Mortgages for Auction Properties...?

[Benjaminpalma]

Having taken time off to enjoy time with my newborn son - and having now watched seemingly every Homes Under The Hammer ever - the wife and I are thinking about buying an auction property.

Our mortgage adviser urged caution, as unknown issues thrown up by the survey can stop most mortgage applications. Further, delays with paperwork can mean that completion can't be done within a month.

Does anyone know of any mortgage providers who are geared up for auctions?

We'd be happy to pay over the odds in the short term, as, naturally, we'd have paid under the odds for the property.

I can't believe this is a market purely for cash buyers.

Thanks.

[KTF]

I believe when you buy a property at auction you have to have it all completed in a week (or other short time scale) which is why cash is king as a mortgage company cannot move that quickly.

[Napper]

KTF said:

I believe when you buy a property at auction you have to have it all completed in a week (or other short time scale) which is why cash is king as a mortgage company cannot move that quickly.

This is how it worked out for us too

[Wacky Racer]

Benjaminpalma said:

Having taken time off to enjoy time with my newborn son - and having now watched seemingly every Homes Under The Hammer ever - the wife and I are thinking about buying an auction property.

Our mortgage adviser urged caution, as unknown issues thrown up by the survey can stop most mortgage applications. Further, delays with paperwork can mean that completion can't be done within a month.

Does anyone know of any mortgage providers who are geared up for auctions?

We'd be happy to pay over the odds in the short term, as, naturally, we'd have paid under the odds for the property.

I can't believe this is a market purely for cash buyers.

Thanks.

I have seen very few bargains on "Homes under the hammer"....

Most seem to go for silly money, far above the estimate.

Sorry, can't answer your original question, but I would guess there are companies out there eager to make a fast buck.

[Sarnie]

KTF said:

I believe when you buy a property at auction you have to have it all completed in a week (or other short time scale) which is why cash is king as a mortgage company cannot move that quickly.

No.

You have to exchange contracts on the day of the auction and complete within 28 days ordinarily.

It's perfectly possible to do, we do it for clients all the time, everybody just needs to be onboard from the outset......we submitted an application last Thursday and it's completing this Friday, so it can be done within 28 days if required.

In most cases you would have already sourced the mortgage, had the AIP accepted, provided all documents required etc so that on the day of the auction, if you win, then we set everything in motion immediately.

The spanner in the works is if the property is a "Doer upper" Eg it's run down or uninhabitable. The lender will send out a surveyor and it needs to be habitable and in decent condition as it's assessed based on how it stands at that point not based on what work you are going to do and what it will be worth afterwards.

[Anglade]

Theoretically at least you may be able to get a bridge loan; which can help in this kind of situation.

Edited by Anglade on Wednesday 23 September 11:39

[Benjaminpalma]

Sarnie said:

KTF said:

I believe when you buy a property at auction you have to have it all completed in a week (or other short time scale) which is why cash is king as a mortgage company cannot move that quickly.

No.

You have to exchange contracts on the day of the auction and complete within 28 days ordinarily.

It's perfectly possible to do, we do it for clients all the time, everybody just needs to be onboard from the outset......we submitted an application last Thursday and it's completing this Friday, so it can be done within 28 days if required.

In most cases you would have already sourced the mortgage, had the AIP accepted, provided all documents required etc so that on the day of the auction, if you win, then we set everything in motion immediately.

The spanner in the works is if the property is a "Doer upper" Eg it's run down or uninhabitable. The lender will send out a surveyor and it needs to be habitable and in decent condition as it's assessed based on how it stands at that point not based on what work you are going to do and what it will be worth afterwards.

Thanks very much for that.

Yes, the ones we have been looking at work on the basis of a 10% non-refundable deposit being paid on the fall of the hammer with immediate exchange and completion within 28 days.

There's one property which caught our eye. It's a very solid 1950s bungalow, but which has some non-structural dry-rot in the floorboards. Our (mate-of-a-mate and somewhat undynamic) mortgage adviser said that most mortgage providers would walk away on this basis.

Are there any providers who can (i) cope with doer-uppers, and (ii) act within the timeframe?

[Sarnie]

Benjaminpalma said:

Thanks very much for that.

Yes, the ones we have been looking at work on the basis of a 10% non-refundable deposit being paid on the fall of the hammer with immediate exchange and completion within 28 days.

There's one property which caught our eye. It's a very solid 1950s bungalow, but which has some non-structural dry-rot in the floorboards. Our (mate-of-a-mate and somewhat undynamic) mortgage adviser said that most mortgage providers would walk away on this basis.

Are there any providers who can (i) cope with doer-uppers, and (ii) act within the timeframe?

Working within the timeframe is not a problem.

If you were my client I'd be telling you to instruct a PCA accredited specialist to complete a Timber Report on the property, before the auction, that should then tell you the extent of the problem and whether it's going to be mortgageable or not.

