Buying a house at Auction

canaldumidi

The_Walker said:

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??

Check whether your agent is suggesting a traditional auction, or a new-style so-called 'modern method auction' which everyone on here will advise against - especially for buyers, but that in turn reduces a seller's market considerable.

Very financially rewarding for agents though.........

The_Walker

I'm not sure what the difference is between a traditional auction or the new type? 

eddddy

The_Walker said:

I'm not sure what the difference is between a traditional auction or the new type? 

Your estate agent is talking about the "modern method of auction", because they say...

The_Walker said:

...but the sale is much more concrete since the winning bidder has to pay out a substantial sum whether the sale happens or not. 

A traditional auction is unconditional - once the hammer falls the bidder is legally committed to buy the property.

The "modern method of auction" is conditional - essentially the winning bidder pays a fee (usually £6k plus) to the auctioneer to reserve the property for 4 or 6 weeks, while they get surveys, apply for a mortgage, etc. The winning bidder is not legally committed to buying the property - they can back out, for example, if the survey is bad, or they can't get a mortgage.

But if they back out, they lose the £6k+ fee. The auctioneer keeps the fee (not the seller).

• So buyers don't like it because they might lose their £6k+ fee.
• And sellers don't like it because people tend to bid £6k less for properties, because of the fee
• But auctioneers like it, because they get a £6k+ fee

andy444

Maybe the buyers overpaid at auction. Not all buyers make money when they buy auction properties. They don't view the property or read the legal pack or find out when stripping the property that there's more remedial work than they thought. And some buyers just rent them out and sell them after a few years after their values have appreciated.

The big boys in the game have their own teams ready who can do the renovation so they can do the flipping quickly and move onto the next one. Even if they 'only' make £5k to £10k profit from the process, it's still not bad for essentially a month's work.

hazyjo

Most will probably keep them on as rentals. Perhaps the yields are good, maybe better than the sell now for profit price. Also seems to be a lot of people going into the serviced accommodation industry.