House Auctions

Davenewcastle

Hi,
I'm new to all this so please be aware I don't know everything about house buying. I have seen a couple of houses I like. However they are both up for auction. As I would have to pay £6000 for the reservation cost on top of my mortgage deposit, this would take me over my savings. Is there any way you can still buy the house without paying an auction or the additional fees please? I have tried working out a lower mortgage depksit but it would cost nearly £100 more per month. Thanks for any advice or ideas you can give. Dave

Doozergirl

Buying at auction whilst needing a mortgage is a risk in itself as you have to complete within 28 days. You're at the mercy of the mortgage company unless you have a valuation survey before the auction with no guarantee of being the highest bidder. Auctions are the domain of cash buyers; not just for that reason - properties are often unmortgageable. You must tread very carefully!

Is the £6,000 a "fee" or a 10% exchange of contracts deposit? The exchange of contracts deposit does count towards your mortgage. Fees don't.

eddddy

Since you mention £6,000 - I'm guessing this is the "modern method of auction", as they call it, and that's the £6,000 reservation fee.

If so, in theory you can make an offer to the seller before the auction, on the basis that the seller pays the £6,000 fee.

But the seller and/or auctioneer may not bee keen.

eddddy

... and the £6,000 buys you a 28 day lock-out period.

So the seller can't sell to anyone else for those 28 days - i.e. you have 28 days to reach exchange of contracts (including arranging a mortgage etc).

If you go over the 28 days, the seller can choose whether to stick with you, or sell to somebody else.

If they sell to somebody else after 28 days, the £6,000 isn't refunded.


(Or at least, those are the 'typical' terms - check to make sure that's what your contract says.)

PasturesNew

This is not the house for you.
This type of auction is 'dangerous' for most people.
Investigate how these things work and you will agree that it's not for you.
Do not be sucked into thinking this is the perfect house and your only chance .....
Learn more about houses/buying houses/ problems, auctions, borrowing money/conditions etc etc.

This is not a straight forward "auction" - and even if it were this would probably not be the house for you with your current understanding of what you're walking into .... and the risks involved in trying to buy like this.

It's not like ebay ..... or homes under the hammer.

A_Frayed_Knot

I bought my house at auction.

The auctioneer's fee was 1% of the final bid price (I think I may have got a bargain ), which I paid along with the deposit which if I can remember right was either 5% of final bid or £3000.

You have 28 days to complete, and if you cannot, it means they can take the house back, but you are still left to pay it :eek:

I got all the surveys carried out before the auction which meant I was out of pocket if I didn't win the auction . The after waiting 7 days to see financial adviser, took it upon myself to apply for the mortgage myself. But managed it and was ready to complete in less than 3 weeks :A, but sellers wasn't.

Only advice I would say is to read the conditions of the auction house, then read it again, then get your lawyer to look over it, and if all ok, get the surveys etc done asap.

Good Luck.

Davenewcastle

Hi everyone, firstly thanks for all your replies. It is a modern auction. You have all clarified what I was thinking its nice to get other peoples opinions. Thanks again for your time. Dave

tealady

Personally speaking no matter even if the house was my dream home then I would not buy. IMO this modern auction method is a rip off.

Seamus2017

I am in the process of selling my house via the modern auction method. As we have yet to complete the deal I am probably somewhat premature in posting about my experiences but an interested party has paid the reservation fee and our solicitors are about to exchange contracts so things are at an advanced stage. From a sellers perspective I would say the main benefit (perhaps the only benefit) is that once the buyer has paid the reservation fee of circa £6k they are unlikely to pull out which lends a degree of certainty to what can be a very uncertain process. In my case this counts for a lot, not so much because I need a quick sale but rather I just didn't want to be embroiled in a protracted process which could fall through at any time. I might not have achieved absolute top dollar price but I am really quite happy with the outcome. Would I sell via this method again? Well if you're selling a nice family home, and in no particular rush, I wouldn't bother as in the end you will probably achieve a better price selling in the conventional manner but for anyone looking to dispose of an asset at the lower end of the market its certainly worth thinking about. In a way, as a seller, you don't really have anything to lose because if the property doesn't sell quickly you can just give the auction house 30 days notice and then revert to selling via a regular estate agent.

eddddy

Seamus2017 wrote: »

I am in the process of selling my house via the modern auction method...

<snip>

Are you connected with the auction company?

Anyway, I'm glad it's working well for you.


But there are many downsides as well...

- Buyers are at risk of losing their £6k
- It doesn't really work for buyers with a property to sell
- Buyers need an extra £6k in cash, in addition to their mortgage deposit
- A 'regular' EA might charge only £2k in fees - so a seller might accept an offer of £4k less (Or get £4k more in their pocket.)


The factors above means the pool of potential buyers is smaller. Fewer buyers means less competition, which means a lower price is achieved.

Perhaps that's good for buyers (with plenty of cash and nothing to sell), but not so good for sellers.

Seamus2017

eddddy, In answer to your question my only connection with the auction house is that I am using them to sell my house. I just thought it might be useful to relate my own personal experience as I get the impression that most of the contributors on here have never used the service and therefore might not really be all that well acquainted with the process. Like I say I've no axe to grind either way but based on my own experience I would say that the so called Modern Method of auction has its place in the market and that sweeping statements like "its a con" and "don't touch it with a barge pole" are a bit unfair and wide of the mark.