Auctions, Cons and Benefits?

[MrXxxx]

Reading this article piqued my interest [https://www.dailymail.co.uk/property/article-12952277/I-registered-buy-wreck-property-auction-heres-prepared-bid.html],

and made me think of several questions......my initial ones as an individual buyer [not developer/BTL] were:

1. The cost/benefit only makes sense in a rising market where you want to know you wont be gazumped.

2. How much cheaper does an auction property need to be to justify the 'loss of flexibility' given in a normal purchase i.e. being able to withdraw right up to Exchange of Contracts and/or being able to negotiate price up to this point for 'circumstances' such as survey info/delayed purchase in a falling market [also know as gazundering?].

3. Is it a 'den of iniquity' best left to the professionals due to a) The tricks played on the naive i.e. taking bids off the wall, b)  only making a single rather than multiple purchases so the saving is limited over the timescale of owning the property, and c) being at a competitive disadvantage due to professionals have access to cheaper redevelopment/refurb costs and Tradesmen.

4. Are the majority of auction lots 'pups'  hence why they are being sold at auction, and so the risks are proportionally greater at getting 'stung' AND so not worth the limited risk premium that you may save.

.....anyone on DB have experience and like to give their thoughts/opinions/enlighten me?

 

Also, anyone have experience of the 'Modern methods' now used by agents [rather than a traditional auction format] and like to comment on the Cons/Benefits of these, as I can't see any ie. they are only to advantage of the seller/EA.

 

Also, here is part 2 of the article [https://www.msn.com/en-gb/money/other/how-to-buy-a-property-at-auction-expert-tips-on-fees-when-to-go-over-budget-and-even-where-to-sit/ar-BB1hAb1D]

Edited February 2 by MrXxxx

[Frank Hovis]

"Modern methods" are to be avoided like the plague.

Here is one for a country cottage in Cornwall.

Twenty days after winning, and paying your big non-refundable deposit, to exchange and then 28 more days to complete.

How confident would you be that your local authority will complete their searches in 48 days, let alone twenty?

And if you don't have them you can't obtain a mortgage, and if a cash buyer then you are gambling that they won't turn up anything.

Or, if you don't wish to gamble and pull out, then losing 3.5% x £772,500 (guide) x 120% (VAT) = £32,445.

Why would you risk thirty grand in this way? 

 

Online Auction

Online Auction scheduled to finish on Friday 16th February 2024 at 2pm. This property is being sold by conditional online auction and a non-refundable reservation fee of £5000 or 3.5% + VAT applies, whichever is the greater (in addition to the purchase price). If you are the successful bidder, you will be charged the amount of £5,000 + VAT (£6,000) or 3.5% +VAT, whichever is the greater, which will be processed online, immediately at the end of the auction, only if you are the successful bidder. You will then have 20 working days within which to exchange contracts, and a further 28 days to complete the purchase. 

 

https://www.rightmove.co.uk/properties/144075458#/?channel=RES_BUY

 

[Pip321]

24 minutes ago, MrXxxx said:

Reading this article piqued my interest [https://www.dailymail.co.uk/property/article-12952277/I-registered-buy-wreck-property-auction-heres-prepared-bid.html],

and made me think of several questions......my initial ones as an individual buyer [not developer/BTL] were:

1. The cost/benefit only makes sense in a rising market where you want to know you wont be gazumped.

2. How much cheaper does an auction property need to be to justify the 'loss of flexibility' given in a normal purchase i.e. being able to withdraw right up to Exchange of Contracts and/or being able to negotiate price up to this point for 'circumstances' such as survey info/delayed purchase in a falling market [also know as gazundering?].

3. Is it a 'den of iniquity' best left to the professionals due to a) The tricks played on the naive i.e. taking bids off the wall, b)  only making a single rather than multiple purchases so the saving is limited over the timescale of owning the property, and c) being at a competitive disadvantage due to professionals have access to cheaper redevelopment/refurb costs and Tradesmen.

4. Are the majority of auction lots 'pups'  hence why they are being sold at auction, and so the risks are proportionally greater at getting 'stung' AND so not worth the limited risk premium that you may save.

.....anyone on DB have experience and like to give their thoughts/opinions/enlighten me?

