Are house auctions scams (London)?

FataVerde

I'm house hunting for a purchase and never considered auction because of the risk involved. Over the last week, around 7-8 new houses popped up on rightmove as auction sales in the neighbourhood in London where I am looking to buy. I registered on their websites and signed up for a viewing mostly to get a sense of the process, etc. Houses are up for auction on 7/07 and the legal pack has only been uploaded on 1/07. Two of the viewings I had scheduled were canceled and curious if a 3rd, just 2 days before the auction will go ahead. Is this typical? I thought any legal pack searches and house evaluation have to be done before the auction but this basically gives potential buyers 3 days.

deannagone

Sounds like a modern auction?  Have you had any paperwork saying a large £6k ish fee has to be paid on winning.  That large fee is non refundable if you do investigations and decide the property is not for you.  It is often considered to be a scam because if you withdraw, you lose the money you have paid. The EA just keeps putting the property up for the modern auction again, with buyers losing the fee every time.   Sellers are pulled in by this idea by EA's because they don't have to pay fees.  But they also don't get many offers because of the risk of losing that large fee.  And offers will often be much lower because of the risks.

Or are the houses going through a traditional auction where you have 28 days to get all the legal work done and the mortgage or monies to pay for the purchase ready to go?

Normally with a traditional auction you have more time with a legal pack to at least start doing some of the legal work that you may need to do to check if there are obstacles to stop you buying the property.  It may need major work that makes a mortgage impossible or there are clauses to make financing the purchase difficult.  Bear in mind there is usually a reason a property is auctioned and more often than not that reason is something being wrong with the property.  Occasionally a property is auctioned because the seller needs a quick sale.., but you can't assume this.

But traditional auctions can work for people with cash to pay for a property, who know what they are doing (able to assess whether a property is a good buy or not)

Countrysider

Assuming you're talking about traditional auction (not modern method of auction) then yes i'd say it's quite typical for legal packs not to be ready until a few days before the auction. I don't know why this is the case but i've never seen a legal pack available when the property is first marketed or even when i've gone to view. 

One property I was looking at recently got to auction day with no legal pack available, but it was withdrawn and then put into a later auction in a couple of weeks. 

GDB2222

FataVerde said:

I'm house hunting for a purchase and never considered auction because of the risk involved. Over the last week, around 7-8 new houses popped up on rightmove as auction sales in the neighbourhood in London where I am looking to buy. I registered on their websites and signed up for a viewing mostly to get a sense of the process, etc. Houses are up for auction on 7/07 and the legal pack has only been uploaded on 1/07. Two of the viewings I had scheduled were canceled and curious if a 3rd, just 2 days before the auction will go ahead. Is this typical? I thought any legal pack searches and house evaluation have to be done before the auction but this basically gives potential buyers 3 days.

The sort of people these auctions are usually aimed at may just look through the auction pack and take a view. Or, they'll have a lawyer who will give it a quick look through. Bear in mind that most of the people bidding don't want to spend a lot on the legals and then lose the auction.

london21

FataVerde said:

I'm house hunting for a purchase and never considered auction because of the risk involved. Over the last week, around 7-8 new houses popped up on rightmove as auction sales in the neighbourhood in London where I am looking to buy. I registered on their websites and signed up for a viewing mostly to get a sense of the process, etc. Houses are up for auction on 7/07 and the legal pack has only been uploaded on 1/07. Two of the viewings I had scheduled were canceled and curious if a 3rd, just 2 days before the auction will go ahead. Is this typical? I thought any legal pack searches and house evaluation have to be done before the auction but this basically gives potential buyers 3 days.

I recently went through a traditional auction with 6 weeks to complete.

Will say read the terms and condition and extra special conditions, if you can get a lawyer to look through if it’s something you definitely want to go for.
mine had auction fee and also other fees towards seller’s fees.
the legal pack and searches were all there and went to view the property. Upon auction ending within 24 hours  required 10% deposit.

the extra special condition had clauses that made financing the purchase difficult, I had to buy cash and get a mortgage afterwards once registered. 

Price was a little cheaper but wasn’t a huge bargain. 

Looked though recently sold lots, the prices are high, the stamp duty holiday played a part.


 

user1977

FataVerde said:

I thought any legal pack searches and house evaluation have to be done before the auction but this basically gives potential buyers 3 days.

