Help! £8k down on auction property

tocs23

Hi all, bit of a nightmare situation...

My hubby and I put in an offer on an auction property (pre auction - £62k), having had a mortgage AIP for £70k. The house needs a lot of work... absolutely fine as this was all about adding to our pension pots and we were looking on it as a long term investment. So the offer was accepted (much to our initial delight), and a 10% deposit plus fees - £8k in total - immediately whipped out of my account by the auction house.

However, it was only on meeting with our mortgage advisor the next day that we realised we have potentially made a HUGE mistake. We didn't realise that the absence of a bathroom suite (ie. toilet, sink, bath/shower) would essentially deem the house unmortgageable. This is the feedback we've had from several lenders now, including my own bank.

We're now trying to arrange to get access to the property pre survey to fit the basics, but our solicitor has said it is unlikely the seller will agree.

Does anyone have experience of this, or advice?

As a slight aside, when I called the auction house the guy who had taken the funds said that he had "assumed" we were cash buyers. So, tough luck basically. Is this right? Do they have no obligation to ask the question / ensure that buyers are aware in this situation? The home report simply says:
The property forms suitable security for mortgage purposes subject to the specific lending criteria of any mortgage provider.

Thanks in advance.

pinkshoes

tocs23 wrote: »

Hi all, bit of a nightmare situation...

My hubby and I put in an offer on an auction property (pre auction - £62k), having had a mortgage AIP for £70k. The house needs a lot of work... absolutely fine as this was all about adding to our pension pots and we were looking on it as a long term investment. So the offer was accepted (much to our initial delight), and a 10% deposit plus fees - £8k in total - immediately whipped out of my account by the auction house.

However, it was only on meeting with our mortgage advisor the next day that we realised we have potentially made a HUGE mistake. We didn't realise that the absence of a bathroom suite (ie. toilet, sink, bath/shower) would essentially deem the house unmortgageable. This is the feedback we've had from several lenders now, including my own bank.

We're now trying to arrange to get access to the property pre survey to fit the basics, but our solicitor has said it is unlikely the seller will agree.

Does anyone have experience of this, or advice?

As a slight aside, when I called the auction house the guy who had taken the funds said that he had "assumed" we were cash buyers. So, tough luck basically. Is this right? Do they have no obligation to ask the question / ensure that buyers are aware in this situation? The home report simply says:
The property forms suitable security for mortgage purposes subject to the specific lending criteria of any mortgage provider.

Thanks in advance.

It is up to a buyer to view and do a survey, and check things with mortgage lender BEFORE offering.

Woulda lender agree to you putting a bathroom in after exchange and before completion, if you show you have the cash available ?

A house without bathroom or kitchen is classified as uninhabitable, so not overly surprising that a lender would not be keen...

G_M

If you require a mortgage on an auction property, you should obtain a firm mortgage offer before bidding (or in this case making a pre-auction bid since the same rules apply.)

Once the hammer falls (or offer accepted) you are commited, so you need confirmed funds.

You wouldn't Exchange Contracts on a 'standard' house purchase without knowing you had the funds confirmed would you?

I fear your options are

* shop around and hope to secure a mortgage
* obtain the funds elsewhere (sell your pension? borrow from family?)
* forfeit the deposit and walk away a wiser but poorer person.

marksoton

tocs23 wrote: »

However, it was only on meeting with our mortgage advisor the next day that we realised we have potentially made a HUGE mistake. We didn't realise that the absence of a bathroom suite (ie. toilet, sink, bath/shower) would essentially deem the house unmortgageable. This is the feedback we've had from several lenders now, including my own bank.

Oh dear. The mortgage company probably consider it as uninhabitable ( Which it would be)

I'm confused as to the sort of mortgage you're applying for though.

Residential or BTL?

tocs23

I know, inexperience is shining through and - believe me - I am absolutely kicking myself. £8k really does hurt.

It's a residential mortgage.

PasturesNew

tocs23 wrote: »

... house unmortgageable ......


Do they have no obligation to ask the question / ensure that buyers are aware in this situation?

Sorry you got caught out.

Auction houses do tend to come with issues and problems. Not having a bathroom/sink would, for most, render the property unmortgageable.

There are solutions, in some instances, that I am not qualified to even suggest .... but seeing a whole of market broker would be the starting point.

Auction properties are mostly for developers, builders, seasoned borrowers etc etc, who have everything in place.

It's not something the auction house will be pointing out to anybody really as "everybody knows" there's likely to be all sorts of problems with houses for sale through auctions.

Auctions are notoriously: The time to make ALL enquiries is before you enter the room. Once that hammer goes down it's yours and you should have the money in place.

Did you not watch enough Homes under the Hammer episodes before you went?

chappers

tocs23 wrote: »

Is this right? Do they have no obligation to ask the question / ensure that buyers are aware in this situation? The home report simply says:
The property forms suitable security for mortgage purposes subject to the specific lending criteria of any mortgage provider.

Thanks in advance.

I'm sorry about your situation, but no, that's the risk of buying at auction and even though you didn't buy under the hammer, auction houses conditions of sale nearly always follow the same rules as if you did.
You will need to read their terms and conditions to check though, particularly with regards to buying outside of the auction, most sales outside of an auction usually happen after the property has failed to sell at the auction.

The main thing you need to check is if they had the right to sell prior to the auction or below reserve for example, you may have a get out there, but I expect it highly unlikely.

Normally at the fall of the hammer it is as if you have exchanged contracts and then you are legally obliged to complete.
This could mean that your £8k is only the beginning as you could be liable for any costs or losses they incur due to the sale not completing.

Get legal advice pronto and definitely ask the question of the vendor as to whether you might be granted access to carry out the works to enable you to complete.
Act quickly though as you have 28 days before they will serve you a notice to complete.

marksoton

tocs23 wrote: »

I know, inexperience is shining through and - believe me - I am absolutely kicking myself. £8k really does hurt.

It's a residential mortgage.

A residential mortgage should never be viewed as an investment. It's your home and the T&C's reflect that.

alchemist.1

Too much homes under the hammer and not enough research. You're going to have to take the hit.

tocs23

Sore one. Thanks for all your responses anyway, much appreciated. Very expensive lesson.

teneighty

I usually hate people citing TV programmes as examples as they are usually very unreliable but this just sprung to mind.

I saw an episode of Homes Under the Hammer ages ago and buyer made same mistake on a house in Sherborne, Dorset except it had no kitchen.

The vendor allowed them to go in and fit a couple of kitchen units and a sink so they could secure a mortgage before completion. So I suppose if you cannot secure bridging finance you could throw yourself on the mercy of the vendor. You could probably get a cheap bathroom suite thrown in for well under £500.

As usual with this programme they ended up making a huge profit.