Bankruptcy Auctions in the UK - Questions and Answers

Bankruptcy auctions in the UK can occur for a variety of reasons, but most often, a bank is trying to sell the property in order to recoup losses because the mortgage holder defaulted on payment. Banks don't want to be in the property business, so usually there are significant bargains to be had at a UK bankruptcy auction. Here's a list of common questions and answers about these events.

Q. Will the bank cooperate with investors who want to buy the property before the auction?

A. Yes. Again, it's important to stress that banks don't want to be in the property management business. This is because if the bank tries to sell the property on a secondary market, purchasers tend to shy away from banks with high foreclosure rates. In addition, government entities may give extra scrutiny to banks with high rates of foreclosure. There's even a type of sale called a "short sale" where a bank sells the property for less than the amount that's owed on the mortgage.

Q. What is the bank's bidding strategy in a seized property auction?

A. Since banks usually intend to re-sell the mortgage on the secondary market, they normally bid up to the amount that's owed on the property. This is called the "upset price." One bank instructs its representatives at United Kingdom bankruptcy auctions to open the bidding at a token amount like £1000 to £2000 and then immediately bid up to the full upset price if anyone tries to outbid them. Banks rarely bid over the upset price.

Q. What if the bank wins the auction?

A. The strategy here is to remember that it's very likely that the bank will be willing to get rid of the property as soon as possible. All you need to do is contact the bank that won the bid, even on the day of the auction, and express your interest in buying the property. Since banks generally buy only those properties where the liens and/or debt exceed the property's market value, they'll be very inclined to make a deal with you.

Q. Is it possible to turn a profit when buying at a bankruptcy auction?

A. Yes, provided you follow a few simple rules. First, know your competition and don't underestimate it. Recognize that there can be a large number of people who want the property as much as you do. Next, have a lot of irons in the fire. Take the time to analyze as many properties as possible so you can bid successfully at UK bankruptcy auctions. Keep an open mind, as well. Finally, be flexible. If you can't buy a property from the bank before the auction, you may be able to buy it from the winner after the bankruptcy liquidation auction ends.

Q. What if there's a problem with the property after the sale?

A. It's important to remember that a home sold in a bankruptcy liquidation auction is sold "as seen," meaning that there are no warranties as to the property's condition. In fact, sellers may intentionally fail to disclose problems or in good faith not be aware of them, so it's imperative to retain the services of a professional home inspector before bidding on any property, whether owned by a bank or any other entity.

Buying a home at bankruptcy auctions in the UK, if done with due diligence, can net the buyer either a tidy profit if he chooses to re-sell the property or an affordable residence if he chooses to keep it.

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