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Buying A House At Auction

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Can someone point me in the direction of some information about buying a house at auction? And is this something full of pitfalls, that only experienced housebuyers should attempt, not FTBers like us? We are looking for a 4-bed place or a 3-bed one to extend. Our income has tripled in the last 2 years - previously we had not a hope of getting even a 1-bed flat otherwise we would have bought years ago.

We would really like to move within a year (in slightly unsuitable rented place with a toddler) and it seems that auctions are where the bargains are to be had at the moment, whereas we would need to wait much longer for the general housing market to catch up (or rather down...) I think?

How do they work? Do houses come up for auction with surveys already done? Or do you have to pay out for one before you bid and then risk losing that money? Are they really for investors and not people just looking for a home for the next 20 years?

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We would really like to move within a year (in slightly unsuitable rented place with a toddler)

Get on the council waiting list. If you're not suitably housed you're more likely to get a council place. Be cheaper than private rental giving you more savings for a property.

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Get on the council waiting list. If you're not suitably housed you're more likely to get a council place. Be cheaper than private rental giving you more savings for a property.

Thanks, I will look into it. I doubt that they'll consider us unsuitably housed though. Perhaps I should have said "annoyingly housed" - e.g. deathtrap garden that has to be out of bounds to said toddler, wrong area for us now that my parents are getting old and need more help so we ought to be closer to them, etc.

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When last we looked into doing this (10 years ago), you had to have a 10% deposit to pay on the actual day, and you also had to pay the balance within 28 days, which probably means that unless you are a cash buyer, you would have to have the mortgage offer in place.

The problem with auctions, though is that they are definitely "caveat emptor". You have to go and visit the property, and it is often a good idea to get a survey anyway, since a lot of properties at auction have structural problems and can't be sold in the normal way.

So it is often a costly affair, and there is a danger that having paid for the survey, you are then emotionally involved in buying that property, since you don't want to throw away the money you have already spent, and that could mean paying over the odds.

I would also imagine that there are mainly flats out there at the moment, not much in the way of houses, since they can more easily be sold in the normal way.

If you have the time, it might be an idea to get some brochures from auctioneers, have a look at a few properties and turn up on the day with no money, so you aren't tempted to buy (there is no backing out as I believe it is a legal contract when you go to an auction).

That way you can get a "feel" for the market and how particular properties are selling.

Then you can tell us. :)

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Get on the council waiting list. If you're not suitably housed you're more likely to get a council place. Be cheaper than private rental giving you more savings for a property.

He'd need to join the back of the queue, behind the Somalians and other assorted peoples from coconut kicking countries :lol:

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Guest portwinestain

Last time I checked you had to pay a deposit on the day and then pay in full, say a month later or you would lose your money. Check the internet for auction sites.

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He'd need to join the back of the queue

Wicky, I am a laydee. ;) I won't quote the rest of your sentence...

Thanks bobthe~ and bear-lite - that is my main worry: that I would probably have to put down money with a significant chance of losing it. I suppose the really logical thing to do would be to rent somewhere else. Maybe it's pathetic but having rented various places for 10 years (and moved 3 times in the last 5 years - twice due to the landlord selling up, and once because he wanted to come back and live there) now I am so, so, so sick of relying on landlords and just can't bear the thought of moving again only to be beholden to someone else.

Have just found a book on auctions on Amazon so will do some more reading.

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This was written on here by someone, but I can't remember who. An appropriate search might find the whole thread,

Peter.

I bought our present home at auction in 1997. It was in a nice area in Sheffield, but had been repossessed by the lender and had been for sale with EAs for a good 18 months or so apparently.

It was classic auction stuff - tons of work needing doing, poor state of repair, filthy, overgrown. Apparently there had been a couple of sales agreed, but all had fallen through, so the owner (lender) just wanted rid of the property.

We had seen it when it was advertised as 'for sale' in the EA, but by the time we'd viewed the owner had decided to put it to auction instead of going through yet another failed sale.

It had been priced at around 75-80% of an equivalent 'tidy' house (that sold 2 doors down a few months earlier) when in the EA, and had had a lot of interest [good area, nice road, best school catchment. Always a draw].

We had been willing to pay that amount for the house, and could just have managed it on the max 2.5x joint income.

Having been told that it was withdrawn from sale and put into auction, we were despondent. I did the research on how to buy, and the risks involved.

Basically - the hammer price is the price you pay. You must complete within 28 days (check) - and therefore you need to have much in place before the auction itself:

-searches are done by the seller, and your lawyer can request a copy. The successful bidder pays the cost of the searches

-you will need to put down 10% of the hammer price on the day of auction. This means you will need to arrange for a significant bankers' draft (or can pay by Switch card if sufficient funds. Check this!)

