House Five - buying at auction

As June progressed we got a bit frustrated that 'interesting' property listings had started to dry up, so with the lack of long term properties to get invested in, we had a good look at this investment possibility - a fire damaged house in Barr, Dumfries and Galloway. John had set up an alert through On The Market for properties in this area, and this dropped into his inbox one day - starting bids £13k!

Don't laugh - we're serious, it even featured in this Daily Mail article!

Buying a house at auction in Scotland goes something like this:

Step 1: get registered with the auctioneer. You can do this online and send the usual proof of ID (scan of passport) which will get you an account with a big button on the screen saying 'bid now'. We did this process on a Sunday evening about a week before the auction. 20 minutes later, the phone rang and it was the auction house, on a Sunday! We were validated and the lovely lady was very helpful in enabling us to understand the process even though we were complete novices.

Step 2: the auction itself. Auctions have an end time (let's say Thursday at noon). Here's the subtlty - if you put in the winning bid, that's the price you will pay, even if you outbid everyone else by thousands of pounds, so bid in the smallest increments. The end time of the auction is 'soft' so if you place a bid with 1 minute to go and it's 'to you' they simply extend the auction another 10 minutes. So, you can't steal a win by dropping a bid in with a few seconds to spare. Seems fair and allows everyone to respond to the bidding. Disclaimer: not all auctions may work like this, so check with the auctioneer!

Step 3: you have to pay immediately (on the working day), so having the cash in your bank for a payment over the phone (debit cards acceptable!) is the requirement or you may lose it to the next highest bidder. Fees are usually a percentage of the sale price but for a house of this low value, a fee floor applies (£5000 plus VAT in this example)

The house was being auctioned by Pattinsons and you can see on their website the types of property that usually go through auction (pretty distressed sales!) This house had suffered a fire that started in the roof space and been damaged so badly the owner just wanted to get back as much money from the sale as possible without any hassle. I hope they also had an insurance payout.

We were surprised the auction house lady called us on a Sunday, and we asked her as many questions as we could think of: do you have any floor plans or any photos of the inside before the damage, what is the floor area, for example, to help us work out what it might be worth once done back up to a liveable standard.

Surprisingly, she was unable to help with much more information than what was in the listing: A significantly fire damaged 2 storey, 2 bedroom villa, with garden to the front, and an attached garage. To the rear an enclosed courtyard. Located in the centre of the picturesque conservation village of Barr in Ayrshire. Barr is nestled amidst the Carrick hills beside the converging rivers of Stinchar and Greg. Barr has an excellent local primary school as well as good local amenities including community village store, and bowling green. Ayrshire is renowned for its many golf courses including Trump Turnberry (about 22 miles). There are wonderful opportunities for walking and cycling in the area, including the world renowned Culzean Castle and Country Park. This property is located within easy reach of local amenities.

It turned out the local shop was right next door. This was not ideal as we think people will park outside the property to access the shops, and possibly the waste might attract rats. And the rear courtyard was a bit of a stretch - it was little more than a strip of pebbles! This was not somewhere we would live, and so the prospect was purely for investment purposes.

A little research via Rightmove showed that about a year ago, this house, in a newly renovated condition, had sold for £138,500 so this sounded too good to be true. There were internal photos and floor plans and the full sale price history going back 20 years. We hadn't got time to view the property, but decided to give it a go anyhow. John rang a local roofer who was very helpful with a rough quote, and we estimated that for less than £80,000 the house could be back to that condition. Even without house price inflation in the last year, there was potentially a £40,000 margin that could be had - and perhaps benefit our kids as a deposit to get them on the housing ladder.

The auction closing time was a Thursday at noon and Liz was in charge of the big green 'bid now’ button. Liz says: Again John surprised me with his willingness to go through this process. He didn't believe there was a margin big enough to make the effort worth while, and the distance was still a worry for him. But, if we set a limit and we could have enough cash ready in the bank to cover the payment then he would let me give it a go. We'd agreed our ceiling price (£19,000) and all I had to do was stick to it.

The boss was, fortuitously, out of the office, because the auction was very distracting! I planned to log in at about 11.30am thinking I might as well let everyone else get any bids out of their system, and perhaps we would already be outbid. But, John texted me to say that on our first bid I would need to enter our details, so not to leave it to the last minute as that would slow me down and might mean that I would be too late to get a bid in. So, I put in a low bid early on and filled in the details requested, then we were ready to go at it full tilt. The process was both painfully slow, dragged out over an hour and a half, but also furiously exciting. Each time I submitted a bid I was winning for a few minutes, my heart racing, but the other bidder(s) always came back quickly. Then as the closing time came round, and we were bidding back and forth, the end time of the auction got extended over and over, until at £19,000 to us (our limit), the other bidder didn't respond, and suddenly I was panicking - oh, gosh, we were winning, we were winning, and the timer ticked down to two minutes to go, I was sure we were going to get it ... and then he bid! You can see our bid history below.

To cut to the chase, someone else won it for £19,250 and we'll never know whether that was their ceiling, and they really had to debate whether to go for that last bid, or whether I could have just put in one more bid and come good. Or maybe they saw more opportunity than we did (eg. if they had more experience in doing a house up than we do!).

So again - nothing ventured, nothing gained ... or in this case lost. Unlike shooting off up to Scotland, this 'learning process' cost us precisely £0.00 and puts us in a better frame of mind should another auction come along, and we both got a rush out of the process!

How do we feel about not winning it? As with everything else so far, some sorrow and some relief. It's a big step to buy a house when still working and many miles away, and so we were, and are, still scared of it. Despite the bravado and the rationale behind all our decisions, the unknown is daunting. The other big reason of course it that if we tie our money up in a property we don't love, it means we won't be able to afford the one we do love if it suddenly comes up. So, on balance, it's a good thing!