Buying at Auction - Mortgage Advice Needed

liverpoolguy

Hello everyone,

I am really hoping someone on here can help give me advice. I have seen a house which is going up for auction on the 5th June and I want to put in a bid for the property. I'm willing to bid 135k and I have read through all the stuff on the auction website (Pugh) and from what I understand...

I need to pay 10% deposit on the day if I win the auction.

The sale must complete within 14 days of the auction or I lose the house and the 10% deposit.

At present I have NOT got a mortgage agreed in principle, although I have met with a mortgage advisor who has said I will be able to get a mortgage for this amount. In order to make sure I am in a position to bid for this house what do I need to do?

I'm assuming I would need to have a mortgage agreed in principle? Would I get a mortgage company to agree that they will do a mortgage specifically on this house? Would this mean I would need to pay a valuation fee before I have even managed to win the house at auction?

Also I was wanting to get a 95% mortgage. Will this still be possible given that I need to pay a 10% deposit to the auctioneers on the day?

Finally I am really concerned that something could go wrong. Like what happens if there is a delay in terms of the mortgage or the legal stuff. Are the auctioneers likely to just take my 10% deposit and leave me without a house? Does this happen often?

PasturesNew

(unqualified opinion): Buying at auction is not for the faint-hearted - and with a stipulation of completing within 14 days that would be enough to put most people off. 14 days is a VERY tight timescale. You'd really be hard pushed to achieve it.

If you don't complete on time, yes, they keep your 10%

There are very few (any?) 95% mortgages about these days.

Overall, my opinion would be that even if you did manage to get a mortgage in principle (unlikely), then the 14 days would finish you off.

Once you've applied for a mortgage, the mortgage company would need to send a valuer out to value it. That can often take 2-4 weeks alone, so to pursue this you'd need to know the tiniest of details about the mortgage application process and find somebody that could push your mortgage through in this exceedingly short timescale. Same with a solicitor, find one who is FULLY on board with your unmovable completion date.

Each lender has X days that the solicitor has to apply for the funds before the completion date. So there could be a conflict between getting the survey OK/mortgage offer and the solicitor's ability to request the funds in time.

What most might do instead is to get the money from somewhere else, then get a mortgage on the house once they own it.

So, beg, borrow, steal, bridge the finance to ensure you can complete in 14 days, then mortgage it through a proper company. But, again, IF you can mortgage at the level you want.

As I said: the above is my completely unqualified, personal and inexperienced opinion.

Drea

I work for a property auction company so can maybe help you a bit here. We also take a 10% deposit on the day of the auction. Although usually we give 28 days for the sale to complete (but sometimes the seller wants it done in the 14 days).

I would advise you do try to get someone to agree to giving you the mortgage before you bid, obviously you don't want to lose out on your £13.5k!

If there is a delay in you getting a hold of the money, it isn't actually up to the auctioneer to give you more time, it would be the actual seller that would agree to give more time or not and more often than not they will, because at the end of the day, if they were to have to put the property back up for auction it's costing them more because they have to pay their fee again so they generally want the transaction to go through! But don't rely on that, there are a lot of businesses who auction property and they won't care so much about losing the £400 that it costs to pop a property into auction.

It doesn't happen often that people lose the deposit, but that's because most people have prepared everything before the auction, but yes, I have come across a few cases that this has happened to. Annoying for me because the we get blamed for it! People forget that we are working for the seller, everything is pretty much up to them.

Don't know if any of that was what you needed to know, but just thought I would try clear some things up a bit.

silvercar

IMHO you need your formal mortgage offer in place before the date of the auction. You also need a solicitor geared up to be ready to complete within 14 days of the auction, this could mean starting the legal work before the auction. If the cost of this means the risk that you won't get the property is too great, then auction buying is not for you.

For your 95% mortgage, you will need to borrow from elsewhere to pay the 10% deposit at auction and can then repay your borrowing when your mortgage comes through.

liverpoolguy

The 10% deposit isn't a problem but I am a little concerned about the solicitors thing. What do I actually need to get a solicitor to do PRIOR to the auction? I don't want to be shelling out money to solicitors for a property I might not even win.

Drea

Yes, you absolutely need a solicitor set up. After the auction your solicitor needs to set up auction contracts, deal with the sellers solicitors, etc.

liverpoolguy

What I meant was will I need to pay any solicitors fees prior to me winning the auction or can I just consult a solicitor now and have them ready so that if I win the property the solicitor can then start the process?

Drea

Just have one ready

nrsql

I think a lot of mortgage companies are taking longer to agree the mortgage as they are being more deligent in checking afforability. I'm sure mortgage brokers on the site will jump in with an opinion on that.

Have you asked your mortgage advisor? Is he a broker? He should have a company in mind and know how long they take and how well you fit in with their criteria.
I doubt if you coukld get a guarantee from them but you might be able to get an estimate of the time it would take.

I doubt if you would be able to do it in the 14 days without putting a lot of pressure on the solicitor and mortgage company.

Jonbvn

The consensus seems to be that buying at auction with a mortgage is extremely difficult, if not impossible.

Given this, can the BBC stop broadcasting Homes under the Hammer?

Mutton_Geoff

Given this, can the BBC stop broadcasting Homes under the Hammer?

No, I like a bit of morning PP with my cornflakes! What they should do is run a programme about Ms Beenys' own projects so we can see just how good she really is.