House Auction Fee Confusion?

eddddy

It's sensible to read Savilles' website - but the definitive information on fees, costs etc will be in their terms and conditions and the special conditions of sale for each individual lot.

Some lots can have significant extra chunks of fees/costs which might only be mentioned in the special conditions.

Rambosmum

Jaydotr said:

Thanks All A lot of people also said "dont do auctions" And reading the forums it looks like it isn't a good idea haha! 

We've bought at auction a fair few times, admittedly almost exclusively business properties (warehouses, units etc) and never had an issue. But yes, 10% purchase price as deposit and comes off the total you have agreed to pay. The fee is in addition to that.

The big issue is when you need a mortgage - the delays come from the mortgage company. Most auctions stipulate a 28 day exchange. I have previously managed to negotiate a 28 day exchange with a 3 month gap between exchange and completion but this certainly isn't a guaranteed possibility.  

eddddy

Rambosmum said:

We've bought at auction a fair few times, admittedly almost exclusively business properties (warehouses, units etc) and never had an issue. But yes, 10% purchase price as deposit and comes off the total you have agreed to pay. The fee is in addition to that.

The big issue is when you need a mortgage - the delays come from the mortgage company. Most auctions stipulate a 28 day exchange. I have previously managed to negotiate a 28 day exchange with a 3 month gap between exchange and completion but this certainly isn't a guaranteed possibility.  

With traditional (unconditional) auctions, exchange of contracts happens immediately after the hammer drops. The conditions of sale will say when completion happens - it's normally 28 days later. There won't be scope for negotiation.

It sounds like you're talking about conditional auctions (like the 'Modern Method of Auction') - but in that case, you pay the 10% deposit on exchange of contracts, not on the day of the auction.

trex227

If you've not already I would strongly recommend you get a solicitor to review the legal pack for you, especially as you've said you will require a mortgage. The solicitors I used to work for was one of the few in the area that would review legal packs so we would get a few a month. It was very very common for there to be issues uncovered, in fact I can only remember one instance where the client actually ended up buying the property at auction!

There was a thread the other week where someone had bought at auction not realising the flat had cladding and so was unmortgageable until this was sorted out- they stood to loose the 10% deposit as they needed a mortgage but couldn't get one. I don't know if theres been an update on that thread.

NameUnavailable

trex227 said:

If you've not already I would strongly recommend you get a solicitor to review the legal pack for you, especially as you've said you will require a mortgage. The solicitors I used to work for was one of the few in the area that would review legal packs so we would get a few a month. It was very very common for there to be issues uncovered, in fact I can only remember one instance where the client actually ended up buying the property at auction!

There was a thread the other week where someone had bought at auction not realising the flat had cladding and so was unmortgageable until this was sorted out- they stood to loose the 10% deposit as they needed a mortgage but couldn't get one. I don't know if theres been an update on that thread.

Actually they can be held liable for the full purchase price, as that's what they committed to when the hammer goes down.

In reality most vendors will take the 10% deposit and costs and 'cut their losses' and put the property back up for sale, but they could go legal on you for the full purchase price.

If you need a mortgage make certain your offer is watertight before bidding!

greatcrested

Jaydotr said:

So it states:  "You will also be required to pay a non-refundable 10% deposit of the selling price and an auction administration fee of either £1,000(London)"

.... I have a 20% deposit of £40,000 available and a mortgage in principle to say i can get a mortgage for £160,000 (£40,000 deposit - totalling to £200,000)

The bold has been explained.

* The 10% is a deposit towards the agreed purchase price to the vendor. Payable immediately

* that leaves 90% of the purchase price to be paid at Completion

* the fee goes to Savills.Payable immediately.

But the worrying bit is your mortgage offer. You do NOT have a mortgage offer to purchase the property. You simply have agreement from the lender that your credit record is such that they might lend you £160K when you apply. But when they look at the property on your application, they might not.

Since you will be legally commited as soon as your bid wins at the auction, your must have your funds confirmed and certain at that point.

There's no point bidding, winning, paying 10%, applying for mortgage, getting refused (and there are reasons properties go to auction - often unmortgageable!) and losing your 10% (and more besides) because you cannot afford the other 90%.

Most buyers at auctions either

* are cash buyers. They know exactly what they can afford, and have the money ready, or

* pay the application fee for a formal mortgage offer on that property before the auction, knowing that if they don't win the biddig, their mortgage fee is lost, or

* are amateur FTBs who don't understand the risks, and are either very lucky (win bidding and get mortgage arranged) or unlucky (win bidding and get financially and legally stung very badly)

[Deleted User]

You would be lucky to have a mortgage application reviewed within 28 days with some lenders, never mind getting an offer in to the hands of the solicitor ready to exchange. 

Have you got a backup plan?  Bridging or 2nd charge on another property perhaps? 

fwiw, i refuse to do any application for a normal mortgage on an auction property.  Too much can go wrong on my side with lenders delays that I dont want any complaints back to me.    If your broker is feeling confident about arranging a mortgage in 28 days then fair play but just be careful

GDB2222

Rambosmum said:

Jaydotr said:

Thanks All A lot of people also said "dont do auctions" And reading the forums it looks like it isn't a good idea haha! 

We've bought at auction a fair few times, admittedly almost exclusively business properties (warehouses, units etc) and never had an issue. But yes, 10% purchase price as deposit and comes off the total you have agreed to pay. The fee is in addition to that.

The big issue is when you need a mortgage - the delays come from the mortgage company. Most auctions stipulate a 28 day exchange. I have previously managed to negotiate a 28 day exchange with a 3 month gap between exchange and completion but this certainly isn't a guaranteed possibility.  

I am not sure what auctions you are talking about, but with Savills exchange takes place on the day of the auction, and completion takes place 28 days later unless there are special conditions for that lot.

It is essential to complete all your legal work and have a firm mortgage offer for that particular property in place before bidding. I expect you are too late to do that by November. 

GDB2222

In any case, people see the guide prices in the auction catalogue and get all excited. Then, the property sells for a much higher figure. 

AlexMac

I made every mistake listed above when I bought my only ever auction property in the last years of the 20th Century. No survey, no professional advice on the legal pack, no builder's prices to refurb what was effectively a wreck, no funding in place (just an oral offer from a kid in my Bank's call centre- the Natwest).  And to make it worse, the auction was in late December, so the Christmas/New Year break got in the way of the 28-day deadline when I had to complete (or lose my deposit).  And my Bank's surveyor was 4r53-covery, so a couple of days before the deadline, they confirmed the mortgage offer...

... subject to a 100% "retention" ... pending a roof survey, a timber & damp survey, a structural survey and a tree survey (of the 100-year old street trees wot weren't anywhere near the property! ) In effect, NO mortgage.

Oh and did I mention I was getting married 2 weeks later?

Bizarrely, I pulled it off.  Got another loan just in time (bless the Halifax), bought the gaff, got married, sold three years later (after a new roof and complete internal refurb)...  at an obscene profit... and lived happily ever after!  But that waz in the days of silly money House Price Inflation; in my case almost 30% a year even after allowing for the £25-30k refurb costs.

Prices ain't rising like that now; and won't again...    So dunno if I'd take the same risks now...