Why cash is king for buyers hunting the bargains
Would be owner-occupiers are thin on the ground at northern auctions, which mean rich pickings for cash buyers. Sharon Dale reports.
NEWS that owner-occupiers are outbidding investors at property auctions barely raised an eyebrow among those who bring down the gavel in London and the South East.
But for Yorkshire auctioneer Tony Webber, of Leeds-based Eddisons, it came as a surprise and provided yet more evidence of a north-south divide.
“It is definitely a different story up here. In fact we are seeing fewer owner-occupiers. It’s nearly all investors and they are not using bank money, they’re using their own from savings or pension funds,” he says.
At auction, cash is king and in London there are many more wealthy buyers who aren’t reliant on a mortgage.
“In the boom when banks were lending freely you could get a mortgage quickly and easily and come to auction. That is very difficult now because of the time frame. It only takes about three weeks from listing to sale and when the hammer comes down it’s a legally-binding contract. You have to pay,” says Tony.
The would-be owner occupiers who do bid often borrow from the bank of mum and dad and pay the loan back later after securing a mortgage.
There are certainly bargains to be had for the fortunate few able to house hunt in the auction catalogues, but they have to look hard to find their dream home.
“It is mostly distressed property. We don’t tend to sell beautiful houses in nice areas at auction We leave that to estate agents,” says Tony.
“Property comes to auction through receiverships, repossessions and deceased estates, where there’s a will to sell as quickly as possible. We also get local authority and water company properties.”
In Eddisons next auction on July 26, there is a three-bedroom, canal side mews house in need of modernisation in Sandbeds, in Keighley with a guide price of £120,000-£140,000 and for first timers, a terraced house in need of refurbishment on Kitchener Street, Selby, with a guide price of £45,000-plus.
The guide price tends to be close to the reserve, which is usually between 20 and 25 per cent cheaper than similar property for sale through estate agents.
Those looking now will find that the July and August catalogues are slim due to the summer lull. September onwards should offer richer pickings for those who have cash and are prepared for a project.
Anyone who watches Homes Under the Hammer will know that almost everything at auction requires either modernisation or full-scale renovation.
“Homes Under the Hammer has created a lot of interest in property auctions but the reality is that there aren’t that many people out there with fluid cash in a position to bid,” says Tony.
“That means it is a great time to buy for those who are in that fortunate position.”
Eddisons next auction is on July 26 at Leeds United Football Club, Elland Road. www. eddisons.com
Buying at auction tips:
For details of auctions in your area, contact local property auctioneers and check their websites for catalogue listings. Some banks send all their repossessed property to London auctions, which is where the Essential Information Group website is useful. A site used by investors, www.eigroup.co.uk lists most UK auctions and you can register for alerts on properties in your search area. It costs £450 plus VAT for a year and £250 plus VAT for six months.
If a property looks like a bargain there will be a reason so inspect it yourself before the auction and, if possible, have a survey. The cost could be £500 but at least you will know what you are buying. Once you know you can ask a builder how much the work might cost.
Viewing in person will also put the property in context. It could be next to a pylon or a dual carriageway.
Check the guide price against the potential re-sale value of homes in that area. Ask a local estate agent. You can check on what homes have sold for in the area recently on “sold house prices” on www.zoopla.co.uk
Check the legal documents and conditions of sale, which the auctioneers will have.
You may want to engage a lawyer to look through the legal pack to check for covenants or restrictions.
The fall of the hammer at the final acceptable bid constitutes a binding contract and the purchaser is required to pay 10 per cent of the purchase price, cheques being made payable to the vendor’s solicitors.
Completion of the sale and payment of the balance takes place four weeks later unless the conditions of sale provide otherwise.
You’ll also need to organise insurance as you become liable for any damage to the property as soon as your bid is accepted.
Work out the maximum you’re prepared to pay and stick to your budget. It is easy to get carried away in an auction environment, especially if you have a competitive nature. or that potential bargain could become an expensive mistake.
REGENCY GEM: Northgate House has eight bedrooms and a secluded position the sought-after village of Honley.
FIRST TIME BARGAIN: This house on Kitchener Street, Selby, is up for auction with Eddisons, with a guide price of £45,000.