Could buying a property at auction be the solution to rising house prices? What to do before the hammer falls
08-05-2014
By Dominic Prince
One of the most expensive residential properties ever to be offered at auction goes under the hammer next month. The lot comprises a residential block of flats in London and is expected to fetch more than £10million.
It’s a significant price tag, but what’s just as interesting is that the vendors have chosen to sell at auction rather than via an estate agent in a conventional way. There is a trend here.
Buying and selling at auction is becoming more and more popular with purchasers cramming into auction rooms where previously only developers and property professionals dared to go.
A real find: The Old Rectory bought at auction by Dominic Prince
There are several advantages to buying at auction rather than in a private treaty sale. When the hammer falls, the property is yours. Nobody can come along with a higher offer, so there is a finality about the transaction for both the buyer and seller.
Buying or selling at auction also means that the whole process is completely open. This, in particular, is useful if siblings are selling the home of a parent and then sharing the proceeds.
Between 2009 and 2013, the average residential lot sold by Allsop — the auctioneer selling the £10million block of flats in London — increased from £156,000 to £216,000.The agency conducts seven sales a year and offers between 300 and 350 lots per session.
Allsop sells properties from all over the UK at The Cumberland hotel in London’s Marble Arch, ranging from residential to commercial, from acres of land to London penthouses.
At the other end of the market is Kidson- Trigg, based in Ramsbury, Wiltshire. This popular local agency also has an auction in September when it will be offering just four lots.
Real gem: The Rectory's kitchen with an Aga cooker
Alastair Kidson-Trigg, a partner, says: ‘The biggest growth we have seen is wealthy people in their mid to late 50s who are looking to buy their final purchase at auction. ‘Generally, the property will be in need of substantial work and will not shift easily through conventional marketing. Often properties are auctioned to wind up a deceased estate when absolute transparency is needed.’
Offered in its September sale is a six- bedroom farmhouse, which needs underpinning, in Royal Wootton Bassett standing in 18 acres of land with a guide price of £400,000.It is essential to do your homework before a sale and that may mean forking out legal fees for a property that you won’t end up buying.
Visit the property as many times as possible looking for signs of impending disaster like dry rot, subsidence and any potential rights of way or neighbour disputes. It’s a good idea to get a local builder to look round also, pointing out any work that might need to be done.
If you are still keen, you are ready to bid. But that’s also when it gets a little scary — as I know from personal experience.
ON THE MARKET: Seaview Chalet and Clifftop Chalet, in Brentfields, Looe, Cornwall, are two vacant, detached chalets on a lawned plot with coastal and headland views. Auctioneer Countrywide Property Auctions. Viewings by appointment with Stratton Creber Looe, 01503 262271, strattoncreber.co.uk. £50,000 to £100,000
My wife and I had been looking at innumerable houses all over the South-West that had been messed around with and, in some cases, spoilt. Then we saw a seven-bedroom Georgian rectory, set in three acres of land and decided we had to have it.
Auction day loomed but the house carried a guide price of £775,000 and the automatic option of buying a barn for a further £75,000. So we sat up the night before doing our sums and agreed on what we could afford to pay.
West Country auctioneers Symonds & Sampson offer about 150 properties a year, which is how we ended up, just two months ago purchasing our Old Rectory.
Mark Lewis, the man who dropped the gavel on our winning bid, says: ‘In the past three years, we have seen a 30 per cent increase from people wanting to buy at auction. There is always the chance of finding a true gem.
‘But if you get a house like the Old Rectory the attraction is that you are buying a blank canvas.’
What you see and what you hear at the auction is final. From the time the hammer drops, you are legally committed to buy the property, contracts will be exchanged and a 10 per cent deposit must be accounted for.
UP FOR AUCTION: This house in Aspley has had planning application submitted to convert it from a three-bedroom to a five-bedroom detached home. The property is located on a generous corner plot. Graham Penny Auctions: 01159 588702, grahampenny auctions.com. £160,000 plus
The balance is usually payable within 28 days of the sale, unless you make a pre-sale arrangement with the vendor to settle later than that, as we did. Be warned, you’ll need to have the means to settle and that has to be in a tangible form.
‘We had one buyer recently who turned up with £16,000 cash in a Waitrose carrier bag, but we specify that we will take payment by debit card or cheque only. He scurried off to secure a cheque from his bank.
‘In the past I’ve been left a saddle, the keys to a Porsche and, on one occasion, somebody’s wife,’ says Lewis.
Approximately 10 per cent of lots at Allsop (and most other firms) are sold prior to auction, so if you know what you have to spend, and don’t want to risk the auction room, it may be worth putting in a bid prior to the sale day.
Most auction houses will accept phone bidding, postal bidding (with the requisite 10 per cent deposit cheque enclosed) and online bidding from anywhere in the world. All auction houses will state a guide price which, generally speaking, is the reserve price for the property.
Some lots do sell at below the guide price. Be aware that accidents can happen. ‘We had a client who came back after a very good lunch and got his lots muddled up. He overpaid and then had to dispose of the property at a £56,000 loss,’ says Allsop’s Gary Murphy.