Buying a house at Auction

evosy1978

Hi al,

I decided in the new year I was going to buy a house at auction. I know very little and I'm finding information out each day.  So I'm after  knowledge and info from anyone that has any, (for free lol).

Fist thing I'll say is, I've been on the Bond Wolfe auction site. I was looking at 3 houses, all need totally modernising. After reading a few websites they all said guides prices would increase by upto 30%.    
I watched the auction yesterday,  every house was going literally doubling in price by the time the hammer went down.  
The houses I looked at, their guide price, the price they went for and the street current prices were

£50,000  went for £130,000 ---   £160,000
£20,000 went for £56,000 --- £75,000
£20,000 went for £61,000   --- £80,000
(each house needs fully modernising)

who would be buying these house as it was the same all day.  Investors, builders?  There's doesn't seem to be that much profit margin if a builder was to  do one up and sell within 6 months.   
How come the guide prices were so low?  

Thanks

deannagone

The guide prices were so low to invite interest and more bids.  It worked.

caprikid1

These are bought by professionals who do this for a living, they are quick, have tradespeople lined up and the cash to buy. When you are organised and can produce a high finish they may money. If you are financing it, fitting in around work and paying top rates for good tradespeople then in a flat market you may struggle.

A lot of people also make a percentage of their money by the house going up in value during the refurb process.

theartfullodger

I bought, guide price £18k, went for £18.5k. Two bed terrace, views of lochs and mountains, garage, garden, open hillside 50mtrs away.

Countrysider

I've always wondered this. I remember a house near me recently that was on the open market for ages for £150K and didn't sell. Went to auction with a guide of £100K and sold for £165 + auction fees. 

Why, if these are professionals, didn't they just buy the house when it was on the open market? It was cheaper and didn't have auction fees. 

My personal belief is that people start getting competitive in the auction environment and feel that they have to win, almost at any cost. There might also be a reluctance to leave the auction empty-handed. 

jimbo6977

Lots of tradespeople have armloads of cash from the last 2 years. I won't speculate as to how they came by it as someone will no doubt get upset. However, the end result is that they are ideally placed to buy at auction and start a nice little lettings portfolio.  

eddddy

evosy1978 said:

who would be buying these house as it was the same all day.  Investors, builders?  

Perhaps the buyers were lots of other people like you...

evosy1978 said:

I decided in the new year I was going to buy a house at auction. 

But looking back at the past few auctions for that auctioneer, properties often seem to go for between 2 and 4 times their guide price.

lesalanos

Bond Wolfe are notorious for low guide prices, increased just before the auction 

canaldumidi

You are aware of course of the financial risks involved unless you are legaly and constructually capable?

Before bidding you must have done the legal prep, either yourself or by paying a solicitor, and paid for a survey, unless you are able to do this yourself. Once the hammer falls it's too late to find out there are issues.

Similarly finance, unless you have the full price in savings, you must have your loan arranged. Not just 'in principle', but a full application and offer which usually requires an application fee. Again, once the hammer falls it's too late to discover no lender will give you the mortgage you need on this property

And all those upfront costs are lost if you don't win at the auction.

Apologies if this does not apply to you or is not new to you.

jacko74

It's been a long time since genuine bargains could be had at auction, and there has always been all sorts of dubious practices such as artificially low guide prices (aren't they supposed to be set at within 10pc of any reserve price? Yeah right!) and the auctioneer taking bids ''off the wall'' 

I definitely wouldn't bother with auctions these days, they are now usually always packed to the rafters, mostly with inexperienced, gullible, giddy people getting carried away with auction fever and paying well over the odds.

I've seen numerous examples of properties that were initially for sale on the open market, failed to achieve a sale so get chopped in to auction and end up selling for more at auction than what the asking price was when they were on the open market.

I think agents have wised up to the ''auction fever'' factor now as I'm seeing more and more perfectly habitable and mortgageable houses going straight to auction as well.

The_Walker

This is very interesting to read, since I'm considering selling a property at auction (under duress). My agent told me I could lose maybe £30K - £40K off the proper value by going this route, but the sale is much more concrete since the winning bidder has to pay out a substantial sum whether the sale happens or not. 

So is this untrue then? It did occur to me that bidders might get carried away up the value. But really, aren't auctions for people looking to buy under value??