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Buying At Auction?

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I'm wondering about the process of buying at auction because there seems to be more and more auction property showing up and recently learned that, yes, auction property quite a lot less than shop window prices in many cases.

What I wanted to know is how mortgages work at auction. I know you will typically pay 10% straight away then you usually complete within a month. I also know you should have your mortgage in principle.

BUT I've also heard that banks are often now valuing properties lower than the sale agreed price, leading to deals falling apart.

Could this well happen on an auction property and you just lose your deposit? Seems like a big risk for anyone other than a cash buyer.

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I'm wondering about the process of buying at auction because there seems to be more and more auction property showing up and recently learned that, yes, auction property quite a lot less than shop window prices in many cases.

What I wanted to know is how mortgages work at auction. I know you will typically pay 10% straight away then you usually complete within a month. I also know you should have your mortgage in principle.

BUT I've also heard that banks are often now valuing properties lower than the sale agreed price, leading to deals falling apart.

Could this well happen on an auction property and you just lose your deposit? Seems like a big risk for anyone other than a cash buyer.

You have to get your mortgage arranged beforehand. Obviously you lose the set up fees if you don't get the property. Sometimes they don't even make it to market.

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I'm wondering about the process of buying at auction because there seems to be more and more auction property showing up and recently learned that, yes, auction property quite a lot less than shop window prices in many cases.

What I wanted to know is how mortgages work at auction. I know you will typically pay 10% straight away then you usually complete within a month. I also know you should have your mortgage in principle.

BUT I've also heard that banks are often now valuing properties lower than the sale agreed price, leading to deals falling apart.

Could this well happen on an auction property and you just lose your deposit? Seems like a big risk for anyone other than a cash buyer.

To buy at auction you need 100% cash or bridging finance. You cannot remortgage a property until you have owned it for 6 months.

This is what the BMV guys do, purchase with 30% discount of open market valuation. You then take out 100% bridging finance of the purchase price(+30% of Injin deposit), with all fees rolled up into the deal. 6 months later you remortgage off the bridge onto a btl mortgage or flip to a punter. This is also called a no money down deal and if you got your sums right you get a big fat cheque in your hand at the end.

Down side you got your sums wrong and paid to much, market slides over 6 months and not enough equity to jump to BTL, you get declined for a mortgage because your a twit. You cant sell because the market is dead. The refurb takes longer than you thought, during the refurb you uncover something that cost you money to fix.

Back in the day of B&B and Mortgage Express you could do a day 1 remortgage, release your 15% deposit and be back down the auction house the next day to rinse and repeat and look at the mess the got us in.

Now then, that will be £2,500 for a weekend seminar on how to be a property investor, if you could pay the lady on the left as you leave that would be great. You can also purchase one of my many sort after books on how I became a bmv gazzillionaire.

We also currently have a whole host of 1 and 2 bed flats where we manged to negotiate a 15% discount off the purchase price from the builder( who also happens to be my brother in law). See me later and I will give you my personal mobile number, but dont tell anyone else.

Sorry got a bit carried away the the first paragraph should cover what you need to know. :D

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I tend to disagree on prices at auction, they seem to be higher i think. I have only looked at houses that need lots of work, maybe there is lots of compition in this area. I have even bought a house from an agent(sealed bids), flipped it at auction after deciding not to do the work. Should'nt it have been the other way round.

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To buy at auction you need 100% cash or bridging finance.

This is not correct.

It is quite common for people to bid for an auction property with the intention of paying for it with a normal mortgage.

Of course, you have to be sure that the mortgage company are happy with the house at a specified value and will be able to meet the required completion timetable. It is not unknown for people to fail to do this, lose the purchase and have to compensate the seller.

But it's most definately not, theoretically impossible

tim

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Now then, that will be £2,500 for a weekend seminar on how to be a property investor, if you could pay the lady on the left as you leave that would be great. You can also purchase one of my many sort after books on how I became a bmv gazzillionaire.

We also currently have a whole host of 1 and 2 bed flats where we manged to negotiate a 15% discount off the purchase price from the builder( who also happens to be my brother in law). See me later and I will give you my personal mobile number, but dont tell anyone else.

Sorry got a bit carried away the the first paragraph should cover what you need to know. :D

:lol:

Ajay, is that you ?

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This is not correct.

It is quite common for people to bid for an auction property with the intention of paying for it with a normal mortgage.

Of course, you have to be sure that the mortgage company are happy with the house at a specified value and will be able to meet the required completion timetable. It is not unknown for people to fail to do this, lose the purchase and have to compensate the seller.

But it's most definately not, theoretically impossible

tim

Ok you can do it with a mortgage, but if you where one of my clients I would strongly advise against it.

You also need to be sure the lender can get the offer out in 28 days, if there is any delay you are going to be right in the proverbial

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If you see a property that you like on an auction website, it is worth making an offer ahead of the auction date. In the current environment, sellers know that a lot of properties are not selling even at auction so will prefer the sure thing. If your offer is accepted, you will have to pay the 10% deposit before the auction date to have it taken out with completion about a month after (remember that a quick sale is one of the reasons that sellers choose to use auctions).

Don't bother offering below the guide price if you are serious about buying the place, especially if the guide price looks suspiciously low already (auctioneers sometimes do this to drum up interest).

You will lose that 10% deposit if you pull out (barring a couple of exceptional circumstances) - the bid is to buy - so you need to have looked around the place and be comfortable that you have the cash to be able to remedy any problems that you find. For this reason, I personally would only buy for cash. If you do have to mortgage, I would look at having cash reserves of not less than 25% of the purchase price to allow for slippage in mortgage valuation (if you've done your homework you'll know what similar properties in the area have sold for recently) plus remedial works if needed.

Before you even think about looking at the property, you should already have 1) a good local solicitor (you are working against the clock so shaving a day by driving documents around can matter), 2) a idea of what you are conservatively mortgageable for (speak to your bank or an advisor beforehand).

Hope this helps.

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I honestly think a good relationship with a decent EA will help get a comparable, or even better price, than at auction. Worked for me once back in the day.

Once the local builders have had their pick of the repos and fixer uppers, (subject to the usual backhandery) there will be enough other desperate sellers about and you can proceed with your purchase in the normal way.

Dont forget wrecks and such are hard to get finance on, even moreso now i would imagine.

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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