-you will need to have any mortgage agreed in advance, including the survey.

-you will have to have appointed a solicitor to get some of the basics underway (such as reviewing the searches and leasehold stuff)

There are a few costs that you are therefore risking, if you go for the property but are unsuccessful:

-mortgage valuation /survey fee

-some lawyer costs

-possibly mortgage application fee

You can minimise them by choosing a mortgage co with no app fee; and get the basic valuation survey.

You are still gambling a minimum of £300 -odd though.

Things to watch out for

- You are risking a min of £300 (see above) even if unsuccessful

- You will have to complete quickly - and if you need to sell your house then you'll inevitably have a period of 'bridging' before you complete the sale of your own house. If you have sold and are renting already, then this will not be a problem (depending on notice period of tenancy)

- You will need instant access to funds totalling 10% of sale price

- You will be bidding against a mixture of developers, builders, 'portfolio growers' and similar people to yourself. Some of these will be in the auction room, some will have submitted a written max bid; others may be bidding by telephone through the auctioneer staff.

- the house will be advertised in the sale catalogue with a 'guide price'. This is often way below market value in an attempt to entice interest. [Guide price on our house was 75% of the EA previous asking price]. Trouble is that your mortgage valuation will never come out higher than the asking price / guide price, so if the winning bid is significantly higher than the guide price, then you'll have to find the excess from your deposit / existing equity [if for argument's sake the guide price is £150k and sells for £200k (which may well be a realistic price compared to local market), then your mortgage valuation will lend to the max of £150k and you'll have to find the remaining £50k yourself

- You'll need to prove ID before getting an auction 'number' that enables you to bid

Top tips

- Attend the auction if at all possible

- Bring someone else along for moral support if you can

- Sit near the back, so you can see the others in the room

- Don't worry about 'accidentally' making a bid: the auctioneer will confirm any new bidders are actually bidding

- Check peoples' shoes! A strange tip. Lots of people go to these auctions as speculators / developers, and dress down deliberately. However they always have decent shoes on, which gives them away. Real builders will have proper workboots.

- Dress down. Do not draw attention to yourself.

- You will be bidding against developers / builders. Whilst they can do the work cheaper than you (if you can't do any of the work on the house yourself), they'll also have to factor in a profit margin as well as the financing cost (they'll have to have the purchase costs tied up in the house for at least 6 months before they can realise their future gain on the house).

Eventually they will stop bidding when the price won't net them a quick profit; but will still be a sound investment for you if you are looking to do up the house to your taste and not just to re-sell for a quick profit.

- Watch the room to see who is bidding on other properties (assuming yours isn't first on the list). You will start to see which people are there speculating on several (they'll be speculators / developers / builders with cash available), and which people are there for one specific house on which they've set their heart (they'll be the well-dressed, worried-looking couples).

- Watch for bidding around the stamp duty thresholds. Bids will tail off when crossing the different bands (£125k, £250k, £500k) due to the sharp rise in duty payable.

- Don't get involved in the early bidding. The auctioneer will usually start the bidding low to generate interest from speculators, and will play these against the 'sealed bids' they've already received and against any telephone bids. Bide your time and wait until their bidding starts to stall

- Make your bid clear to the auctioneer. Wave your hand / auction number at them. They are professionals and should spot your interest! Don't wait until the hammer is about to fall though...

- Don't get carried away. Know your limit. Keep to a limit by having a max deposit available (10% of the max you are willing to pay) - if the bidding then goes above your limit you won't be tempted because you wouldn't be able to put down the full 10%

- Keep calm. DO NOT DRINK.

- Go to the toilet well in advance of your lot. You wouldn't want to miss the auction because you were caught short?!

- Arrive in plenty of time. Sounds obvious. When I went to collect my keys from the EA, they told me that another person who had set their heart on our house, had got caught up in a traffic jam and missed the auction. Fate smiled on me that day!

Whilst the auction itself is a bit of a roller-coaster of emotions, and the price uncertain until the hammer falls, you will have the certainty that the house is definitely yours. Hopefully you'll get it at a good price. Whilst it may well need a fair bit of work doing, you will be able to do it to your taste whilst adding value to the property (rather than buying a 'done' house then having to change to your tastes but not adding value).

Good luck. We eventually got our house for 80% of the original EA price we were willing to pay. And hope that you aren't up against other people like yourself to ramp up the final price!

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