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Buying a Property at Auction & Need a Mortgage? – Read our Do’s & Dont’s for Auction Finance

Do:

Your research…

Go to at least one property auction before you intend to purchase, just to see how they work.

Go and view the property you’d like to buy, at least once.

Compare the price and condition of the property to others that are similar that have recently sold or are currently on sale in the street/area. This will help you determine what you think the true market value of the property is and how much you are prepared to bid for it. Websites like Zoopla offer lots of information on previous purchase prices and average prices in the area.

Get a survey/valuation of the property in advance of the sale if this is possible.

Get hold of the Legal Pack and get a solicitor to check it prior to the auction. This pack contains all the information that your solicitor would normally check if you were buying a property in the more conventional way and usually includes key information such as special conditions of sale, title deeds, searches, leases and any legal issues.

Take advice from a mortgage broker or adviser on the suitability of the property for raising a mortgage.

If you can get a mortgage approved on the property prior to the auction or if not get a Mortgage Decision in Principle and an application near ready to submit, before you go into the auction room as you will usually need to complete within 28 days or forfeit your deposit.

Get initial quotes for remedial work if the property needs considerable work. You might be surprised at how much these jobs will cost – better to know up front than after you’ve made your purchase.

Ensure you have sufficient funds available for costs and remedial work if considerable as your mortgage lender will very likely retain part of the mortgage amount until these works are completed.

Have your deposit ready for payment on the day – usually 10% of the hammer price.

Don’t:

Bid on a property at auction that you haven’t seen and looks to be a real bargain in the auction room – there’s probably a reason why no-one else is bidding on it.

Get carried away in the auction room – know your maximum bid before you arrive and don’t get into a bidding war that pushes you beyond this maximum – be prepared to walk away.

Presume you’ll be able to get a mortgage after the event – you may need to shop around or get independent advice. If you can’t pay the balance within 28 days of the auction you will pay hefty interest and possibly forfeit your deposit.

For mortgage advice on short term finance for property auctions visit us here rightmortgageadvice.co.uk

Mortgage Broker Q&A – What is a basic valuation for mortgage purposes and what other types of survey are there?

Most typical purchase mortgages and many remortgage products will include a fee for a basic valuation.
This valuation is not for the buyers benefit and doesn’t protect you in the event of a property defect or if work is subsequently required for things like damp treatment or subsidence.

You are paying for some form of valuation to satisfy the lender that the property being mortgaged is suitable security for the loan. The surveyor owes no duty of care to you as the buyer despite the fact that you pay for it.

Many borrowers believe that this basic valuation is suitable evidence that the property is in a good state of repair, and many have found out in court to their dismay that this is not the case.
Some basic valuations will not even involve entering the property it may just be a “drive by viewing” or even performed on an AVM or “Auto Valuation Model” which is a computerised average.

Many lenders will offer either a homebuyers report or a full survey as a form of extra or upgrade to the basic valuation. These survey types do offer you some legal protection and do entitle you to a duty of care from the surveyor in question.

A homebuyers report should identify major problems and structural defects, where as a full survey should be very thorough and identify any serious issues including electrical and dry rot problems etc.
If you buying a property and you want to know that the property is structurally sound then don’t rely on the basic valuation to protect to you because unfortunately it will not.

Hope for the Housing Market

A recent report by the Council of Mortgage lenders has revealed that the number of homes repossessed in the UK fell by 7.5% in the first three months of 2010. Home repossession is one of the ultimate fears for any homeowner, and the fact that the figure is falling is perhaps proof that the finances of the nation have recovered a little.

In terms of the actual number of repossessions that figure fell from 10,600 homes in the final three months of 2009 to 9,800 in the first three months of 2010. Most encouragingly that number was 26% lower than the same period in 2009 when an enormous 13,200 people lost their homes.

The CML said that the biggest factor in the drop of repossessions was the drop in the interest rate. In March 2009, partially in response to the rising number of people losing their homes, the Bank of England dropped its base interest rate to 0.5% and has kept it there ever since. This meant that many people who were looking at the precipice, even those who found themselves unemployed, were able to claw back some of the arrears on their mortgages.

On the back of these positive figures that CML has said that it may revise it’s original forecast of 53,000 repossessions for the year should there be no further problems with the economy.

The news did, however, come with a warning from the CML. If interest rates were to increase, it warned, many hundreds of thousands of people could find themselves struggling to meet higher repayment costs and therefore find themselves facing the prospect of repossession. It warned that it was imperative for the BoE to keep the rates low for as long as possible, even in the face of rising inflation.

Mortgage Interest rates have however fallen to record lows for those customers with a sizeable deposit and good credit history. The personal loans market is also improving steadily with Santander’s flagship product for existing customers having a typical of 8.9%, and secured loan rates also falling to levels more in line with previous years.

At the end of the day the news from the CML is positive, though there is the warning that things could deteriorate at any moment and we should not forget that even though the numbers are dropping, nearly 10,000 people lost their homes in the first three months of this year, the economic crisis, whatever the figures may say, is very much still with us.

Nationwide house price index shows year on year growth level

The Nationwide has just released it’s latest house price indices figures today which show for the first time since the beginning of the credit crunch that year on year house price inflation is now static at 0.0% change from September 2008.

This indicates the average house has now recovered losses since this time last year as prices continues to rise month on month. Monthly change is down slightly at 0.9% from 1.4% in August. It leaves the average drop since the 2007 peak at 13.5% which is some way off the 40% drops expected by pundits until quite recently.

The news comes in a week where lenders have continued to announce reductions in interest rates on products up to 75% loan to value with the Nationwide themselves releasing a raft of new rates yesterday, of which there were too many for me to go into detail but more news will be this week.


House Price rises driven by larger properties

Findaproperty.com’s new house price index suggests that house prices have remained stagnant at the bottom end of the market while strong rises in higher value properties are propping up the major indices.

Their figures collated from average asking prices on the website over the past month show high value properties climbing at 6.6% annually against a monthly rise of o.3% for first time buyer properties leaving them still down -4.6% year on year. This would appear to suggest that the difficult lending conditions for first time buyers are continuing to drag down property prices as second times buyers struggle to find a purchaser who can afford their property in the current market.

However there is good news in the bag too with average first time buyer affordability improving dramatically fuelled by the price reduction. Their figures for affordability gap or the average deposit required show a drop to £55,700 or 1.74 times gross household income against £71,000 or 2.8 times gross household income in January 2008.

Overall the indices showed a 0.2% rise on August figures leaving the average national asking price at £218,134.

You can see their results and the rest of the overview here Find a property.com’s September House Price Indices

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. YOU DO NOT HAVE TO PAY A FEE FOR OUR SERVICES AS WE RECEIVE COMMISSION FROM LENDERS. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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