 

Also, anyone have experience of the 'Modern methods' now used by agents [rather than a traditional auction format] and like to comment on the Cons/Benefits of these, as I can't see any ie. they are only to advantage of the seller/EA.

 

Also, here is part 2 of the article [https://www.msn.com/en-gb/money/other/how-to-buy-a-property-at-auction-expert-tips-on-fees-when-to-go-over-budget-and-even-where-to-sit/ar-BB1hAb1D]

Bought a few at auction and (if I try and view through the lens of a non investor) it can be fairly painless and very fruitful.....but often its the tail wagging the dog. i.e. the appeal of auction is the potential saving, not because its your dream home. 

Having monies in place and a rapid appetite to proceed helps. I would say the dilly dally at the early stages of buying a home that discounts 95% of buyers. 

I have viewed, applied for mortgage and instructed valuers in the same day. With loads that can go wrong there is no time to think or worry about losing a few hundred pound valuation fee or mull over whether the sofa will fit in the living room etc so its a very dispassionate purchase.

Bids off the wall etc aren't tricks as such....they are common practice and even sometimes signposted by the auctioneers to let the 'audience' know where they need to be to breach the reserve otherwise no one is buying it. And if you follow others in the room (real or otherwise) to determine how much you will pay then its the wrong methodology for you (if that makes sense)....ie if reserve is £100k and you wanted to pay £90k....then they can bounce bids all day long, stop at £90k.

The main issue is speed....not just the admin and pushing everyone through but as much its the speed in which a buyer makes the decision to buy. Sounds really easy but most after a few days start people begin to question whether its worth the hassle and potential costs and then 'have a think' for a week. By then its too late. So its probably not the easiest way to buy a home that you plan to live in for many years unless its a particular house you know. 

The house could be a pup but as often its the buyer who just needs to sell with no nonsense and cant be bothered getting building regs for a loft ladder installed in 1978. Some solicitors (often on behalf of some lenders) can really drag things out on issues that 15 years ago just didn't matter. 

The modern method again looks like it could work but I think the issue is again knowing at the outset you definitely want to buy. I doesn't appeal to me though...I would want a discount, a big one otherwise I would buy from the hundreds of other properties out there that give breathing space. 

We would often not get full searches from the council....most of what they tell you can be gathered from local knowledge and online searches. I bought a house once after using the neighbours searches who had bought a few months earlier....

[Andersen]

I've looked at a few at auction properties and been to auctions but never bought that way. Tips would be make sure your finance is arranged beforehand if possible and try to remove emotions from the buying as much as possible (so make a quick decision and don't get into a bidding war and pay over what you were comfortable with) 

Best case it's a keen seller who wants a straightforward sale rather than spending time negotiating with flakey buyers.

Worst case the place is a can of worms with physical or legal problems and the owner just wants to move the problem onto somebody else.

Personal choice but with any house I'd say either buy something tidy you can live with or buy something trashed so you can redo it the way you want it. It makes no sense to me paying a lot for something "ok" then spending a load of time / £££ / energy ripping it apart to redo it. 

[MrXxxx]

2 hours ago, Pip321 said:

Bought a few at auction and (if I try and view through the lens of a non investor) it can be fairly painless and very fruitful.....but often its the tail wagging the dog. i.e. the appeal of auction is the potential saving, not because its your dream home. 

Having monies in place and a rapid appetite to proceed helps. I would say the dilly dally at the early stages of buying a home that discounts 95% of buyers. 

I have viewed, applied for mortgage and instructed valuers in the same day. With loads that can go wrong there is no time to think or worry about losing a few hundred pound valuation fee or mull over whether the sofa will fit in the living room etc so its a very dispassionate purchase.

Bids off the wall etc aren't tricks as such....they are common practice and even sometimes signposted by the auctioneers to let the 'audience' know where they need to be to breach the reserve otherwise no one is buying it. And if you follow others in the room (real or otherwise) to determine how much you will pay then its the wrong methodology for you (if that makes sense)....ie if reserve is £100k and you wanted to pay £90k....then they can bounce bids all day long, stop at £90k.

