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
Most house purchase mortgages and many remortgage products will include a fee charged for a ‘basic valuation’.
This valuation is not for your benefit; it does not protect you against a property defect or if work is required, such as damp treatment or for subsidence.
You are paying for some form of valuation to satisfy the lender that the property is suitable as security and estimate its value. The surveyor owes no duty of care to you as the buyer, even though you pay for it.
Many borrowers believe that this ‘basic valuation’ is suitable evidence that the property is in a good state of repair; many have found out in court, to their dismay, that this is not the case.
Some 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’. The latter is just a computerised average.
Many lenders will offer either a ‘home buyer report’ or a ‘full structural survey’ as an upgrade to a 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 home buyer report is intended to identify mainly major problems and structural defects with less detail; a full structural survey should be thorough and identify any serious issues in more detail.
Although, both types of report would not usually involve invasive testing or inspection of concealed areas.
If you are buying a property and you want to know that it is structurally sound, do not rely on a basic valuation to protect you; unfortunately, it will not.
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 nation’s finances have recovered a little.
Repossessions 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 in the same period of 2009 when an enormous 13,200 people lost their homes.
The CML said that the main factor in the drop in 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.
That meant many people on the precipice of default, even those who became unemployed, managed to avoid losing their homes.
On the back of these positive figures, the CML has said it may revise its original forecast of 53,000 repossessions for the year should there be no further economic downturn.
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 struggle to meet higher repayment costs and face the prospect of repossession. It warned that the Bank of England needed 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; Santander’s flagship product for existing customers has a typical of 8.9%, and secured loan rates are falling to levels more in line with previous years.
This news from the CML is positive, though there is a warning that things could deteriorate at any moment, so 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.
The Nationwide Building Society has just released its latest house price indices today, which for the first time since the beginning of the credit crunch, show that year-on-year house price inflation is now static at 0.0% change from September 2008.
That indicates the average house value has recovered any losses since this time last year, as prices continue 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%, some way off the 40% drops expected by pundits until 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 Nationwide themselves releasing a raft of new rates yesterday, of which there were too many for me to go into detail, more news will be available this week.
Findaproperty.com’s new house price index suggests that house prices have remained stagnant at the bottom of the market while large 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 0.3% for first-time buyer properties, leaving them still down -4.6% year on year.
That would suggest that difficult lending conditions for first-time buyers continue to drag down property prices as second times buyers struggle to find a buyer who can afford their property in the current market.
However, there is good news in the bag as average first-time buyer affordability has improved dramatically, fuelled by the price reduction.
Their figures for the 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 over the August figures, leaving the average national asking price at £218,134.
