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Property -> Hammering out a property bargain at auction

HAMMERING OUT A PROPERTY BARGAIN AT AN AUCTION
By Dominic Moody (March 2005)

Buying a property at auction need not be scary if you follow a few simple rules.Those in the know say that one of the persistent fears of property auction newbies is that they'll clinch an unwanted purchase with an inadvertent scratch of the head.But the chances of buying a semi-detached in Croydon while attending to an itchy forehead are unlikely, say the experts at the Royal Institution of Chartered Surveyors (RICS). Auctioneers know their stuff and are unlikely to mistake a casual gesture for a firm bid.



And as competition for properties is seemingly hotter than ever, a growing number of newbies are considering seeking a new home via an auction, rather than through the traditional channels. RICS says that auctions currently account for around five per cent of all property transactions in the UK, and they're increasingly popular with buyers and sellers.

One of the big attractions for buyers, at a time when competition is high for properties, is that there's no gazumping - once the auctioneer's gavel goes down, the sale is concluded. Even better, there are none of the agonies of a drawn-out completion. The process will be concluded within a set time, which usually makes buying through auction a far speedier transaction. It's benefits such as these, as well as the prospect of snapping up a bargain, that have attracted a growing number of private buyers to auctions in recent years.

"Twelve years ago, auctions were the preserve of the black hat brigade, and builders in donkey jackets," says David Sandeman, auction property expert. "Nowadays, I rarely go to an auction without seeing a baby in a pram. Private buyers are becoming much more common. Talking to auctioneers, I'd say that private buyers probably account for more than 50 per cent of all sales."

Around 25,000 properties are sold at auction each year, of which a large majority are residential. Sandeman says that the boom in sales to owner-occupiers, rather than landlords and investors, owes a lot to a change in attitude amongst the auction houses themselves.

"Auctioneers are more customer-focused these days," he explains. "They make it much easier for buyers to get the information they need and go out of their way to help private individuals and walk them through the process."

But with the increasing appeal of auctions come new drawbacks - the main one being that true bargains are hard to come by. "Properties won't be bargains," agrees Sandeman. "But you should be able to buy an opportunity - by which I mean something that you can do up, stamp your own identity on. A development opportunity."

How does it work in practice? Auctioneers advise that buying in this way is mostly unsuitable for first-time buyers as a ten per cent deposit is usually required, which can be prohibitive for those on a tight budget. Auctions are also usually unsuitable for those who are part of a chain, and depend on selling their own property in order to finance their purchase.

That said, for those who do their homework, get the finances in place and stick to their guns, the rewards can be considerable - a fair-priced property with little of the to-ing and fro-ing associated with a typical purchase.

Kick things off by checking the local press for auctioneers' details. They will be able to send catalogues for their next auctions, which will give an idea of properties available and their guide prices.

TOP TEN TIPS FOR BUYING AT AUCTION

1. Do your research thoroughly before the auction.
2. Ask the auctioneers for the legal pack.
3. Pick auctions that are at unpopular times such as school holidays, or in places that are difficult to get to as there's more chance of getting a bargain.
4. Work out a budget for your purchase.
5. Stick to your budget and bidding limit.
6. Don't take too much notice of the guide price as it's often set artificially low to entice bidders.
7. Always try to attend the auction in person.
8. Be patient and canny when bidding.
9. Check what others are doing to avoid pushing the price up if you don't have to.
10. Don't be scared. You won't necessarily get a bargain, but at least you won't get gazumped!

FURTHER INFORMATION

Essential Information Group: www.eigroup.co.uk or 0870 112 30 40
RICS: www.rics.org.uk or 0870 333 1600.

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