The main issue is speed....not just the admin and pushing everyone through but as much its the speed in which a buyer makes the decision to buy. Sounds really easy but most after a few days start people begin to question whether its worth the hassle and potential costs and then 'have a think' for a week. By then its too late. So its probably not the easiest way to buy a home that you plan to live in for many years unless its a particular house you know. 

The house could be a pup but as often its the buyer who just needs to sell with no nonsense and cant be bothered getting building regs for a loft ladder installed in 1978. Some solicitors (often on behalf of some lenders) can really drag things out on issues that 15 years ago just didn't matter. 

The modern method again looks like it could work but I think the issue is again knowing at the outset you definitely want to buy. I doesn't appeal to me though...I would want a discount, a big one otherwise I would buy from the hundreds of other properties out there that give breathing space. 

We would often not get full searches from the council....most of what they tell you can be gathered from local knowledge and online searches. I bought a house once after using the neighbours searches who had bought a few months earlier....

Thanks for taking the time to give such a thorough reply, very interesting/thought provoking reading with many 'home truths' i.e. people pontificating.

I think the point you make about taking bids 'off the wall' is particularly salient i.e. if it influences you, you are not sticking to your own plan/maximum bid. Further, I have read many professionals find this useful and 'play it' to their own advantage i.e. if they can see bids are coming 'off the wall' it tells them no one is interested, so it might be better not to bid, let the lot go uncompleted, and then approach the auctioneer/owner after auction finish with an offer.  I also read that its legal for auctioneers to do it which I find astounding, as its is not far off fraudulent behaviour as far as I am concerned...but perhaps that explains why I am not an auctioneer or Estate Agent i.e. I have a 'moral compass'! :-)))

[MrXxxx]

4 hours ago, Frank Hovis said:

"Modern methods" are to be avoided like the plague.

Here is one for a country cottage in Cornwall.

Twenty days after winning, and paying your big non-refundable deposit, to exchange and then 28 more days to complete.

How confident would you be that your local authority will complete their searches in 48 days, let alone twenty?

And if you don't have them you can't obtain a mortgage, and if a cash buyer then you are gambling that they won't turn up anything.

Or, if you don't wish to gamble and pull out, then losing 3.5% x £772,500 (guide) x 120% (VAT) = £32,445.

Why would you risk thirty grand in this way? 

 

Online Auction

Online Auction scheduled to finish on Friday 16th February 2024 at 2pm. This property is being sold by conditional online auction and a non-refundable reservation fee of £5000 or 3.5% + VAT applies, whichever is the greater (in addition to the purchase price). If you are the successful bidder, you will be charged the amount of £5,000 + VAT (£6,000) or 3.5% +VAT, whichever is the greater, which will be processed online, immediately at the end of the auction, only if you are the successful bidder. You will then have 20 working days within which to exchange contracts, and a further 28 days to complete the purchase. 

 

https://www.rightmove.co.uk/properties/144075458#/?channel=RES_BUY

 

Agree, if I wanted to bid in an auction I would go to a 'proper' auction and pay for the privilege BUT get to see 'what' and 'whom' were bidding against me realtime. If I go through an EA I can do the same thing as a 'Modern method' auction by giving a single non-negotiable offer and have the 'luxury of pulling out/re-negotiating if the searches 'threw up' issues....oh, and I don't have to pay the EA a fee for what he is already earning from the seller!

[wherebee]

The house is nice enough, and location is great for history (and you'll never have a new housing estate built on the iron age fort), but where's the discount?  

And, shitty estate agent alert, where is the shot showing the land being sold?  every property in Oz has an arial shot with the outline of the land shown, of course with a disclaimer, but gives you a good idea.

[Pip321]

12 hours ago, MrXxxx said:

Thanks for taking the time to give such a thorough reply, very interesting/thought provoking reading with many 'home truths' i.e. people pontificating.