You don't need to wait for the legal pack before having a survey. And the legal pack needn't take 3 days to read. In ye olden days buyers would often only be looking at the documents when they got to the auction room.

Not sure what you think any "scam" is?

newsgroupmonkey_

Seems to me that property in London isn't necessarily keeping up with that outside - I guess as more people work from home, they'll start moving out.

I know a lot of people have said on here that particularly with flats in London, there's a lot on the market. I wonder if they've put them up for sale with an estate agent, not getting much of a bite and putting them up for auction at which point an investor decides to make an offer which is accepted.

I mean, if you spot somewhere nice, nothing to stop you doing the same?

FataVerde

@london21 "Price was a little cheaper but wasn’t a huge bargain." 

Yes, that's what I noticed. The listed/starting price is only a few tens of thousands cheaper than you'd get via regular EA so not really worth the risk or fees for smb more inexperienced like me. They are all via Savills in a hot London area, where those houses would likely sell/go under offer within 3 days of viewings. I've seen very similar, more old fashioned or run-down properties, doing just as well via EA. The one property advertised via auction that I wanted turned out to be wrongly listed as first floor but 3 days before the auction they finally corrected to ground floor (I had spotted this in the lease just uploaded). My previous viewings were all cancelled so basically there is the chance of doing a super fast survey 3 days before auction. Legals also only uploaded 4 days/2 working days before auction. Too much risk and, as you say, they are not bargains. I was not going to bid this round, just familiarise with the process.

FataVerde

newsgroupmonkey_ Currently renting in a London borough, where properties stay long on the market with the exception of 1 or 2 decently priced garden flats. I'm looking in an area further north that sells like crazy, literally within 3 days of viewings, likely pushing other people out, so these auctioned flats would not be long on the market. Especially those run down likely to cost less.

london21

FataVerde said:

@london21 "Price was a little cheaper but wasn’t a huge bargain." 

Yes, that's what I noticed. The listed/starting price is only a few tens of thousands cheaper than you'd get via regular EA so not really worth the risk or fees for smb more inexperienced like me. They are all via Savills in a hot London area, where those houses would likely sell/go under offer within 3 days of viewings. I've seen very similar, more old fashioned or run-down properties, doing just as well via EA. The one property advertised via auction that I wanted turned out to be wrongly listed as first floor but 3 days before the auction they finally corrected to ground floor (I had spotted this in the lease just uploaded). My previous viewings were all cancelled so basically there is the chance of doing a super fast survey 3 days before auction. Legals also only uploaded 4 days/2 working days before auction. Too much risk and, as you say, they are not bargains. I was not going to bid this round, just familiarise with the process.

Yes. My experience was very stressful. Was impossible to get a mortgage due to the property being a back to back sale. I only realised once I received the contract that the seller wasn’t the registered proprietor on land registry. 

Had to raise the cash, was lucky I had majority of the funds and borrowed the remaining from family. 

Not sure I will take such a huge risk next time. 

FataVerde

deannagone said:

Sounds like a modern auction?  Have you had any paperwork saying a large £6k ish fee has to be paid on winning.  That large fee is non refundable if you do investigations and decide the property is not for you.  It is often considered to be a scam because if you withdraw, you lose the money you have paid. The EA just keeps putting the property up for the modern auction again, with buyers losing the fee every time.   Sellers are pulled in by this idea by EA's because they don't have to pay fees.  But they also don't get many offers because of the risk of losing that large fee.  And offers will often be much lower because of the risks.

Or are the houses going through a traditional auction where you have 28 days to get all the legal work done and the mortgage or monies to pay for the purchase ready to go?

Normally with a traditional auction you have more time with a legal pack to at least start doing some of the legal work that you may need to do to check if there are obstacles to stop you buying the property.  It may need major work that makes a mortgage impossible or there are clauses to make financing the purchase difficult.  Bear in mind there is usually a reason a property is auctioned and more often than not that reason is something being wrong with the property.  Occasionally a property is auctioned because the seller needs a quick sale.., but you can't assume this.

But traditional auctions can work for people with cash to pay for a property, who know what they are doing (able to assess whether a property is a good buy or not)

They might have been modern auction style. Legal pack uploaded 3 days before bids and 5 out of 6 houses withdrawn, only 1 sold.