Property auctions: do they offer a good deal?

Thursday, 22 January 2009 2:54 PM

By Sarah Garrod

With property prices falling there's never been a better time to pick up a bargain if you have the funds behind you, and where better to start than an auction?

It may sound grim, but with home repossessions on the rise, more and more great deals are finding their way to the auction house. If you're a first-time-buyer with a deposit, then an auction could be just the place for you to find yourself a good buy and with auction lots being very diverse on the whole, chances are you'll find the home of your dreams.

Barnard Marcus are one of the largest residential property auctioneers in the UK. We interviewed their divisional managing director, Chris Glenn, to give us some tips for anyone thinking about buying at auction for the first time, and to explain a bit more about auctions as a whole.

What would you suggest for those buyers who have never been to a property auction before they go?

Chris says: "Preparation is the key to success. Go to an auction before you go to bid so you can get the "feel" of what happens. When you are bidding you will need to make sometimes life changing decisions in a matter of seconds so to know the environment and procedures makes the process less daunting. Be well prepared both financially and legally. Arrange your mortgage funding in principle before you even start looking at the auction catalogues, that way you will get an understanding of what you can afford. Also, contact a solicitor. Make sure they can act quickly and get paperwork sorted out like ID documents and other papers as your solicitor will need them before you even find a property. This will take a lot of the stress out of the process and make your auction buying experience an enjoyable, fun and possibly profitable one."

Has there been a significant increase in the number of properties going to auction since repossessions increased?

Chris says: "It is a fact that there has been an increase in the number of properties at auction and some of these are repossessions. The lenders have a duty of care to the defaulting borrower even after possession. The mortgage account will continue to accrue interest and cost until the property is sold and the transaction completed. There is a risk that if the property is not sold within a reasonable period of time then these costs will escalate and therefore, any shortfall between the sale proceeds and outstanding loan will be far greater. Auctions have proven to continue to be an active market where properties continue to sell and therefore, an ideal market for lenders to place repossessions."

Do repossessed homes offer a good deal, particularly for first time buyers?

Chris says: "There are a number of advantages for any buyer attending an auction and these are not exclusive to first-time-buyers. The properties offered by auction will have a full legal pack available in advance of the auction. This can be viewed by a buyers solicitor quickly and any issues identified at the outset rather than becoming apparent at a later stage in the transaction. This will limit the exposure of cost (and emotion) that can happen in a private treaty transaction where legal issues / faults become apparent after a sale has been agreed, and often cost expended by the buyer on items such as survey etc. Whilst HIPs in private treaty go some way to limit this exposure, they are not as comprehensive in content as many auction legal packs (which will include a HIP where required)."

What sort of properties do you see the most of at the moment?

Chris says: "Auction lots represent a wide spectrum of the market and there is not one particular type more prevalent in the catalogues than another. This gives buyers a wide range of choice either in property type or location."

What does the average property at auction go for and how does this compare to last year?

Chris says: "The auction market reflects the rest of the market in terms of price variation. As prices have fallen so have average lot values in line with the housing market generally."

How can buyers pick up a bargain at auction?

Chris says: "Commentators and others often use the word "bargain" in relation to auction sales. If a buyer attends an auction hoping to buy a property for say £100,000 and the property has a genuine value of say £200,000 they may be disappointed and outbid by others. If however they wish to buy a property and set their limit to say £150,000 and actually, the hammer falls and they buy it for say £140,000 then, in their eyes the have a bargain."

What sort of buyers are you seeing most of in the auction houses at the moment?

Chris says: "Our auction rooms are full of a wide range of buyers. These include owner-occupiers not involved in a chain as well as first time buyers. As some pension schemes no longer provide returns that were originally forecast, we find a lot of people buy at auction as part of their retirement planning. Most of all, the buyers in all sectors from the professional landlord, property developer to first-time-buyer enjoy the certainty of the auction and know a binding exchange has taken place on the fall of the gavel."

How has the credit crisis affected the sale of land?

Chris says: "Development land values have suffered and this type of lot is no more immune to market fluctuations than any other. Amenity land and agricultural land has suffered less and there is some albeit anecdotal evidence that this sector has gone up in value over the last 12 months."

Are there any qualities that make a property at auction go for more?

Chris says: "Location is the key issue for any property. In the main, you can change almost any aspect of a property but not its address."

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• buying
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• selling
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• uk property features