Fine art, rare jewels and ancient manuscripts are just a few of the items that are associated with auctions. But trading houses, usually a hotbed for collectors of everything from Chinese porcelain to exotic butterfly collections, are offering a wider variety of goods than ever – and among them an increasing supply of affordable housing.
The number of residential properties auctioned over the past 12 months has risen substantially, with more than 25,000 homes on sale in 2010, says Essential Information, a property auction specialist. More than 100 residential auctions were held in December alone, with 2,000 lots sold generating revenues in excess of £370m.
The final quarter of 2010 saw a 10 per cent increase in residential sales compared with the same period a year earlier. Property experts predict the trend is likely to accelerate over the coming year. And while stately homes and sprawling mansions tend to dominate the headlines, there are scores of homes that go under the hammer each month at much more accessible prices.
Chris Coleman-Smith, the residential auction director at Savills, says he has seen a wide variety of buyers at the company's auctions ranging from first-time buyers, those looking for a second property, buy-to-let investors, professional builders and property developers. Prices at the last auction he attended started at £5,000 and went up to £3m. Convenience, combined with the chance of a bargain, underpin the rising demand, he says. "A lot of people just come along to auction to buy something quickly. They aren't interested in dealing with an estate agent for three months only to find out at the end that the vendors have changed their minds," he says.
Another factor is the attitude of financial institutions. Gary Murphy, a partner and auctioneer at Allsop, a property auction house, says tougher lending policies are also prompting buyers to rethink the way they purchase homes.
"With bank finance tight and lower ratios of loan to value available, consumers will be spending more of their own money and less of the banks', meaning buyers will be looking for value for money now more than ever," says Mr Murphy. "Good auction houses will work with sellers to ensure that they will offer lots only at realistic reserve prices.
"We have sold houses in the more depressed areas of the north for as little as £10,000 and flats in Belgravia for £3m in the same auction."
While the atmosphere of the auction house may not have universal appeal – with bidding often completed in less than the time it takes a kettle to boil – they can make sense for savvy house-hunters keen to avoid drawn-out exchanges with estate agents and the prospect of homeowners who renege on offers at the 11th hour.
Bargains to be had
Charles Smailes, the managing director of Feather Smailes Scales and a former chairman of the National Association of Valuers and Auctioneers (Nava), says he saw properties fall by tens of thousands of pounds in auction rooms last year, offering a lifeline to frustrated first-time buyers.
"In December, a two-bedroom ground-floor flat in Harrogate went up for auction. It had been valued at £160,000 on the market but was sold for £129,000 on the day to a couple buying for their son and daughter-in-law," says Mr Smailes.
Similar price reductions were seen elsewhere, he said, with a former Post Office in the village of Markington, Yorkshire, falling from a market price of £265,000 to £179,000 and a bungalow south of Harrogate dropping from £250,000 to £220,000.
The reason for the dramatic reductions comes down to a number of factors. Some properties require a good deal of renovation, while in other cases sellers are in need of a quick sale to bring an end to costs such as council tax and mortgage repayments – typically following the death of an owner-occupier, a divorce or a court order – and are willing to sacrifice a bit of money to speed up the process.
Unlike in the open market, auctions set a level playing field. "At an auction, people are reassured to know that they are only paying one bidding increment more than the next highest bidder. At private treaty [a sale through an estate agent], you are far less likely to know where the competition has stopped," says Mr Murphy.
For those with the financial resources and wherewithal to do up a property, renovation work done properly can reap plentiful rewards and even boost the overall value of a property. Digging a new basement can add 20 to 30 per cent to the value of the property and typically takes 12 weeks to complete. "Buyers like doing up properties. It gives them an opportunity to improve to their own style and add value in the process. They're not paying for other people's improvements and tastes. Estate agents, on the other hand, generally present homes ready for immediate occupation at prices that reflect the owners' aspirations – which may not always be realistic," says Mr Murphy.
According to Homebuilding and Renovating, an online magazine, the cost of minor repairs – such as replacing cracked or damaged plasterwork, replacing damaged or missing floorboards and repairing or replacing windows – are typically in the region of several hundred pounds per job. Moderately expensive repairs cost between £2,500 and £5,000 and would cover the cost of rewiring, replumbing, replacing a bathroom or upgrading a kitchen. The most expensive repairs involve complete overhauls – such as replacing an entire roof, kitchen, bathroom or rebuilding a wall – costing upwards of £5,000 for each job.
A house less ordinary
Another attraction is the chance of something unique. For those in search of a quirky, unusual or rare property, these are typically more often found at auction than on the direct market. Windmills, water towers, churches and, for those with a strong stomach, disused public toilets are a few of the less-conventional properties found on sale at residential property auctions.
What to watch out for
However, there are serious considerations to bear in mind before going to an auction. This form of property purchase won't be for everyone. Auction catalogues typically go out on general release two to four weeks before auction day, so prospective buyers need to act quickly to ensure their due diligence is completed and they have accumulated the requisite levels of finance to enter the bidding.
Mr Murphy says preparation and a level head are the keys to finding a bargain and to avoid flushing money down the drain. "Buying at auction is a great way for anyone to buy, but you must remember that the sale is binding when the hammer falls. You will have to complete within 20 working days of the sale usually, so if you need to sell your home before you can buy, auction may not be for you.
"Homework is critical. You must look into all corners before bidding. Complete full legal enquiries through a solicitor; instruct a surveyor to do a thorough condition report; arrange finance; view the property first and don't be afraid to ask questions before the auction day. Most importantly, if you still have doubts when the lot comes up for auction, don't bid for it."
Such due diligence can be expensive with some valuers charging about £500 for a valuation – a figure that cannot be recouped if you decide not to bid or are outbid on the day.
And while renovations can add value to a property, faulty jobs can have a damaging effect, reducing the overall value of the property. More information on the impact of renovating can be found by visiting the Government's planning portal at planningportal.gov.uk, speaking to the local council and consulting the Building Regulations Code, which outlines rules pertaining to thermal heat loss, ventilation and fire safety.Reuse content