They say that you should always have a trial run at an auction in case your emotions get the better of you. We saw a perfectly sane woman bid and win £220,000 for a lock up garage in Surbiton! I’m not saying that preparing for auction is unnecessary, but we spent four agonising hours watching other people bid, crash and burn before our lot came up. More importantly, know what you are bidding on and what your absolute top bid is.
We had done a considerable amount of homework. Three viewings of the property, including two ‘open houses’ where all the interested parties got thirty minutes inside the house. We saw property tourists, would be investors, builders, first time buyers, all shapes of property buyer. And us.
We spoke to the neighbours on both sides and discovered that the house hadn’t flooded for nearly ten years. Subsidence blights the area and we found that although the buildings in that street had moved, it had been at the time of building, 150 years ago. We brought a surveyor to have a look and he confirmed there was no evidence of recent movement. He looked for cracks in the plasterwork around doors, chimneys and windows. Looked for cracks in the external brickwork. Found none.
We got in touch with the council to check for Compulsory Purchase Orders (CPO’s), and debt. We researched the ownership – there were two mortgages outstanding therefore the risk for us was that the original one might still have a claim on the property. Our solicitor checked it out and confirmed that was not the case. The second mortgage holder (who had repossessed and was selling the house) had priority in repayment.
Trees obstruct the light – we found there was a successful application for permission to chop them down, granted in January.
Cost of Refurbishment
The house itself is a mess. A repossession owned for twenty years by a landlord who had let the property deteriorate until tenants willing to pay a decent rent were no longer forthcoming. The property is structurally sound, but the bannisters have been smashed on the stairs, there is no electricity and piles of abandoned detritus litter nearly every room. Any removable features have long gone.
We looked at the ashen faces around us and thought we might be in with a chance at auction…
Calculating your Bid
Work out what the property would be worth, once the renovation is complete. We don’t intend to sell our house, but unless you have a money tree, you have to have some boundaries around affordability.
Take advice from a surveyor and work out a ball park figure for the structural renovation. Err on the side of caution, round everything up and add 10% for error.
Calculate the cost of clearing the property and resiting electricity and gas.
Calculate the cost of applications – you may need architects drawings for example.
Once we had those costs, we added them up. Our top bid was worked out by subtracting the total of these costs and the costs of buying – conveyancing, stamp duty etc from the market value after the renovation. If you are wise you will also factor in the profit you would make on the money if you did something else with it.