Approaching the Owner of a 'Fallow' House

Section62

BlueVeranda said:

FreeBear said:

BlueVeranda said:

Does the similar house selling by auction also tick your boxes? Because if it does, and you suspect it may not get much interest at auction, you could go along and put a bid in yourself instead of waiting to see what the outcome is. 

No, no, and no.

Do not encourage the use of dodgy selling practices. You would end up being on the hook for fees even if the sale fell through (although some exceptions may apply).

Ok, I'm not a fan of auctions myself, but it seemed to be slightly more proactive given that the similar house is at least known to be for sale.

The key point here was that it is the 'modern method of auction', not a traditional auction.

But as the OP is a FTB they should really approach any kind of auction with a great deal of caution.

I do agree with your wider point though that it would be better for them to spend time and money on looking at properties that are known to be for sale, rather than one which sounds fairly unlikely to be marketed in the near future (and has 'baggage').

Herzlos

FreeBear said:

BlueVeranda said:

Does the similar house selling by auction also tick your boxes? Because if it does, and you suspect it may not get much interest at auction, you could go along and put a bid in yourself instead of waiting to see what the outcome is. 

No, no, and no.

Do not encourage the use of dodgy selling practices. You would end up being on the hook for fees even if the sale fell through (although some exceptions may apply).

But presumably with an auction of 1, you're going to get it at the rock bottom price.
If you approach the seller directly then they may want significantly more?

eddddy

RHemmings said:

There is a house selling by 'modern method of auction' nearby. A like and similar house. My experience of my city is that it is very rare for houses selling by 'modern method of auction' to get even one bid.

I'm going to wait until the auction has finished, and see if it gets any bids. Then, I'm going to put an envelope through the front door addressed to 'The Owner' in hand-writing, and have a very polite letter asking if they are interested in selling the property. 

If you mean the auction property - there would be some complexities with doing that.

Firstly, you should probably say in your letter to the owner/seller something like:

"I am interested buying in your property, but I do not want to deal with the auctioneer / estate agent, because I am not prepared to pay any buyer's fees to them"



It's then up to the owner/seller to read their contract with the auction company, and decide what they want to do.

The owner's/seller's contract with the auction company probably says the following...

• The auction company typically have Sole Selling Rights for the property for 8 or 10 or 12 weeks. If you "introduce" yourself during that period - there are implications for the seller, as below...

• The contract might say that the seller must refer you to the auctioneer / estate agent during that period. 

• The contract will definitely say that if the seller sells to anybody introduced during that period who doesn't pay the buyer's fee, the seller must pay the full fee to the auctioneer instead (typically a minimum of £6k). Typically, the seller has to pay on exchange of contracts.

If that's the case - maybe you'd want to persuade the seller not to refer you to the auctioneer, but don't suggest that the seller doesn't pay fees to the auctioneer that are due. (That would be suggesting that the seller commits fraud.)


Or if you wait until the Sole Selling Rights period has ended - those complexities go away. (But you have the challenge of finding out when that period ends.)

But if you're planning to wait until the Sole Selling Rights period has ended - in the meantime, you mustn't do anything that could be considered an "introduction". So don't contact the auctioneer, don't contact the seller, and definitely don't view the property.

RHemmings

Just in case there is confusion, I'm talking about two houses in the same street. One is the 'fallow' house. The other is the house that is up for auction. I wouldn't be approaching the owner of the auction house directly. 

It's not guaranteed that there will be an auction of 1. And, of course, there may be 'bids from the wall'.  

RHemmings

eddddy said:

There would be some complexities with doing that.

Firstly, you should probably say in your letter to the owner/seller something like:

"I am interested buying in your property, but I do not want to deal with the auctioneer / estate agent, because I am not prepared to pay any buyer's fees to them"



It's then up to the owner/seller to read their contract with the auction company, and decide what they want to do.

The owner's/seller's contract with the auction company probably says the following...

• The auction company typically have Sole Selling Rights for the property for 8 or 10 or 12 weeks. If you "introduce" yourself during that period - there are implications for the seller, as below...

