40% would buy property at auction

Wednesday, 10 October 2007 12:00 AM

Some 40 per cent of British homebuyers would consider purchasing a property at auction according to new research from Standard Life Bank.

As many as 15,514 properties were sold in this way during 2005, an increase of 13 per cent on the previous year, and the method is an increasingly popular way of buying a house.

The vast majority of those questioned (98 per cent) thought buying a house at auction would save them money.

An optimistic nine per cent of this number imagine they will be able to acquire a property for 30 per cent less than market value, while a more realistic 48 per cent hope to secure a reduction of between ten and 30 per cent.

Furthermore, 50 per cent of those buying a house by this method thought estate agents overvalued property and 31 per cent were keen to avoid fees.

However, many people are unaware of the requirements necessary when completing a transaction in this way.

While 94 per cent of homebuyers said they would view a property before deciding to bid for it, only 48 per cent said they would be willing to pay for a survey - leaving them exposed to potentially huge costs further down the line.

Up to 26 per cent of auction bidders would not have thought to arrange a deposit and just over half would have a mortgage prepared.

A staggering 78 per cent of buyers do not know they are required to put down ten per cent of the value of the property as a deposit in order to confirm the sale.

"It is essential anyone thinking of buying at auction gets their financial house in order before they start the process," said Ashley Ramsay, of Standard Life Bank.

"I'm sure many people don't realise if they bid over the market value of the property they may not get a mortgage for the full amount, and once their bid is accepted they are legally committed to buy it."

In response to the findings Standard Life is offering those looking to buy property at auction some helpful tips:

• Do your homework: Know what you want to buy, how much you want to pay and the market you are buying in to secure the best deal.

• Understand how the auction works: If you are the highest bidder you have to pay ten per cent before you leave and the remaining balance within 28 days.

• Beware of hidden costs: Stamp duty - on properties costing over £125,000 - surveys, legal advice and administration fees to the auctioneer can all add costs.

• Price: Set a price before you start bidding and stick to it.

• Finance: Have a mortgage in place with a lender before you walk into the auction house.

"Doing your homework and considering the practical implications of buying at auction is a good foundation for what can be an exciting and fulfilling experience," concluded Ms Ramsay.

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