Property buyers looking for a good deal at auction have been warned about the problems of getting a mortgage on some of these homes.
Almost three quarters of first-time buyers have considered buying from an auction, but research from broker First Mortgage suggests that a third could be refused a mortgage.
David McGrail, compliance director at leading mortgage broker First Mortgage, said:
“The appeal of an auction is clear to see, the prices can be significantly lower than the property market in many areas of the UK.
“However, first time buyers or any buyer looking to get a deal at an auction, should exercise extreme care. Many of the properties for sale at the auction are there for a reason, they might have issues with damp, subsidence, vermin or even lack basic facilities, such as a functioning kitchen or bathroom.
“This means that getting a mortgage approved will be almost impossible, so what might be a good deal on the surface might turn out to be the opposite
“Properties in bad condition often end up at auction. Mortgage lender require a property to be habitable in order for them to secure a mortgage on it. If a property is not habitable then it becomes harder to sell in the event of repossession.”
He added that buyers have been inspired by property shows such as Homes Under The Hammer, Grand Design and Restoration Home.
The top reasons for why first-time buyers wanted to go to an auction included being cheaper (36%), being able to style the house as they wish (22%) and because they wish to rent the property out (17%).
McGrail added: “The average price of a property has risen 7.4% over the past 12 months, and in some parts of the country the rate of growth is even higher.
“This has left would be buyers in an incredibly hard predicament, facing higher interest rates due to having to borrow more money over a longer period and more at risk of negative equity due to their share of the house being lower.
“The average deposit has grown in recent times. Meaning that many are left paying even more money than planned for a deposit of the same or smaller percentage.
“Therefore, it is even more important that buyers are choosing wisely, are not rushing, and are seeking advice from a qualified professional.”