Buying a house at auction, anyone done it?

Delmonte

Junior Member
Messages
215
I’m considering buying a house at auction for buy to let (on a mortgages). It will be my second BTL, but never used an auction.

I’m told you pay a 10% cash deposit on hammer fall (not a problem) but then have only 4 weeks to get the rest of the cash, which both my solicitor and mortgage provider say is tight, but not impossible. Of course they’ve can’t guarantee it. I suppose if anything crops up at conveyancing you could bust tHe deadline and lose deposit. The auction house then say you are looking at bridging loans - but I know nothing of these at all.

I realise that it’s not an ideal way to buy but am tempted by potentially bargain price (I’m looking in an area where sales and prices and rents seem to be ‘on fire’.

Anyone done the auction thing with a mortgage can give me any insight?
 

Hawk13

Junior Member
Messages
69
I know a couple of people who have bought from auction but as cash buyers.

I would worry about losing my 10% if solicitors cannot complete searches etc in 4 weeks or the mortgage offer is delayed (or worse declined following a survey).

I recently bought a house with no chain and despite me and vendor pushing solicitors to get it done asap, it took over 5 weeks.

Bridging loans can work out expensive and, as I understand it, you will still need some form of security - which you wouldn't have unless they were willing to go 90% LTV on an auction sale.
 

2b1ask1

Centenary Club
Messages
15,006
Mortgage not an option for buying at auction; auction properties are usually unmortgagable with things like structural problems, buyer beware every time.

If you are set up as a business, talk to your bank, we used to buy property at auction having a business loan secured on other properties, get them, do them up and then secure against them. That was in the 80’s though.
 

Delmonte

Junior Member
Messages
215
I know a couple of people who have bought from auction but as cash buyers.

I would worry about losing my 10% if solicitors cannot complete searches etc in 4 weeks or the mortgage offer is delayed (or worse declined following a survey).

I recently bought a house with no chain and despite me and vendor pushing solicitors to get it done asap, it took over 5 weeks.

Bridging loans can work out expensive and, as I understand it, you will still need some form of security - which you wouldn't have unless they were willing to go 90% LTV on an auction sale.
Well they wouldn’t need to go 90% as I have at least 25% in cash. However I take your point. 5 weeks is very quick never mind 4. I recently had a purchase fall through due to vendor solicitor messing around for 6 months. Mortgage offer expired
 

Delmonte

Junior Member
Messages
215
Mortgage not an option for buying at auction; auction properties are usually unmortgagable with things like structural problems, buyer beware every time.

If you are set up as a business, talk to your bank, we used to buy property at auction having a business loan secured on other properties, get them, do them up and then secure against them. That was in the 80’s though.
I think you’re right, not an option unless full cash. Thanks for confirming what I suspected ☹
 

sionie1

Member
Messages
410
^^^^^^^^^^ this sometimes ^^^^^^^^^^^^^
Lots of auction houses have links to finance companies, a bridging loan is typically 65-75% ltv so you’ll still need the funds for 25% of the value. They then have min terms such as 3 months etc. The other option is to get pre-approved ( Agreement in principle) for a mortgage amount and have thatready to go, but that could be tight and limited to lenders and rates. You can always offer before the auction and complete the more traditional way - I’ve purchased a property that was for auction this way, nothing wrong with it really, but was an ex rental that the tenants had trashed so the vendor just wanted rid. I was looking at 50% deposit on that one. In fact I follow Pugh &co for national auctions and they have a decent % that never make the sales date, sold prior.
https://www.fundingoptions.com/knowledge/auction-finance/ to crunch some numbers.
All I’ll say about auction is do your homework, I bid on an old chapel that needed a new roof, literally the roof was sliding off the wall plates, was out bid but drove past to see what happened to it. The purchaser had spent loads of money on everything apart from the roof so at some point they’ll be in for a HUGE surprise, like an open air bedroom with a non-retractable roof. I knew what I was looking at though.
 

JonW

Member
Messages
2,102
Not bought from an auction, but I have bought a 2nd property with a bridging loan

Depending on how much equity you have in your own home, or how much securable assets you have, you can get the bridging loan in place before you commit to the purchase.

I did this before we exchanged on a house purchase when my mother in law was downsizing, and we secured the bridging loan on my house, which meant she could act as a cash buyer ant have the stress of being in a chain...

Not the cheapest way to do it, but not unreasonably expensive if only for a short period...
 

Ewan

Member
Messages
3,150
Typically auction buyers are cash buyers. But the auctioneers should have completed the standard searches already, so you can ready all the paperwork in advance. Hence the standard time taken between exchange and completion is shortened. 4 weeks is plenty. But be sure you can access the funds, so if you are needing a mortgage, have it agreed in principle beforehand.

Be careful on what you bid though. With the abolition of tax relief on BTL mortgages and the general flattening of the market (and likely dip if Boris forces through a No Deal) I’d only be taking on another BTL if I was getting it VERY cheaply.
 

lifes2short

Member
Messages
1,763
Cash is king at auction, having your finances in place first is imperative, although you can get an AIP from a lender it's still subject to various things including a mortgage valuation, which can still be organised prior to auction date in some cases, as long as the house has a serviceable bathroom, kitchen and structurally sound then mortgages can be arranged, however, bear in mind that if you exchange contracts and don't complete, not only will you lose your deposit but you will also be sued for substantial damages in most cases
 

Phil H

Member
Messages
1,747
I realise that it’s not an ideal way to buy but am tempted by potentially bargain price (I’m looking in an area where sales and prices and rents seem to be ‘on fire’.
A lot of properties are undervalued to attract bidders, so do your own homework and don't take guide prices at face value.
Be wary of bidding wars; if you’re bidding on a ‘bargain’ property where “prices and rents are on fire” you won’t be the only one, and a bargain can become a liability if you overbid.

PH