• The contract might say that the seller must refer you to the auctioneer / estate agent during that period. 

• The contract will definitely say that if the seller sells to anybody introduced during that period who doesn't pay the buyer's fee, the seller must pay the full fee to the auctioneer instead (typically a minimum of £6k). Typically, the seller has to pay on exchange of contracts.

If that's the case - you'd maybe want to persuade the seller not to refer to the auctioneer, but don't suggest that the seller doesn't pay fees to the auctioneer that are due. (That would be suggesting that the seller commits fraud.)


Or if you wait until the Sole Selling Rights period has ended - those complexities go away. (But you have the challenge of finding out when that period ends.)

But if you're planning to wait until the Sole Selling Rights period has ended - in the meantime, you mustn't do anything that could be considered an "introduction". So don't contact the auctioneer, don't contact the seller, and definitely don't view the property.

If I did this for the auction house, I would do it through the online auction website. And, I would pay the fees. 

I would explain in my offer (there is a box for doing so) that my budget is £XXX,XXX minus reservation and other fees of £Y,YYY, and hence my offer to you is £ZZZ,ZZZ. 

The probability of acceptance is probably quite low. But, if you don't ask, you don't get. 

eddddy

RHemmings said:

If I did this for the auction house, I would do it through the online auction website. And, I would pay the fees. 

I would explain in my offer (there is a box for doing so) that my budget is £XXX,XXX minus reservation and other fees of £Y,YYY, and hence my offer to you is £ZZZ,ZZZ. 

The probability of acceptance is probably quite low. But, if you don't ask, you don't get. 

That's a risky thing to do.

The £6k+ fee is a reservation fee - for reserving the house for a period of 4 or 8 or 12 weeks.

If you win the auction and pay your £6k+ reservation fee, there is no guarantee that you will end up buying the house. If you don't buy the house, you don't get the £6k+ reservation fee back.

 

RHemmings

eddddy said:

That's a risky thing to do.

The £6k+ fee is a reservation fee - for reserving the house for a period of 4 or 8 or 12 weeks.

There is no guarantee that you will end up buying the house. If you don't buy the house, you don't get the £6k+ reservation fee back.

 

Yes. I'm very aware of that. And thinking about it very carefully. I am looking into the process of making offers and the T&Cs. What I would like to do is see if I can have a property survey done between the time when the offer is accepted by the sellers (if it is) and when I am legally committed to pay the fee. 

eddddy

... plus there's also the lesser issue that the £6k+ reservation fee isn't part of the purchase price.

So, for example, if you're buying with a 90% mortgage - you'll need enough cash to cover the 10% deposit as well as the £6k+ reservation fee (and other costs).


This approach potentially gets around all those problems (if the seller agrees)...

eddddy said:

Firstly, you should probably say in your letter to the owner/seller something like:

"I am interested buying in your property, but I do not want to deal with the auctioneer / estate agent, because I am not prepared to pay any buyer's fees to them"

eddddy

RHemmings said:

And thinking about it very carefully. I am looking into the process of making offers and the T&Cs. What I would like to do is see if I can have a property survey done between the time when the offer is accepted by the sellers (if it is) and when I am legally committed to pay the fee. 

The T&Cs will almost certainly say that the reservation fee is payable immediately that an offer is accepted.

Obviously, there are other reasons that the sale might not happen...

• Your mortgage lender won't lend on the property (or they find an issue on the financial side)
• Your solicitor finds a legal issue
• You find out something that changes your mind about buying the property
• The seller decides they don't want to sell the property after all - so becomes obstructive

RHemmings

I won't be using a mortgage, so don't have to worry about mortgages. The same risks that would put a mortgage lender off may remain risks for me of course. 

Yes, legal issues are a risk.

I'm fairly familiar with the type of property, as I lived in a house just around the corner in the same estate that is a very similar building. And, I know the area. It's possible that I will find out something that changes my mind, but 

A seller deciding not to proceed is a risk in any property purchase. 

These are all things that I've thought about (except for the mortgage issues.) 

I'll check what the T&Cs say.