Auction - questioning guide price

lola62

Hello,

We're exploring the possibility of buying a house at auction for the first time, and have found a property we are very interested in

Asking around the area, the vendor is well known and the property has been on the market (not with auction houses) for a good few years (being taken off, small amount of work done, then put back on etc)

The guide price of the property seems VERY high (about 20% higher than anything the same size in the village) but is also an unusual property, and last exchanged hands about 40 years ago so hard to actually value! We've also spoken to estate agents who've valued it recently and the valuations have varied hugely (though still *all* fall below the guide price)

When we've spoken to the auction house, they have assured us that the property has been valued by a RICS chartered surveyor (albeit remotely, ie without visiting the property) and the value is "very close to" (eh hem...) the guide price

I know someone can put their house on the market for whatever price they want, and maybe we're being caught between being overly interested (if they just want too much money for it, not much we can do about it) and overly cautious (it's an odd property, so probably a smaller market)- but is it ever acceptable to ask to see evidence of how the price was arrived at?

I suspect the answer will be to just let it lie and find a different property, but thought it might be worth asking some advice on!

martinthebandit

If it's up for auction the guide price is largely irrelevant, the winning bid will be the price that it's worth.

G_M

It could go for considerably less than the guide price. Or considerably more!

Have you ever attened an auction? If not, go to 2 or 3 before the one where you actually want to bid so you get the feel for them.

Do ALL your checks before the auction:

* survey
* legals
* cash/mortgage confirmed
etc


Once you win and bid, it's too late to start checking.

SmashedAvacado

you should be happy that the guide price is high if you are genuinely interested. It will put off a lot of buyers. What is more relevant is the reserve price, which you will not be told about. I have bought at auction, and bid at auction and failed to buy. I have bought after the auction (on the auction contract) for a price lower than guide. If you want the property, then this situation is potentially good for you.

AdrianC

Another vote for "who cares?"

Decide what you want to pay. Raise your hand while it's below that figure, sit on your hand as soon as it goes above.

End of.

GDB2222

No, it's not end of, Adrian. The OP would have a lot of expense just to be in a position to bid at auction, as GM says. That's all wasted if the reserve is set so high that the OP cannot buy even if he makes the highest bid.

AdrianC

GDB2222 wrote: »

No, it's not end of, Adrian. The OP would have a lot of expense just to be in a position to bid at auction, as GM says. That's all wasted if the reserve is set so high that the OP cannot buy even if he makes the highest bid.

But you never have any idea what the reserve is. You can guess that it's typically no more than 110% of the guide, but you don't even know if there is a reserve. Or whether the vendor may decide to ignore it and sell anyway.

The pre-auction money is just as wasted if the person sat next to them gets daytime-TV-fever, anyway.

daveyjp

You don't go into a property auction considering the 'money wasted'. If the reserve isn't met it shows the property may well be over priced.

The seller is now aware of this, still has a property which is costing them money and may be open to an after sale bid.

I've seen guided properties go for ten times the guide and I've seen bids stop at 10% of guide. Auctions are not for the faint hearted.

eddddy

An ASA ruling in 2014 stated that advertised auction guide prices must be within 10% of the reserve price.

As a result, in my experience, auction guide prices are always 10% below the reserve price.

(It's unlikely that the advertised guide price would be set higher than the reserve, as that might deter some potential bidders.)


But as others say, if a property fails to reach it's reserve price at auction, the seller will sometimes resign themselves to accepting a lower offer after the auction. (Or they'll sometimes try again at the next auction.)

GDB2222

This particular seller has a long history of wanting more than the property is worth apparently. Plus the guide is set very high. The OP has to consider whether it’s worth the gamble of getting into a position to be able to bid on the off chance the seller suddenly becomes reasonable after the auction.

lola62

Thanks everyone - a couple points just to clarify the question I was asking

- The seller does appear to have a history of asking too much for the property (ie more than anyone will appear to pay for it)
- The valuations (EA's) we've found have ranged *hugely* - over £210,000 between the highest and lowest (the highest also being *under* the guide price) Would also like to press this isn't a multimillion £ property we're looking at - it's an awfully large percentage! This makes it hard do due dilligence on how much the property should be worth / a mortgage lender would value it - basically balancing "it's worth what someone would pay for it" vs "it's worth what the mortgage company will lend you for it"
- Is it every acceptable to ask to see proof of how the guide price was arrived at?

As mentioned by GDB2222, we will have spent a considerable amount of money to get to the point of being able to bid (we also need to secure a mortgage) so if we can possibly root out if the buyer is simply being greedy (again) and has set a guide price significantly over what it's been valued as, we could save ourselves a lot of hassle and just move onto a different property.

Something else I'd like to check though (might clear up all of the above!!)- we had been guided by the auction house that a survey should be done AFTER the auction (it's an online auction, where a buyers premium is paid to secure the property, and the surveys are done afterwards) It does sound like that's quite unusual and that surveys should be done beforehand?