BUYING A HOUSE AT AUCTION
3 KEY STEPS TO BIDDING PROPERLY
Updated: 27th March 2023
Upcoming Allsop Auctions 2020
BIDX1 Online Auction: 19th February 2020
Bidding at a property auction, whether online or at a
particular venue, is almost always an exciting time for
prospective buyers, as they try to calculate their
chances of purchasing their dream home at a low price.
This excitement can however, especially for newcomers to the
property auction scene, quickly turn to disappointment or, even worse, substantial financial loss.
Buyers need to be prepared to research the following
three key aspects of an auction bid.
BE LEGALLY PREPARED
The big day of the auction arrives and you are fired up to get your house at the right price. If you are able to obtain mortgage approval, (or have cash in hand) and you are fortunate enough to win the auction, you CANNOT change your mind.
So avoid putting yourself in the position that, after the auction, you discover some significant aspect of the property does not fit your needs.
If this happens it is because you did not prepare for the auction process properly.
So it is vital to do your legal homework early and carefully.
Ask your solicitor to obtain a copy of the title deeds and any accompaning documentation. The vendor's solicitors details will invariably be found on the auctioneer's website as soon as their catalogue of auction lots is published.
See if you can find out how many copies were requested as this may give you an idea of the level of interest in the property. Can your budget withstand attacks from say, 10 or 20 other bidders?
Your solicitor needs as much time as possible to read over the legal documents and if for some reason your solicitors cannot obtain these documents within 10 days of the actual auction date, then maybe it's time to back away from the deal.
Most modern auctioneers however, running online auctions for example, will not put off prospective clients in any way and will provide enough time for potential buyers to kept well appraised of the legal position outlined by the contract details.
BE "STATE OF HOUSE" PREPARED
The majority of bidders pretty much know what they are after in a house purchase. But some bidders can't resist a "bargain" , especially if they only notice the lot in the catalogue a few days before the auction.
Things to look out for (almost always with the help of a surveyor or structural engineer) include:
- The condition of the roof, especially
in older houses.
- Has planning permission been granted for structural changes that required it?
- Are the LPT and Household charge paid up to date?
- Are the utilities: electricity sockets and wiring, plumbing, piped gas supply (if fitted), legally up to the appropriate building standard.
- If not, does the asking price reflect this?
- Are you eligible for the House Renovation Incentive (HRI), which allows an income tax credit on the VAT paid for the work in the next two years, as long as the work is carried out by fully tax compliant builders, (so well meaning "helping out" by relatives, handy around the house friends etc., does not count!). The HRI covers such items as kitchen supply and fitting, extensions, windows, attic conversions, rewiring, insulation and landscaping.
BE FINANCIALLY PREPARED
Unless you are lucky enough to be a cash buyer, you will need to find a mortgage lender in order to support your bid.
Here is a selection of the detailed questions mortgage lenders will ask you before considering your application.
You will be asked how long you have lived at your current address as well as details of your previous address if you moved less than 3/5 years ago.
You may also be asked questions regarding your married/seperated/divorced status. If you are currently living in rented accommodation, your parents address and phone number may be required.
If the mortgage application is a joint one, then details of the second applicant will also be needed.
You will be asked:
| Reason For Application |
First time purchase |
Investment
|
Equity Release |
Other |
Moving House |
Refinance |
| Employment Status |
Employment Sector |
Occupation
|
Net salary p.m. |
Gross basic salary p.a. |
Overtime p.a. |
Bonus p.a. & Commission |
Mortgage approval, if granted, may only last 3 to 6 months, depending on the lending institution. It is vital that, if you do get mortgage approval in principle, that this is changed into a formal loan offer before the day of the auction.
Don't assume a temporary increase in salary, such as a bonus or commission, will be considered in your ability to repay your mortgage.
Other income, such as rental income, should also be mentioned.
You will be asked for details regarding your employer such as:
- Employer Address,
Length of service.
- If less than one year in current position you may have to state:
- Your previous occupation, Your length of service, Your previous employer's name and address.
- Salary payment method Bank / Building Society Direct Credit Cheque Cash
Self Employment Details
If you are self employed you will be asked about your personal financial details.
Self employed applicants will need to submit copies of their last three years audited accounts, accompanied by their accountant's confirmation of the applicant's current tax position.
You need to supply your:
Business name, address and type of business you are engaged in, the date your business was established and your shareholding and director's fees and payments (if any) and
your average annual profit for the last 3 years.
Your savings and investments will also be considered with regard to:
- Bank Details
- Financial commitments
- Details of all credit cards in this section along with any
existing mortgages. Credit card statements will be carefully checked for such items as bookmaker or online gambling payments, which will not help your application.
- Are any of these loans to be re-finanaced /redeemed as part of your mortgage loan?
- Name, Account Number, Present Balance & Date Account Opened
- Lender
- Amount Present Repayment, Repayment Purpose
- Account Borrowed Balance frequency amount of loan re-financed
- Name and Address of Bank/Building Society
- Sort Code
- Account Number
- Do you have a Laser Card?
- Has either applicant any other financial commitments not indicated
above including overdraft, Life Assurance, Separated Person's
Maintenance Payments etc?
Each applicant will have to declare if they have ever been declared bankrupt or insolvent, or are currently undergoing such proceedings.
Other related questions will include:
- Have you ever had a court order/judgement registered against you?
- Made an arrangement with creditors?
- Fallen into arrears on payment?
- Been refused finance?
- Have you currently any legal action pending against you?
Details of Present Property
If you have ever owned a previous property, you may be asked:
- Have you previously owned a property?
- Do you currently have a mortgage?
Have you had a mortgage in the last twelve months?
- If you have, or have had a mortgage in the last 12 months, please submit a copy of your most recent annual statement. If you own, have sold, or are disposing of a property
- Address of property & Year of purchase
- Original Price & Amount borrowed
- Amount still owning, Payment per month & Date repaid (if applicable)
- Sale price, Estimated value & Proposed sale price
- Account number, Full Address of Property to be Mortgaged,
Detached Semi-detached Bungalow Terraced House
& Flat / Apartment
- Number of Rooms, Number of Bedrooms,
Construction Type: Traditional Brick / Block Timber, Frame Pre-cast Concrete,
Area of Dwelling
& Floor Area
Mortgage Required
Questions in this section relate to the: Use of Property, Do you intend to reside at the property?,
Is the property intended as a secondary residence/ holiday home? Is the property Freehold or Leasehold?
Other mortgage related questions may include: Is the property newly constructed?,
Do you require stage payments?,
Do you intend to let or part let?
Another bank question is: Will any business activity, trade or profession be carried out at the property? You will need to provide details if this is the case.
This is by no means all of the questions you will have to complete on an application form for a mortgage, but it may help prepare you for the "inquisition" by the lender into both your lifestyle and your financial position.
This article is intended as a general guide only and you should always seek suitable advice for your own particular situation. This summary is based on a recent Sunday Business Post article by Robert Hoban of Allsop & on material from the Irish Property Buyers Handbook, written by Carol Tallon, Karl Deeter & Derek Trenaman, published by Oaktree Press.
Although we will do our best to provide you with accurate details, information provided is subject to errors or omissions. This information is intended as a general guide and has no legal standing. You should always seek professional advice for your own particular situation.
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