Houses from Auctions

mi-key

maydin said:

I can do some DIY myself and I am unfortunately full time employed so you might be right...

Given that, I would say you have almost no chance of making a profit from it. 

A house that only needs basic DIY renovation isn't going to be sold at auction normally, and if it is, then it is going to go for a lot more than the reserve.

A house that needs the sort of work builders would need to do will be cheaper, but you will lose any savings you make in what you have to pay them to do it.

Buying at auction may seem like a good way to get a cheap house, but there are good reasons why very few 'normal' buyers buy from there

motorman99

this won’t end well……

mark5

I was interested in an auction property last year, it wasn’t a bad house. Built about 1910, detached double fronted stone fronted, reasonable size rooms, decent size plot etc, really nice views but not on the best street with no off street parking, adding parking would have been very expensive due to digging out a mountain side and building retaining walls etc.

Considering the work I estimated it needed the price it eventually sold for seemed mad to me looking at previous sale prices for the street, thats before having to pay the deposit straight away, complete in 28 days and pay the additional auction  fees on top. 

maydin

So auctions means not necessarily bargains

mi-key

maydin said:

So auctions means not necessarily bargains

Most developers will operate on a 15-20% gross profit margin, but that is having their own teams of builders to work for them, or being a builder themselves. You would be very lucky if you get anywhere near this return

AlexMac

maydin said:

So auctions means not necessarily bargains

That's what lots of people above have said! Historically, some people have preferred to buy a do-er upper than a finished project, even if there's no saving on the end result once you count refurb costs.  

An attraction of an auction purchase is that the sale is fast, (often a 28-day obligation for you and your solicitor to complete) so you avoid the delay or even risk of collapse of the deal if the vendor gets cold feet or fails to find a place to buy and move into. 

But, as other have said, you've got to
- know what you're doing; understand what work you can do yourself, and what other stuff is likely to cost

- have the funding in place; very unwise to assume a conventional lender can do their valuation/survey, agree the loan and get the money to you inside 4 weeks; if they don't, and you miss the deadline, your deposit is lost!

- maybe be prepared to skimp on the usual searches, surveys and inspections which you'd normally comission before committing, as the timing is tight.

- accept you might not make any money at all;
I did really well on an auction purchase once, despite not having liquid cash, but I nearly lost my 10% deposit.  My Bank (who'd previously said I was good for the money) pulled the loan at the last minute subject to me commissioning and paying for a battery of surveys  (I kid you not - a 100% retention pending timber&damp survey, roof survey and trees survey; their valuer was so cautious!).  But I scraped the cash together just in time.  I had also owned and refurbished two Victorian houses before that so I had a clue; you sound less experienced? . 

And I was buying it as my primary residence, so the gain was tax free. I'd have hated having to pay CGT on the profit I made when I sold three years later for twice my original investment.   I'd paid £30+ for a new roof, kitchen, bathroom, heating etc, but by far the biggest uplift came from the fact that local property prices had rocketed by over 15-20% a year; so even if I'd done now work I'd have made money!  That won't happen in the next few years; you'll have seen the pessimistic house price trend forecasts from people like the Nationwide? 

I still keep an eye on the auction catalogues and am often surprised at high guide prices.  I pointed one local house our to my grand daughter recently; £400k+ and it was a wreck.  But as she said, you could buy one like it for £450k done up, so why bother?

So check if you can raise the cash, think about your DIY skills, find a reliable local builder, and look at some viewing days; but don't assume it's easy money despite what Dion, Martel, Tommey and Jaqui say on "Homes under the Hammer"!

youth_leader

I watched Homes under the Hammer today for the first time - how people manage to do so much renovation on such a small budget is a mystery to me.  Last summer I paid a huge amount just to have my floorboards replaced. 

ArbitraryRandom

youth_leader said:

I watched Homes under the Hammer today for the first time - how people manage to do so much renovation on such a small budget is a mystery to me.  Last summer I paid a huge amount just to have my floorboards replaced. 

You paid someone... so paid for their time/labour and VAT (plus markup) on the materials. 

That's kind of the point we're trying to make to the OP - the kind of person who does this and makes a profit is someone who doesn't have those costs (they have trade discount and do the work themselves/know people in the trades they can't do themselves). 

All in they can pay maybe a quarter of what you do for the same end result. 

FreeBear

ArbitraryRandom said:

youth_leader said:

I watched Homes under the Hammer today for the first time - how people manage to do so much renovation on such a small budget is a mystery to me.  Last summer I paid a huge amount just to have my floorboards replaced. 

You paid someone... so paid for their time/labour and VAT (plus markup) on the materials. 

That's kind of the point we're trying to make to the OP - the kind of person who does this and makes a profit is someone who doesn't have those costs (they have trade discount and do the work themselves/know people in the trades they can't do themselves). 

All in they can pay maybe a quarter of what you do for the same end result. 

House a few doors down from me was bought by a flipper - By all accounts, the new owner is constantly finding all sorts of bodges and questionable (cheap) work.

[Deleted User]

mi-key said:

maydin said:

So auctions means not necessarily bargains

Most developers will operate on a 15-20% gross profit margin, but that is having their own teams of builders to work for them, or being a builder themselves. You would be very lucky if you get anywhere near this return

That seems like a lot. Is it because British houses are brick and generally required to be crap to meet regulations and be mortgageable?

Because in other comparable countries they can sell much better houses for a lot less, implying they are cheaper to build. In places like Japan they have to be earthquake proof too.

Given the big discounts sometimes on offer I think 15% is low. Plus they rip you off forever after with service charges and shared ownership.