Buying property at an auction, a few Q's...

[n30_mkii]

Hi all, I'm just wondering what peoples experiences are of buying property at auction? It's not something I have looked into before, but have seen a potential development property and have a few questions.

It looks like the auction room require a deposit of 10% on the day of auction. Also I would would need 10% to get a mortgage. So how does this bit work? Do I front 10% of my own money, and the approach the bank for a mortgage and give them a further 10%?

The other issue is the property is going to need some pretty major renovation i expect around 30-40k possibly, so how is that taken into account when applying for a mortgage? as the value may be a lot lower until work is completed. I'm sure there are a couple of websites with helpfull info but I could do with some direction. Will the bank lend more than the value, or is it a case of a mortgage for the auction winning price and then a loan for the development?

If anyone has been in a simlar situation and has adivce that would be appreciated

 

[JAzz]

Yes I believe they require 10% on the day of the auction. I don't know what kind of a mortgage you are going to get but if say you need to put in a 30% deposit then yes that 10% will count towards that so you will need to put up another 20%

One thing you always need to be wary at auctions is getting carried away. So many people get taken to the cleaners and overpay. Not so much these days but in the past it happened a lot. You need to know what you final price is and not go above it.

Also in the current climate don't go into that auction not being 100% sure if you can get a mortgage, the last thing you want to happen is the bank offer you too little and you lose your 10%. I'd say get the property surveyed and have your deal in place before you go into the auction. That way at worse you will only lose out on survey fees rather than anything else. As for how much they will lend, don't hold too much hope of them lending you extra or giving your development funds after. If they do they will be at a very expensive rate which might not be worth it. If the property is in bad condition they will value it accordingly, in the past on certain deals you could get extra funds in place if needed for renovation but I doubt there is much of that around right now.

I'm not trying to sound rude here but it doesn't seem going by your post you have fully done your research into this, I don't buy into this nonsense some people will push about not buying at all right now but you need to go in and make sure you are getting a good deal and know what you are doing. Especially considering you will need to do the place up. If it is going to cost you £40k on top I'd want it to be worth at least £80k more than the original price after doing it up.