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Is this really a good deal?


I have seen a 20-30% BMV opportunity that is nearby and being sold at auction. What is the best and quickest way to purchase the property and ensure that, when I either flip the property or re-finance, it’s re-financed at the market value? The property is in good order and does not need any refurbing.
Do I need to keep the property for a certain amount of time before the flip/re-finance? Is it best to bridge then re-finance?


  1. Your question is based on a number of misconceptions about how auctions and finance works - the nub of which, the deal you think is a deal almost certainly isn’t.
    20-30% BMV - on what basis? if your basis for this is the catalogue guide price, you have zero chance of buying it at this price, simply because the seller and the auctioneer agree a threshold price, below which the auctioneer does not have the seller’s authority to sell. This is the reserve price and is uniformly 10% higher than the guide price shown in the catalogue.
    Properties rarely sell at that reserved price; they usually sell way higher than that. Which means, in reality, most (possibly all) of your perceived 20-30% BMV evaporates in the heat of the bidding process
  2. Refinancing at market value. For this property, you have next to zero chance of this happening, because mortgage lenders’ valuers only uplift the value of recently bought properties based on the tangible improvements made to it since purchase. Buying cheap or BMV is not in itself a basis for a value uplift.
  3. You say "The property is in good order and does not need any refurbing," so when you go to refinance it onto a mortgage, it will be valued at what you paid for it, because you will be unable to convince a valuer you have added tangible improvements to it since you bought it.
  4. Buyer costs are buried in the legal pack of auction properties. You need to know your way around a legal pack, or pay a solicitor to do that for you. Why? Because auction sellers routinely bury substantial costs imposed on the buyer in the legal pack for the precise reason that they know plenty of daft auction buyers won’t read it and will think the winning bid is the price they pay, when the reality is in many cases it will be several thousand pounds higher.

    Without being harsh, your post has all the hallmarks of someone who:

    A) Gets outbid on auction day because, sensibly, they pull out of the bidding war when the price escalates to a no longer credibly BMV price
    B) Gets caught up in the bidding war and ends up paying way closer to the full market value i.e. the same price that you could have bought any property in the street through a normal estate agent.

    Your only possible way to make money out of this opportunity is that:

    A) Because it needs no work it doesn’t appeal to the host of auction buyers that only go to auctions to buy ‘doer-uppers’ and there is nothing to do up on this. By chance you may get to pick it up around reserve price
    B) The buyer costs in the legal pack are not too severe
    C) You can flip it via a local estate agent at a price that covers all of the bridging finance costs (approx. 10% of the purchase price you pay) and still leaves some profit

    Despite what TV programmes such as Homes under the Hammer, would have you believe, auctions bite the ass of the unwary. Be very sure of what you are doing before you get stung.

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