Over The Hill said:
The big big problem with an auction is this-
If you buy in the normal way you make an offer which is not binding- sort out your money, survey etc then commit by exchanging contracts. (Usual England and Wales way).
With an Auction you go to the binding contract stage on the fall of the hammer. If you then cannot get the money, the survey comes back bad or the lenders valuation is not as good as you need then tough luck you are committed. If you back out you lose your deposit.
You can hear of great bargains at auctions but you also get the crud through there too. In the present market I would just look for bargains locally. Make ten really stupidly low offers and you will get a bite. Risk free. Also try daft offers on new houses- builders are up s**t creek.
This is very sensible advice, but it doesn't deal with the real problem of non professionals buying at auction - the money. Ideally, you'll have all the money in cash, by which I mean you've got it readily available on deposit.
If you want to raise a mortgage, then you have to go to all the expense of applying in advance on that particular property and run the high risk that the money will be wasted if you don't get it. If you have a good relationship with your bank and particularly if you are not after a high percentage to value loan and not heavily comitting yourself, then you can sometimes negotiate a generic secured loan on the basis that if you buy a property in a certain category, then the bank will lend without having to know the details in advance.
From the bank's perspective, they know that intelligent "bottom feeders" tend to do well snapping up bargains in a recession, but they also know that amateurs can get their fingers burnt because they buy the stuff that the knowledgable ones avoid.
Do some research (Barnard Marcus and Alsops are a good source as they handle a lot of stuff in their auctions) and look for properties that are less likely to be of interest to professionals - houses that builders can repair rapidly and good letting properties are the ones the pros go for. Check who the lender is - if it's one of the fringe ones then then are more likely to dump the property for what they can and some real bargains can be had.
