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House buying via online auction?


henry d
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Has anyone ever done this? Pitfalls? 

I have seen a property, it's the second we have seen via this method but we lost out before bidding the first time, and it is in good nick, needs a bit of re-jigging but very suitable. The auction process is online and has an expiration date, you can place a maximum bid and there is a starting level and may have a reserve price. No bid can be withdrawn and the highest stands until 2 hrs after the closing time, unless a higher bid comes in within ten minutes of closing when the clock will reset for ten minutes, to allow for another higher bid. This is the bit I find odd as they also say that you should place your highest bid and the algorithm will proxy bid for you. To me that sounds great news for the seller as it could ramp up a bidding war quickly. Would it not be better to sit and bid up to your max yourself?

I will, if successful have to pay a buyer's premium of 2.4%, their legal costs (£500) and a deposit immediately after the sale ends ( card details and "nominal fee" taken as part of the bidding process and complete in 28 days, as far as I can see that is it.

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I should have thought it is full of pitfalls - but possibly there are some mechanisms in place to mitigate?  For example;

  • In the event that the search reveals problems (say for example past alterations without planning, or legal rights of access across the property, old mining/reclaimned land, no rights in deeds to visit/access services passing through adjacent patch).
  • Survey throws up unforeseen problems, past histories of problems etc., Japanese knotweed and other value affecting matters.
  • The buyers finances fail to agree the purchase following survey
  • Errors are found in the sellers declared particulars
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I can tell you that in this market place, if it’s in an auction then there’s something wrong.

Colleague of mine looked at a gaff near her for her disabled daughter - looked lovely in the photos and needed a chunk of money to modernise (rewire, instal central heating and probably roof off job) but that alone would be a one man band builders dream and would have flown out of an estate agents window. Drilled down into the legal pack and there it was, vendor had carved off the garden as a separate plot and the title was defective so forget getting a high street mortgage.

In a low interest rates frothing housing market (which is where we are now) anything in an auction is likely to be a dog. I know what I’m doing and I wouldn’t bother unless it was a commercial owner wholesale dumping a portfolio / section of a portfolio.

Incidentally, I would add that most developers dump problems in auctions ‘sold as seen’ and that’s because there’s always an idiot at the auction and who will buy it.

And that reminds me of when I saw a developer dump a ‘building plot’ in an auction but with no means of access - yes it was land locked, and yes, someone bought it and paid too much money for it as well thinking they had been clever and spotted a bargain. Oh and the follow up to that is that where people buy pups, you’ll see the property being churned out again in another auction some months later or back for sale.

Edited by Mungler
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22 minutes ago, Mungler said:

I can tell you that in this market place, if it’s in an auction then there’s something wrong.

Colleague of mine looked at a gaff near her for her disabled daughter - looked lovely in the photos and needed a chunk of money to modernise (rewire, instal central heating and probably roof off job) but that alone would be a one man band builders dream and would have flown out of an estate agents window. Drilled down into the legal pack and there it was, vendor had carved off the garden as a separate plot and the title was defective so forget getting a high street mortgage.

In a low interest rates frothing housing market (which is where we are now) anything in an auction is likely to be a dog. I know what I’m doing and I wouldn’t bother unless it was a commercial owner wholesale dumping a portfolio / section of a portfolio.

Incidentally, I would add that most developers dump problems in auctions ‘sold as seen’ and that’s because there’s always an idiot at the auction and who will buy it.

And that reminds me of when I saw a developer dump a ‘building plot’ in an auction but with no means of access - yes it was land locked, and yes, someone bought it and paid too much money for it as well thinking they had been clever and spotted a bargain. Oh and the follow up to that is that where people buy pups, you’ll see the property being churned out again in another auction some months later or back for sale.

Not necessarily. There are certain circumstances where auction is required to prove best price has been achieved such as receiverships and trust sales. It is always a case of buyer beware, do your inspections, surveys and read the legal pack or face the consequences. Online sales are no different to traditional auctions in that respect.

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Posted (edited)

Legal pack read, but still passing past the solicitor, previous owner passed away from MND and there are three sellers (family), two people I know separately knew her and nothing untoward, had a quick look last week and have dropped by three times to check the area and spoken to three neighbours and still no warning lights. The starting price is £10k over a similar property that is across the street that sold last year so my assumption is that as she died in November the estate has been sorted legally and her surviving sons/daughters want a quick sale, it's not been on the market.

We are cash buyers so no mortgage necessary

Edited by henry d
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1 hour ago, henry d said:

No bid can be withdrawn and the highest stands until 2 hrs after the closing time, unless a higher bid comes in within ten minutes of closing when the clock will reset for ten minutes, to allow for another higher bid. This is the bit I find odd as they also say that you should place your highest bid and the algorithm will proxy bid for you. To me that sounds great news for the seller as it could ramp up a bidding war quickly. Would it not be better to sit and bid up to your max yourself?

 

Not a house but I've bid on items in an online timed auction which works as you describe. You put your max bid in, say £50. If you are the only bidder you'll become the highest bidder at the starting price. Say £5. If someone else comes along and puts in their highest bid of £25 then you'll still be the highest bidder at £26.

Now if the other person ups their highest bid to say £60 with 5 minutes to go to the end of the auction they will be the highest bidder at £51. The clock resets to 10 mins to enable you to increase your highest bid.

You can bid yourself by keeping increasing your 'highest bid' manually but ensure you have a reliable internet connection.

I don't know if the house auction will work in the same way but I hope that might give some indication of how it'll work.

