First time buyer - Is it safe to buy first property at auction?

greatcrested

* don't watch Homes Under the Hammer - makes it look too easy

* Do attend several real auctions (no idea if they are happening these days or how), with your hands firmly in your pockets. Just observe.

* do read several of the auction guides on the internet, or on auction house websites

Once you identify a property, before the auction:

* pay a solicitor to chck the Title documents

* pay a surveyor to survey the property

* pay to apply for a mortgage against that property (not just a mortgage In Principle), and make sure you have a firm mortgage offer agreed

* viewr the property if you can, ideally at least twice

Only after doing all the above should you consider bidding

* if your bid is sucessfull, you'll pay 10% immediately

* you'll then have 28 days to Complete or lose the 10% (and maye other penalties)

* if your bid is unsucessfull, you'll lose all the money you've paid out above

Best of luck....

trex227

Also have you looked at past auction sales to see what prices were achieved? I don't know if its just round here but houses at auction seem to go for very little less than what they're worth when factoring in the work needing doing. For example the house I mentioned my MIL was looking at. Houses on the same street in perfect condition ready to move in go for max £230k. The house at auction sold for £187k. I think the auction fees plus the sellers costs that were included in the auction conditions totaled £9k.

At a minimum you could tell from the photos it needed new kitchen & bathroom, complete redecoration throughout, new carpet/flooring throughout and the garden clearing. It also looked like it needed some tiles replacing on the roof. Unless you're handy and can do a lot of that work yourself theres not much scope for making much of a saving compared to just buying a finished house. But maybe thats just round here and where you are properties at auction sell for a lot less.

eddddy

EasyToAssemble01 said:

Yeah, the consensus looks to be an overwhelming "No" on auction properties, then. Like you (and others) have pointed out, even if I find a place that's OK, the compressed buying process just seems to add stress to an already stressful situation. I'm already allowing enough spending for paying market-value on a property, so saving money is desirable rather than essential at this point.

Just to add some perspective...

Traditional auctions aren't generally a way of buying properties at "below market value".  They are generally a way of buying problem properties at a price which reflects their problems.

If somebody has a "standard", mortgageable property, they wouldn't sell it through an auction (because they probably wouldn't get a very good price for it) - they'd sell it through a regular EA. And it's often quicker selling using an EA, as well.

Traditional auctions are often a 'last resort' for problem properties which EAs have been unable to sell.


As well as traditional (unconditional) auctions, some EAs promote 'modern' (conditional) auctions. They might offer mortgageable properties, plus the opportunity to apply for a mortgage, but there's a risk of buyers losing many thousands of pounds in fees - through no fault of their own.

theoretica

If there weren't large pitfalls lots more people would buy homes this way and prices would even out with other purchase methods.  The very fact the prices look attractive is an indication to look for problems.

AlexMac

Not recommended. I did actually buy at auction as an amateur, many years ago; albeit not a completely raw ftb, and I only just managed to meet the usual 28-day completion deadline by the skin of my teeth to avoid losing my 10% deposit or having to find expensive bridging finance (which I probably wouldn't have qualified for).

I thought I had a mortgage agreed by my bank (the Natwest) having discussed the project on the phone with a child at a computer in their specialist call-centre in Birmingham.  I was even honest with them that  although it had a (rubbish but functioning) kitchen and bathroom, it was a bit of a wreck with a leaky roof.  But the mortgage surveyor they sent round was mega-cautious, so when the offer was confirmed in writing, it was subject (wait for it) to a "100% retention"; pending a full structural survey, a roof survey, a timber & damp survey, and a tree survey (of the 100 year-old street trees more than 8 metres away!).  So in effect, no loan.

It came good in the end; I'd smelt a rat, applied to another lender(the Halifax), in the days when you could walk into a local office and speak to a grown up.  They engaged with my naive enthusiasm and pulled out all the stops.  My lawyer did well too, although we may have skimped on the seaches, which was less of a problem as I knew the area really well because I'd been living with my girlfriend in the same street a few doors away.

Oh and did I mention that I was due to get married a fortnight after the mid January completion deadline, so the 28 days spanned the Christmas break?  No pressure then?

Another consideration is whether there really are bargains to be had.  In my area at least, there are now hardly any viable improvable properties coming up in the auction sales.  I tended to follow the local auction catalogues, results and local property market for many years after my own one experience, and while I assume there still may be cheapos in some regions, the prices for do-er  -uppers seemed to at one point to increase to the point they became uneconomic as there were less of them.  The purchaser profile seems to have changed too. Whereas in the nineties and noughties many of the buyers profiled in programmes like "Homes under the hammer" were DIY amateurs like me, buying for their own use, now they all seem to be professional developers buying for rent or to sell on after a fast refit.  All of whom seem to have easy access to cash

Good luck with your purchase anyway, wherever you find it

uralmaid

Hopefully you are not confusing an actual auction - ie. going to a physical auction and bidding, with the new fad of Modern Auction method.  See lots of posts on this site about the costly price of purchasing through this method.

NameUnavailable

I would only consider buying at auction as a cash buyer, too much to risk at the whim of a faceless mortgage provider!

EasyToAssemble01

uralmaid said:

Hopefully you are not confusing an actual auction - ie. going to a physical auction and bidding, with the new fad of Modern Auction method.  See lots of posts on this site about the costly price of purchasing through this method.

No, it would be a traditional auction with repossessions or properties requiring some work.