[Benjaminpalma]

Sarnie said:

Benjaminpalma said:

Thanks very much for that.

Yes, the ones we have been looking at work on the basis of a 10% non-refundable deposit being paid on the fall of the hammer with immediate exchange and completion within 28 days.

There's one property which caught our eye. It's a very solid 1950s bungalow, but which has some non-structural dry-rot in the floorboards. Our (mate-of-a-mate and somewhat undynamic) mortgage adviser said that most mortgage providers would walk away on this basis.

Are there any providers who can (i) cope with doer-uppers, and (ii) act within the timeframe?

Working within the timeframe is not a problem.

If you were my client I'd be telling you to instruct a PCA accredited specialist to complete a Timber Report on the property, before the auction, that should then tell you the extent of the problem and whether it's going to be mortgageable or not.

Thanks, again.

The timeframe's a little tight for that for this property, but I may be in touch if anything else suitable comes up.

I'm surprised there don't seem to be any premium mortgages covering lucky-dip doer-uppers, which can be swapped for an ordinary mortgage once faults have been made good. This could be agreed in principle before the auction - without the need for surveys at that stage.

Can the mortgage company's surveyor be called out in advance of the auction - perhaps for a fixed fee?

[Ozzie Osmond]

Sarnie said:

The spanner in the works is if the property is a "Doer upper" Eg it's run down or uninhabitable. The lender will send out a surveyor and it needs to be habitable and in decent condition as it's assessed based on how it stands at that point not based on what work you are going to do and what it will be worth afterwards.

Correct. A lot of properties which go to auction are there precisely because there's something wrong with them which would rule out a normal "domestic purchase with mortgage". That could mean a problem with legal title (full ownership), a problem with method of construction (e.g. timber framed house) or a problem with dilapidated condition (e.g. uninhabitable).

At the auction you pay 10% on the spot (typically by debit card) and are obliged to pay the balance in 28 days. So you're on the hook as soon as you make your winning bid.

Outside the auction room there will usually be various "stalls" set up with mortgage brokers offering their services.

Do not bid on a property unless you know exactly how you are going to pay for it.

[pacoryan]

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

[Benjaminpalma]

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

[98elise]

Benjaminpalma said:

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

Think of it from the lenders side. You want them to lend you a large amount of money effectively as an unsecured loan. How much would you lend someone in the same position?

Also be aware that guide prices are normally about 10-20% off the sale prices, so you need to factor that in. I've bought and sold at auction and I think the prices are way too high, there are very few genuine bargains to be had these days.

[Benjaminpalma]

98elise said:

Benjaminpalma said:

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

Think of it from the lenders side. You want them to lend you a large amount of money effectively as an unsecured loan. How much would you lend someone in the same position?

Also be aware that guide prices are normally about 10-20% off the sale prices, so you need to factor that in. I've bought and sold at auction and I think the prices are way too high, there are very few genuine bargains to be had these days.

Fair point, but the lender could agree to forward funds on the basis that the land was as described - after all this is where much of the value of a property lies. The lender could insure against the possibility of lending against, say, contaminated, worthless land - and the cost of the insurance premium passed on to the borrower.

[Ozzie Osmond]

Benjaminpalma said:

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

It sounds to me as though your strategy could do with some careful thinking. If a house won't sell it's usually priced too high. I can't see that loading yourself with more and more debt on residential property is going to be particularly helpful.

In summary, despite its current popularity BTL is not the answer to every financial question.

[98elise]

Benjaminpalma said:

98elise said:

Benjaminpalma said:

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

Think of it from the lenders side. You want them to lend you a large amount of money effectively as an unsecured loan. How much would you lend someone in the same position?

Also be aware that guide prices are normally about 10-20% off the sale prices, so you need to factor that in. I've bought and sold at auction and I think the prices are way too high, there are very few genuine bargains to be had these days.

Fair point, but the lender could agree to forward funds on the basis that the land was as described - after all this is where much of the value of a property lies. The lender could insure against the possibility of lending against, say, contaminated, worthless land - and the cost of the insurance premium passed on to the borrower.

Thats why they do a valuation survey at the very least. They can do it very quickly, and often don't even need to go on the property (drive by valuation).

For my residential remortgage a few years ago they did a drive by. For my last BTL mortgage we went from offer accepted to mortgage in place (including survey) in under a week.

[sideways sid]

Benjaminpalma said:

pacoryan said:

how much equity do you have in your primary residence? Can you remortgage that and buy the project without a mortgage?

Sadly, no way near enough. And as it's not shifting, we're looking at let-to-buy mortgages so we can rent ours out for now and move on.

Just wish there was a premium, short-term, no-survey mortgage available for auction buyers...

Throwing a spanner playfully into the works, but if there was freely available debt for properties that are difficult to sell for one reason or another, either the property wouldn't be at auction, or you would be competing with a room full of buyers with mortgages who would drive the prices up, eliminating the discount enjoyed by cash buyers.