Property overseas: online auctions

Online property auctions are a great way of picking up an overseas bargain but potential buyers need to be careful, says Laura Latham

As the recession grinds on, property owners everywhere are feeling the pinch, especially those who invested in areas where the market has all but dried up, such as America and Spain.

Increasingly, such properties are being found at auction as owners try to offload homes they can no longer afford. Often alongside them are multiple new-builds in projects on which the developer has defaulted.

Though live auctions are the most common route to such a sale, some companies are moving online, predominantly in Spain, giving bargain hunters a chance to snap up cut-price properties without leaving home. However, several agents involved in online sales warn that buyers should exercise caution and do their research.

"Buying property at auction is one of the best routes right now, as it's possible to find property at substantially lower prices than through estate agents," says Ben Marson of Safe Buying Experience, an accreditation firm for the industry.

Marson claims Spain is still the prime destination for British buyers, who are looking for "good discounts and a safe investment". He says buyers should be careful when using online services. "There's a danger buyers will be enticed into rushing their purchase, without using a lawyer. They may also be told a property is reduced by up to 50 per cent, but that may be based on a valuation taken two years ago."

Geoff McClure, of Azure Property International, says legal rules when buying via auction still stand in Spain and auction houses must provide full details of properties, including title deeds, guarantees and valuations.

Stagnant markets in America are also leading owners to put their properties into auctions with some auctioneers in New York and Florida offering foreclosures at rock-bottom prices. However, all details and contracts relating to a property must be available in advance of the sale and should be checked by your lawyer.

Stuart Law of investment analysts Assetz says his company pulled out of online auctions due to the difficulties in monitoring the legal issues. He says US auctions can prove especially tricky, as property offered at prices as low as £6,000 can look enticing at first but actually can come with "lots of hidden liabilities".

Ingrid Rix, of Direct Auctions on the Costa Del Sol, sells online and at auctions and is seeing investors snap up properties for discounts ranging from 30 to 50 per cent. However, she points out many Spanish homes at auction are poor quality or have legal issues. "Some of the best prices are in developments currently classed as illegal. The local authority moved recently towards legalising them, so they could be great buys, but it might still be years before the situation is settled."

Rix prefers buyers to attend auctions in person having done their research. "Buyers need to see a purchase for themselves as descriptions can be misleading. An agent's idea of spacious accommodation or sea views, for example, might differ completely from yours."

Auctions: Buyer's guide

* Many auctioneers expect buyers to have finance arranged before bidding but banks probably won't give a mortgage on an auction buy.

* In Spain a cooling off period allows your lawyer to check the legal status of a property before signing contracts.

* Safe Buying Experience has developments on which it has checked and offers a free legal history.

* Be wary of buying any property "sight unseen". It may be carrying undisclosed liabilities, have legal issues or be poor quality.