Back out from successful bid on auction property?

by Readers Question

12:00 PM, 8th May 2019
About 2 months ago

Back out from successful bid on auction property?

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Back out from successful bid on auction property?

Hi Everyone, We are in a need of urgent advise. We secured a property in auction just last week and yes despite all the warnings we didn’t see the property and did little research.

Property we secured is a purpose built flat, and what we noticed is no flat has been sold in last 10 years since they were built. Today we called a agent to see how much we can put the property on sale for, and it was somewhat same price that we paid in auction. However, they already had 1 flat (same as us) which was put on market end of 2018 and it is not yet sold. Various reasons for it 1. Property needs lot of work. 2. They had offer accepted, but the bank down valued the property as there was nothing sold in past 10 years. We did not have this problem as we were a cash buyer. He also said that he knows there had been a or a couple of flats sold for which land registry may get updated in coming months and then it should help.

We also noticed there is one block of flats which is not finished since, but agent confirmed that property developer is now starting to build those flats. There is a new school which has been built just next to this block of flats which may give boost little bit to the property.

I have checked with the auction company and obviously they said can’t back out now. I have asked them if they can at least ask the audience if anyone is interested in the property as there were couple of bidders when we were bidding, but they were kind of reluctant and said they will speak to the manager and come back. My point was whats the point of completing the property after paying stamp duty, and other costs and then ask the potential bidders, but again I am not sure if they will accept it.

We are now in panic state, could anyone here be kind enough to give us the advice on what can we do.

Some of the options we thought off:
1. Put up on Rent and in couple of years put up for sale.
2. Can we back off from the auction purchase now (no deposit has been deducted yet), even if that means we need to loose our deposit ?
3. or put the property back in auction after completing.

Many thanks

Kaps



Comments

angela

16:01 PM, 8th May 2019
About 2 months ago

I dont get why you are thinking of backing out, you went to auction, you bid without doing due diligence and you are suffering consequences of a property not having massive equity, what did you expect, either suck it up and get on with it, or lose deposit, your choice, and dont do it again.

kaps z

17:11 PM, 8th May 2019
About 2 months ago

Thank You for responding. The reason we think to back out is the fact we may block our entire savings with no real market to sell the property shall we need to sell. Our deposit is around 10k, is that the only amount that we could loose as we are reading that sellers may go to court to demand the loss if they could not sell at same price we bought it for.
Loosing 10k can still be recovered in short time, but the entire price of the property if market goes more bad then we are stuck with something that can never be sold.

Rob Crawford

19:55 PM, 8th May 2019
About 2 months ago

The auction and seller will undoubtedly know the potential/market potential that this property has (if any). When the hammer fell, contracts were effectively exchanged and the deposit will need to be paid within a few days. The rest normally within four weeks. If you no longer wish to proceed, you will have to come to some arrangement with the auction/seller. But they have no commitment to you to do so. From what you say they will be pleased to get rid, they will of course be chasing you for the full sum. I think you just need to get on with it and hope for the best.

Larry Sweeney

7:21 AM, 9th May 2019
About 2 months ago

Contracts have been exchanged. If you fail to complete you will lose your deposit, furthermore the vendor may sue you for specific performance and the court could force you to complete. The vendor could alternatively remarket the property after retaining your deposit and sue you for any loss incurred ie if the property was subsequently sold for less than the original sale price.

David Lawrenson

9:11 AM, 9th May 2019
About 2 months ago

You are going to have to put it down to a learning experience, I think.
I know of people who buy blind like this - and who have got good deals. But they were v wealthy people, who could afford to take a big risk.

Other bidders, you say - well, yes there may have been.
But bidding up to the reserve price may have been done by the auction house's own staff. Perfectly legal and called "Off the Wall" bidding. Which is why it pays to stand at the back, not that doing this will necessarily help you know its the auctioneers own staff.
Next time, do read up on auctions first - how they work etc. I have a useful section in my "Successful Property Letting" book on auctions and how they work.
Put it down to experience and build your knowledge of how it all works, ready for next time (assuming you've not lost all hope!)

Good luck
David Lawrenson
http://www.LettingFocus.com
Private Rented Sector Advice

Ed Tuff

9:24 AM, 9th May 2019
About 2 months ago

Reply to the comment left by kaps z at 08/05/2019 - 17:11
*lose

Graham Bowcock

9:28 AM, 9th May 2019
About 2 months ago

What were intending to do with it in the first place?

If an immediate sale will yield you a loss (think about the sales and legal costs as well as the price) then you may as well get it rented out. You could then get an income from your investment. Over time the value may rise to allow you to get your money back.

BUT - if you let it please take advice!

angela

9:29 AM, 9th May 2019
About 2 months ago

do you know that you cant put a property back into an auction for 6 months, dont know if that is a law or just auction house rules

angela

9:30 AM, 9th May 2019
About 2 months ago

what area is the property in

John Spring

10:15 AM, 9th May 2019
About 2 months ago

Can’t put a property back in an auction within six months !!!!!!!!!! You could put it straight back in the auction no problem whatsoever

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