimal understanding of how they work, do 2 things:

1) google 'how property auctions work' (or similar) - there are lots of guides on the internet

2) go to several auctions as a spectator (don't take you credit card!) and get a frist-hand idea what's going on. And talk to other people there.

Thrugelmir

You need commercial finance not a mortgage to undertake such a business. With little capital to put down as a deposit you'll struggle though.

ACG

Look up Bridging finance - at that sort of purchase price your probably going to need a 30% deposit - fees all in around £3-5k.

Also read up on the6 month rule - most lenders will not lend on a property if it has been owned by the vendor less than 6 months (so whoever is buying from you will struggle to get a mortgage).

Its not the place to use a normal residential mortgage - due totime constraints and the property unlikely to be suitable for most lenders.

Doozergirl

That's a very low amount to spending to turn a profit. I do speak from experience of buying at auction and selling on, so not risk adverse.

An anticipated profit can turn quickly to loss with a couple of surprises and an over-enthusiastic asking price vs selling price.

happylucky

OP if part (2) of your question relates to fees payable to the auction house, then this varies considerably and you need to refer to the t&c 's of the specific house. Some are referred to as buyer's premium and are % of sale price...other end can be a fixed fee "admin" charge . If you are bidding on a high vale property, the latter set up can be considerably cheaper.

You'll also want to check the special t&c 's for the specific property which will be included in the legal pack. They may stipulate the buyer must pay additional fees generally paid by the seller e.g. search fees for docs given in legal pack that would ordinarily be paid for by the buyer, contribution to seller legal fees, full licence to assign fees for both parties etc. You are liable to pay all stated fees should you win, even though they are in addition to sale price if they are stated.