Bit OT: Buying property at auction?

[Lobster]

Has anyone out there any experience of doing this? I'm possibly interested in a house which is "in need of updating" (estate-agent-speak) and which is being sold at auction soon.

My impression is that must such houses are purchased by builders and property developers, who will give the place a once-over themselves (or maybe won't even do that!) and then they'll maybe bid for it, and will buy if the price is right, paying cash if they do win. If they end up buying a dog which needs underpinning unbeknown to them, then they swallow any extra cost in sorting it out.

In other words, these people pay nothing upfront, in terms of mortgage arrangement fees, structural engineers etc, so if they don't bid, or if they do so and the price goes too high, nothing is lost. Sound about right?

Personally I really don't think I have the cojones to buy a place under those limitationst (even if I could find the upfront cash). However, I also can't imagine paying out substantial fees to various bods in advance of the auction, on the offchance that the price doesn't go too high for me to win it. Does this mean that I personally should forget all about buying at auction? Would be very interested in hearing other's experience and views.

Thanks David

[meow2222]

You really need some skill input to assess the place one way or another. If you cant do it yourself & cant pay a surveyor, then if you've got one cajone it can be someone who isnt a surveyor that can assess it. It means relying on what they say, and no comeback, so not a popular option.

If you cant do any of the 3 options, I dont see how you can buy from auction. Auctions are unsuitable for most buyers. Really you need to be able to go over it yourself and know what needs doing. Or maybe have someone skilled and genuinely on your side rather than hired help.

NT

[tim.....]

I think you'll be suprised how many 'developers' don't have cash in the bank to make purchases with. They will be looking for a loan just like the 'normal' people bidding.

If you do see a house in an auction that is un-mortgagable for a fixable reason, it will go for a lower price because even many of the developers won't be able to bid.

Nope, they put it straight back in the next auction being prepared to take a small hit today rather than an unknown one tomorrow.

Apart from the mortgage bit, yes.

It seems normal for people not to shell out on such expenses. But you will find that (normally) the auctioneer is open in telling bidders about known problems. This will also be apparent from the guide price. A few people get bitten, but not very many provided that they are sensible.

I have noticed that guide prices are pitched at a reasonable amount to pay for making a good profit as a developer. 10-15% over guide is still normally sufficiently profitable. 20-25% is about break even. Obviously there are exceptions to these figures (in both directions).

However, all of the houses that I have looked to bid on have sold for more than that, one went for 100% over guide. Normally developers will not go this high, this is the action of a (well actually two) private buyer(s) being prepared to pay whatever it takes. The exception to this is when a developer thinks that they can knock down the property and hope to get PP to put more than one property back. They do this as a risk, sometime they will win, and sometimes not.

HTH

tim

[Mark]

I've bought property at auction. I would suggest you visit a few properties prior to auction. Assess what they would retail at fully scrubbed up, by checking out what comparable properties have been selling for in the area. Attend the auction and learn. First thing to learn is that the guide price is usually nonsense. Properties come up at auction for various reasons for example probate. Charities sell properties by auction so that they can be seen to be getting the best price. I've not used a surveyor. Didn't want to spend out on a survey with only a slight chance of success. However if the property has good brickwork, not hidden under render, I can see that myself. Likewise if the kitchen and bathroom arn't very attractive I don't care. An immaculate but dated kitchen needs replacing just as much as one which has been kicked to death and is filthy.

You need to assess final retail price and cost of doing it up (be realistic or over cost). That should guide you to your top bid. You need your finances sorted. They don't like defaulters! I've found that property developers arn't the competition. It's more like little old ladies who want to move near to their daughters and cost isn't the issue.

It is very nerve racking. When I'm successful, I'm thinking what's wrong with it? Why doesn't anyone else want to bid more and so on. I've bought 3 this way in the last 10 years and had no real problems.

mark

[Dave Plowman (News)]

The majority of houses in a decent area that are sold at auction are so because they have a serious problem. Or several. So unless you have a good eye for such problems best to employ a pro who has. I'd use a structural engineer.

[Rick]

I have been unsucessfull twice :-(

You have identified the major issues, in that you have to invest some time, effort and possibly cash, to make sure your plans for the place are sensible. You may then not win. You may be able to buy in some cheep advise, by doing a deal with a knowledgeable person, and pay cash in hand, for un-recorded informal advise. This then moves the issue to how much you trust the person to do a good job.

You also need to have easy access to enough cash to buy the place, if you win.

Most of all, you need not bid above your ceiling price.

When I did it, I knew how much cash I had avaiable, did lots of research up-front. The first thing I wendt for was a field, guide price 10K, my celing

20.5K, actuall sale - 120K. The second place, an old church, I bid over my celing, but a rich guy wanted it for his daughter, who did not want it. He won, and then had to sell on at a loss - we did not then buy it.

The prices all depend on who is there on the day. If you want to buy like this, goto some auctions, see what happens.

Rick

[Mary Fisher]

Why?

What about big old ladies?

Except for wracked nerves :-)

Mary

[tim.....]

I presume that he means, "if you are buying to sell on" which is what most people buying at auctions do, but not, I think, what the OP wants.

tim

[Mark]

Well you can keep the kitchen as found if you like.

I'll deal with them privately ;-)

It's good to have a bit of excitement now and again.

mark

[Mary Fisher]

Hm. That's not the same as " ... needs ... "

I can wait :-)

C'mon then! :-)

Mary

[Ed Sirett]

In this game, the state of the kitchen and bathroom is the most important issue. The rest of the place (gas, plumbing, heating, wiring, decor, structure etc.) only has to be good enough not to raise anyone's (surveyors, lenders and buyers) hackles.

A dated kitchen however functional and satisfactory will not make a living for the renovator.

[fullflow plumbing]

Many auctioneers clients will remove a property from auction if they get a reasonable offer for it that they are happy with - gauging that price is the difficult bit

Richard

[Mary Fisher]

I'm sure I'm not unique and that there are others who want function rather than looks.

Mary

[Edward W. Thompson]

I'm sure you are right but they seem to be in the minority. Looks rule!