I think the point you make about taking bids 'off the wall' is particularly salient i.e. if it influences you, you are not sticking to your own plan/maximum bid. Further, I have read many professionals find this useful and 'play it' to their own advantage i.e. if they can see bids are coming 'off the wall' it tells them no one is interested, so it might be better not to bid, let the lot go uncompleted, and then approach the auctioneer/owner after auction finish with an offer.  I also read that its legal for auctioneers to do it which I find astounding, as its is not far off fraudulent behaviour as far as I am concerned...but perhaps that explains why I am not an auctioneer or Estate Agent i.e. I have a 'moral compass'! :-)))

I have seen lots of examples of houses come up which are fine but perhaps previously let and left in an awful dirty state. What happens with normies is interesting….typical example, house in Yorkshire with comparables at £200k, 

Day 1) The house goes up for auction 4 doors away from Mr Normie on rightmove 
Day 4) Mr Normie gets in his car and sees the sign being put up. 
Day 7) Mr Normie notices it’s Allsop Auctions

Day 9) Mr Normie thinks….I will look that up at the weekend 

Day 12) Mr Normie looks it up and the £200k house has a guide of £120k  

Day 14) Mr Normie mentions to his wife that maybe they should view and buy it for their 21 year old daughter who is renting. 

Day 16) They mention it to daughter Normie who is initially excited but has some stuff on this week so they arrange to go to the open view next week

Day 22) the family view, realise other than decorating and carpets this scruffy house is a steal. They get excited and arrange to speak with a mortgage broker

Day 24) Broker rings and begins to take details down, discusses the process and tells them to get the legal pack to their solicitor asap.

Day 27) house sells at auction £117k, many thanks 🙏 

Day 29) solicitor still not replied to the questions Mr Normie was asking about whether there was no Argon report in the pack and whether that is important. 

Day 31) decision in principal arrives from lender and family now have huge remorse not going for it.

This is typical and assumes they don’t dilly dally after viewing or have a weeks holiday. 
 

When I reflect with the ones I have bought (and with mortgages) the property comes up on rightmove and I think about it for the day and make an appointment to view anyway. 
Day 2) I view the outside and instruct the Skipton re a mortgage. 
Day 3) Skipton ring me back, take all the details but I hold on with valuation. 
Day 5) I view property at first available moment and ring the Skipton on the drive home and pay the valuation fee

Day 6) Legal pack to the solicitor via email who gives it a glance over and a view for no charge but knowing if I don’t proceed they will add £50 on the next bill. Mentions there is no Argon report at the moment but in the last 1000 houses in the area…the Argon report has not brought up issues. But that my call. 
Day 12) mortgage offer in place 

10 days to auction.

Sounds daft…..but it often is like this. I used to view stuff and often neighbours would be asking me questions about it and I knew they were mulling it over (even just in a ‘maybe one day’ sort of way) and whilst they pondered the process would move too quick for them. 

 

However, for balance I have seen some houses go for really high prices…and it is that every seller using an auction hopes for.

Finally why do some people sell decent houses at auction? 
I would sell by auction if I knew I would get 85% of value…..but that’s because the properties I own were bought cheap. 

Not an auction story but to put it in perspective I bought something in 2013 for £210k (private treaty not auction) and the neighbouring house was £405k. I was delighted and we bought really fast because they needed the money. But that’s not the deal. When the deeds came through I spotted they paid £35k in 1996, so they were happy, particularly because they owned 30 other properties. They just wanted to sell fast because hubby had died and these 3 guys (it was a little company owned by 3 guys) had been told by his wife she wanted one sold within a few months so she could have some cash flow….basically a group of 70 year olds who whenever they wanted to sell were more interested in speed than price.
 

I would love to buy my main home by auction but I still think auction is for ‘the deal’ and with compromise……

[Long time lurking]

16 hours ago, Frank Hovis said:

"Modern methods" are to be avoided like the plague.

Here is one for a country cottage in Cornwall.

Twenty days after winning, and paying your big non-refundable deposit, to exchange and then 28 more days to complete.

How confident would you be that your local authority will complete their searches in 48 days, let alone twenty?

And if you don't have them you can't obtain a mortgage, and if a cash buyer then you are gambling that they won't turn up anything.

Or, if you don't wish to gamble and pull out, then losing 3.5% x £772,500 (guide) x 120% (VAT) = £32,445.

Why would you risk thirty grand in this way? 

