Houses from Auctions

maydin

I have been told that houses that are sold over auctions to be cheaper when compared to the ones sold from the agents. How cheaper they are? Is the price difference, worth to take the risk. Can someone explain me what are the pros and cons of purchasing a property on auction?

Annisele

Usually (not always) the reason a property is being sold at auction is that it isn't mortgageable. So maybe it's of non standard construction, maybe it's falling down, maybe it has a very short lease, or doesn't own it's own kitchen, etc etc. If you're a cash buyer, then you can take those risks (and many others) if you choose to.

Buying at auction can also be more expensive. Once the hammer comes down you'll be committed to buy (or to lose substantial amounts if you can't go through with the purchase). So, if you need a mortgage you'll need to get all the legal work and surveys etc done before you bid. But since you don't know what the end price is going to be, you could end up paying for work in respect of properties that you're never going to be able to afford.

I think that in general anybody who needs a mortgage should stay away from auctions. There are exceptions to that general rule - but the people who those exceptions apply to likely probably already know about them.

theoretica

There was a post on here from someone who bought at auction and discovered their new property was just about to be repossessed by the freeholder unless quite a large sum in overdue fees of some sort was paid - and this was now their problem, and apparently not the seller's.

maydin

However, as the property has changed ownership, this liability should not be the responsibility of the new purchaser, isn't it?

propertyrental

maydin said:

However, as the property has changed ownership, this liability should not be the responsibility of the new purchaser, isn't it?

No. Liability relates to the property.

ArbitraryRandom

Yes, depending on where you are in the country you can buy a house for maybe 15/20% of what it 'should' go for on the local market... but unless you are in one of the trades, you should really go into it assuming it's going to require £100k+'s worth of work to flip/be habitable.

Don't buy one thinking you can move in while you fix it up in your spare time. There will be a reason it's up for auction. 

maydin

So it is all about good research prior making up our decision. Besides, the buiding materials has became so much more expensive for the last couple of years and every DIY project seem now to cost a lot of money

Scotbot

It's also about having the cash. You have to pay the 10% deposit on the day of the auction and the remainder 28 days later. If you find a problem and decide to pull out you lose the deposit.

mi-key

Basically very very few houses sell at auction to people wanting to buy them instead of going the traditional route. It really isn't a way of getting a home cheaper. There are quite a few good reasons for this

Most are bought by builders to renovate and flip. or BTL landlords renovate and let out. Unless you have all the cash ready to buy it, then you are unlikely to get anything.

Also, any half decent habitable houses will go for well over the auction estimate as someone with more money than you will outbid you, renovate it and sell it on for a quick flip.

If a house is that good, and can be sold normally with a mortgage and moved into, it would be sold via an agent as it will always get more money than at auction. 

Any houses that need work, assume it is major building work, not just cosmetic stuff or easy DIY jobs. If you have to pay builders to do the work, you need cash up front, and also will lose a lot of the money you have saved.

theoretica

mi-key said:

If a house is that good, and can be sold normally with a mortgage and moved into, it would be sold via an agent as it will always get more money than at auction.

Except it is not at all safe to reply on that - people tricked into thinking they are getting a bargain, and it must be cheap as it is in an auction are quite capable of bidding things up to silly money.  Perhaps especially as there are less likely to be mortgage valuations involved to pull things back to earth.  Sometimes properties are put to auction when it is speed of sale that is wanted.

eddddy

theoretica said:

There was a post on here from someone who bought at auction and discovered their new property was just about to be repossessed by the freeholder unless quite a large sum in overdue fees of some sort was paid - and this was now their problem, and apparently not the seller's.

maydin said:

However, as the property has changed ownership, this liability should not be the responsibility of the new purchaser, isn't it?

It's complicated.  (And it's going a bit off topic.)

• If the previous owner hasn't paid a service charge bill, then legally the previous owner still owes the money.

• But the flat can still be 'repossessed' by the freeholder for non-payment.

• So the new owner doesn't owe any money, but they still get their flat 'repossessed' by the freeholder anyway!

This kind of stuff gets sorted out by solicitors with a 'normal' sale - and a 'sensible' seller would have sorted it out as part of the auction sale.

But in the example mentioned by @theoretica, I recall that the seller was probably a bit of a rogue who didn't do things 'properly'. And the buyer didn't ask a solicitor to check the legal pack before the auction.


But it's an example of the type of problems you can encounter with auction property.