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As has been said, "why is it in an auction ?".
Online, or not, a residential property in an auction is usually a problem case, mainly sold as seen, no Searches or Surveys.
If not, it would be easier for the owner(s) to give it to an Estate Agent and in todays market it would sell.
If you have some spare cash and can afford to take the hit, then go for it, but if not, don't touch it.

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@Windswept that is how I thought it would work, many thanks.

11 minutes ago, oldypigeonpopper said:

Hello, could you not contact the family and make an offer with a good survey as first priority, 

The auction closes well before I could get a thorough survey done, the legal pack contains most of the information my solicitor should need.

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3 minutes ago, Cranfield said:

As has been said, "why is it in an auction ?".

I am pretty sure it is that the family need cash quickly or they are, like many families, arguing over what to do. There may also be unpaid care bills as she had MND. There are three signatures as the seller so it is not just someone punting it on and they all live 15 miles or more away.

As yet we haven't seen the searches and without them we won't touch it and we will be taking legal advice very seriously, we just wanted others experiences of it.

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I can see why the family may want to auction it off. I've seen a few house clearances over the years and I'm often quite shocked to see what's left behind (family photos for example), many people just want the cash as quick as possible even if it's not as much as they could get if they did a bit of work (such as tidy up the house before it's sold).

Having said that, in some areas house prices are so volatile perhaps and auction is the best thing?

As for buying, I've bought a couple of houses normally, but from the estate of someone who's died. We didn't get any response from the family from any enquiries (such as any historical problems) so you'll not miss out on that if you buy in an auction.

Also many people don't get a full survey done, if you do they may well end up recommending others which is all money you can put towards fixing stuff. It helps if you're fairly good at DIY as you can often spot a fair bit.

I know some councils put some search details online, plus you can look through local online planning applications (many councils will show you a map to search for planning).

The other thing to note is the stamp duty holiday. I would assume the sale will complete after this, so the price may reflect that.

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jesus it could be full of pitfalls...............could have rights of way thro your back garden.........drainage that needs sorting ...the mind boggles

as other folk have said..........if you have time to do survey and searches..............then you are home and dry..............if not it could be a pig in a poke.....

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Posted (edited)
2 hours ago, Windswept said:

I'm often quite shocked to see what's left behind (family photos for example), many people just want the cash as quick as possible even if it's not as much as they could get if they did a bit of work (such as tidy up the house before it's sold).

Just like THIS PROPERTY 😲

Further update.

The searches are not complete, as they are taking so long, so there is an indemnity in place. This and the fact that the estate agent said that we could put in a pre auction offer, suggests that they need the cash and fast. 

Edited by henry d
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8 minutes ago, henry d said:

Just like THIS PROPERTY 😲

Further update.

The searches are not complete, as they are taking so long, so there is an indemnity in place. This and the fact that the estate agent said that we could put in a pre auction offer, suggests that they need the cash and fast. 

On that basis being a cash buyer should put you in the box seat. Owned by three people who just want it gone points to a deal being available if you can move fast. COVID is still causing delays on things so at least they are being realistic with an indemnity, but your solicitor will advise.

Good luck.

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47 minutes ago, Dave at kelton said:

...but your solicitor will advise.

Just spoke and it seems to think it's doable in the time frame so we have started the ball rolling. Maximum we can lose at the moment is £310 for him to read the legal pack and advise us and I spent two thirds of that on a recent fishing weekend away!

Many thanks for all your advice, I appreciate it.

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The best one I saw was a chap from Herts bought 2 houses at auction in Manchester and unseen purely because the vendor included recent but expired assured short hold tenancy agreements (non binding and in there as ‘padding’).

Buyer thought he was being clever - AST means tenants right? Tenants must mean windows, doors, central heating and a roof etc right? Oh no, they don’t.

Two ‘bomb shell’ terrace houses without even roofs right there 😀

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Ouch!

I was under the floor and in the loft of this one this morning, a re jig of the kitchen diner, remove old sliding wardrobe doors and inner, remodel the garden and build a new garden wall and we should have a very nice home we have the guarantee and safety certificate of the boiler which was replaced last year along with the guarantee for the windows that were done three years ago!

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Sounds like a great opportunity to me. Do your research (which it sounds like your well on top off) make sure you understand the process and step back and make a balanced offer not swayed by emotion and commitment. Fortune favours the brave. 

 

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14 hours ago, henry d said:

Ouch!

I was under the floor and in the loft of this one this morning, a re jig of the kitchen diner, remove old sliding wardrobe doors and inner, remodel the garden and build a new garden wall and we should have a very nice home we have the guarantee and safety certificate of the boiler which was replaced last year along with the guarantee for the windows that were done three years ago!

Sounds like you are going for it.  To be fair it sounds different to the trash you get at auction down south.  If you are local to it and know the area that is half the battle. A lot of the rest is common sense when house buying and depends whether you are stretching yourself or not and can cover any unforeseen issues.  
We have recently bought a house as a long term project, I’ve done a few and I reckon had we let a surveyor near it most would have had a field day……But it’s the area we wanted and idyllic so we know we are prepared for what it has to throw at us. The worst so far has been leaky underfloor heating pipes….. but a few days with a sds drill and a plumber for 2 days has relaid the problem room and future proofed half the house. 
Put the effort in and it will be worth it
 

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38 minutes ago, al4x said:

If you are local to it and know the area that is half the battle. A lot of the rest is common sense when house buying and depends whether you are stretching yourself or not and can cover any unforeseen issues....

Our daughter lives local, which is the reason for the move, and we have been to the local church and also viewed other properties in the area. We have set a limit and left ourselves around £50K for either nasty surprises, refurbishment or lavishing on ourselves and close family so

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