Bidding at auction w/o mortgage approval

Hi Folks,

Myself and my wife viewed a property today which is going for auction this Friday. After some rapid but careful consideration we have come to the conclusion that we would like to bid for this property.

Circumstances:

• No experience of auction room
• We have not yet viewed the Contract for Sale
• Have owned previous property which we sold and now currently rent
• Lump sum in the bank so mortgage would be twice our combined salary
• We have spoken to our bank and have been told that a mortgage in our circumstances would not be an issue.
• We do not yet have mortgage approval though
• I have just changed jobs from contract to permanent 1 month ago. No mention of probation period in my contract.
• Have the 10% ready to go on the day
• Have not had a chance to arrange an engineer's report. The house is built in the last decade so all in all it looks sound. We thought that if other people bid on the day then they would have done the engineering checks.
• House is in a good location.
• Would hold resale value (within reason)
• Good rental yield also (if required)

Thoughts please....

Thanks!!!

Without the finance in place you'd be mad to bid.

If you win you commit to buying the property.

If you fail to complete you could end up being sued.

Get finance sorted first, bid at auction second.

We understand that if we cannot complete the finance then we could lose our deposit.
However, we are willing to take that risk as we are confident of our financing but do recognise that it is a timing issue.

However, when you say we could get sued do you mean beyond losing the deposit?

By bidding you are entering into a contract to buy the house. They can and will pursue you to complete the sale or seek damages for the amount lost beyond the deposit.

You need to pass on this one. Before an auction, you need

1) a solicitor's report on the title deeds
2) an engineer's report
3) the finance in place

We thought that if other people bid on the day then they would have done the engineering checks.

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Think of the implications of this. If the bidding is low for the house and you get it cheap, is that because others have checked it out and decided to adjust the price downwards because of defects in the paperwork or the title?

Don't bid at the auction. The house may not reach its reserve. If it doesn't, then you can go through the private sale process afterwards.

Brendan

Vince said:

We have not yet viewed the Contract for Sale

• We have spoken to our bank and have been told that a mortgage in our circumstances would not be an issue.
• We do not yet have mortgage approval though
• We thought that if other people bid on the day then they would have done the engineering checks.

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Oh my goodness this is way crazy. You cannot buy unless you have the finance. You do not have the finance. No matter what the bank have told you about the mortgage this means nothing.

You absolutely must not buy unless your solicitor has checked out the title. You do not know what problems there are in relation to this. What if the title was messy and bank refused mortgage. What if there was no planning or some other major issue. That's what you need a solicitor for.

Your logic in relation to the engineering report I do not see. But you can ask the auctioneer which engineer has done a report and then contact that engineer and he may let you buy a copy of the report for less than a full priced new report. What if there were something that would cost 50K to put right.

If you're being swayed with the 'low' prices coming on stream with the current auctions of distressed properties don't be. There will be another house, even this house. If it doesn't sell you can always then after the auction make a bid on it as previous poster stated.

As you've no experience of auctions, why not visit a couple to get a feel for them, doesn't have to be property, jewellery, furniture anything to get a feel for what happens. Auctions can be very emotive and people can get carried away.
Because bidding at auction is unlike any other way of buying you have to have everything ready to go basically.

As you've no experience of auctions, why not visit a couple to get a feel for them, doesn't have to be property, jewellery, furniture anything to get a feel for what happens. Auctions can be very emotive and people can get carried away.

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This is particularly good advice.

Apart from not having your finances in place, if you win the auction on Friday, you will immediately be brought into the back room, handed a contract and a pen and be expected to sign it.

You are considering making a huge and expensive purchase, without getting the contract legally reviewed. Be afraid, be very afraid.

Vince

You have inspired this Key Post

A guide to buying a house at auction

I'm glad that I was an inspiration

Thanks all also for the grounding. The advice you have all provided is sound and I guess the answers you provided is exactly what we had expected to hear.

Nice to get a reality check.

Maybe you should contact the EAs before the Auction and advise them that you will not be in a position to attend the Auction, but ask if bids are being accepted prior to the Auction. If you are told yes or maybe, this will give you some idea as to how many are interested in purchasing this property.

A number of things you must remember:

1. You have taken the word of a Banker concerning Finance as Gospel. Have you not learned that unlesss it is in writing from a Bank, then talk is cheap.
2. This is a buyers market. remember in Auctions, there are many cases where a plant is put in trhe room to drive the bids up.
3. Whilst you and your wife feel this property is for YOU. Remember this will not be last house you see that you like. In fact there may be others in better condition, better location and better priced.

The points that other posters mentioned are apt. Auctions can be very dangerous places unless hands are kept in pockets.

Thanks to all for their advice to my original post.
I'm glad to say that we took that advice onboard and went to the auction but left our cheque book at home. The property didn't meet the reserve and so we ended up as highest bidder when it was withdrawn. We have now just closed contracts and are aboslutely delighted.

Thought it would be nice to share a happy ending story and to show that it is not all gloom and doom out there.

Vince said:

Hi Folks,

Have not had a chance to arrange an engineer's report. The house is built in the last decade so all in all it looks sound. We thought that if other people bid on the day then they would have done the engineering checks.



Thanks!!!

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Glad to hear things worked out for you but, if the house was built in the last 10 years, I'd advise anyone to get an engineers report. There are too many stories of badly built houses in the tiger era, ranging from Pyrite to just people who didn't know what they were doing throwing houses up.

Hi Vince

That is great news.

Can I just clarify. You say you were the highest bidder? I presume you mean after the auction and that you did not actually bid at the auction?



Brendan

We bid at auction but at €35k below the reserve price. It was then withdrawn and we ended up as the only and highest bidder. We had decided not to bid at or above the reserve, hence the decision to leave the cheque book at home.

Thanks for getting back on what happened. You say you took our advice but it's a bit confusing. Which advice did you take ?

You went to an auction with the title checked out by a solicitor? Did you bid at an auction without finance (mortgage approval) and without a deposit, (no cheque book).

The property was withdrawn and you then negotiated to buy and did you sign contracts at that stage (there and then in the auction location). Was the contract subject to any conditions such as mortgage approval and an engineers report? Did you pay a deposit at that stage or later?

We had our solicitor do a preliminary check on the title but not comprehensively as we did not have the time before auction day.

We knew that if we bid at or above the reserve price then we would have to pay the deposit and sign the contract of sale there and then. We therefore had decided not to do this as we had no mortgage approval and our solicitor needed more time to complete the title checks.
This is the advice that we took onboard.

On the day there were no bids and it was about to be withdrawn so we bid at €35K below the reserve just so that we would end up as highest bidders.
The property was withdrawn and we then entered into negotiations with the vendor as a private treaty sale and agreed a price. This gave us time to complete our checks and get our finance in place.