 

Online Auction

Online Auction scheduled to finish on Friday 16th February 2024 at 2pm. This property is being sold by conditional online auction and a non-refundable reservation fee of £5000 or 3.5% + VAT applies, whichever is the greater (in addition to the purchase price). If you are the successful bidder, you will be charged the amount of £5,000 + VAT (£6,000) or 3.5% +VAT, whichever is the greater, which will be processed online, immediately at the end of the auction, only if you are the successful bidder. You will then have 20 working days within which to exchange contracts, and a further 28 days to complete the purchase. 

 

https://www.rightmove.co.uk/properties/144075458#/?channel=RES_BUY

 

The other one that is often hidden in the small print is the buyer is responsible for the sellers legal fees ,i know someone that were hit with just under £10k for this on a hammer price of sub £60k 

Edit this was a traditional auction 

Edited February 3 by Long time lurking

[Frank Hovis]

1 hour ago, Long time lurking said:

The other one that is often hidden in the small print is the buyer is responsible for the sellers legal fees ,i know someone that were hit with just under £10k for this on a hammer price of sub £60k 

Edit this was a traditional auction 

 

Wow.

I know from watching the odd Bragin Hunt type show just how much people are paying in fees for auctions far beyond the "hammer price"; it has to be seriously cheap to make it worthwhile.

[Long time lurking]

1 minute ago, Frank Hovis said:

 

Wow.

I know from watching the odd Bragin Hunt type show just how much people are paying in fees for auctions far beyond the "hammer price"; it has to be seriously cheap to make it worthwhile.

The crazy part of that anecdotal is the buyers legal fees were less than £2.5k ,it makes you wonder what affiliation there was with the auction house/seller etc 

But the moral of the story is always read the legal pack!

[JoeDavola]

There's a house that I know quite well that's coming up for auction soon. Will be watching it with interest.

It's a repo and I can only conclude that the last owner must have fucking trashed the place before they left; though that's not obvious from the photos.

[spunko]

Nobody seems to ask themselves why the vendor is putting the house up for sale using this method. That was always my worry, there's something about this place that requires people to be forced to buy it within a certain timeframe i.e. cutting corners.

[Formerly]

2 hours ago, spunko said:

Nobody seems to ask themselves why the vendor is putting the house up for sale using this method. That was always my worry, there's something about this place that requires people to be forced to buy it within a certain timeframe i.e. cutting corners.

MMA - cheapskate sellers who don't want to pay anything.

Traditional auctions - @Pip321 has addressed it to some degree above. However, I'm sure there are some problem houses that go that way too.

[wherebee]

12 hours ago, spunko said:

Nobody seems to ask themselves why the vendor is putting the house up for sale using this method. That was always my worry, there's something about this place that requires people to be forced to buy it within a certain timeframe i.e. cutting corners.

If I inherited a house in the UK and I thought the market was going to fall, I'd auction it just to get it done fast and the money out of GBP.

I have an elderly relative at deaths door, doubt I'll get the house, but if I did I'd seriously consider it bearing in mind the clusterfuck I think 2024 could be for international economies.

[Royston]

21 hours ago, spunko said:

Nobody seems to ask themselves why the vendor is putting the house up for sale using this method. That was always my worry, there's something about this place that requires people to be forced to buy it within a certain timeframe i.e. cutting corners.

Traditionally it's only been 'problem' houses that have been put into auction and traditionally they've gone for below market value, but that doesn't seem to be the case anymore.

I've seen plenty of perfectly habitable and mortgageable houses put into auction in recent years, particularly at the cheaper end of the market.

I attended lots of auctions between 2014 and 2019 when I was looking to buy and in that time frame I saw a huge increase in the numbers of potential buyers attending these auctions, so much so that the main auctioning agent for my area had to change the venue that they'd been using for over 60 years to a bigger venue in order to accommodate all the extra people, many of these people being inexperienced FTBers or 'budding' property developers who've watched a few episodes of HUTH.... the end result being lots of gullible idiots, giddy with auction fever and overpaying.

I've even some examples of houses that had been for sale on the open market and failed to attract any interest, which then get chopped into auction and end up getting bid up by the giddy idiots and going for MORE than what they were available for when they were on the open market!

I think EA's have cottoned on to the above and they are now putting perfectly habitable and mortgageable houses straight into auction knowing there's a good chance they'll sell for more than what they would do if on the open market thanks to all the gullible giddy mugs convinced they're getting a bargain because they're buying at auction.