Pitfalls aplenty when homes go under hammer: Buying a house at auction requires a degree of caution, writes Ian Hunter

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The Independent Online
JOHN CHESTERMAN is one of a growing band. He bought his present home at a property auction.

Every week, surveyors' catalogues appear crammed with flats, houses, shops and pubs. The auction prices are often enticing. The repossessed properties flooding the auction rooms have thrown up some bargains, but the inexperienced should remember that not every property snapped up at an auction is a bargain.

John Chesterman, a surveyor, first considered the possibility of buying at auction after two abortive attempts to buy a house through estate agents.

He said: 'I simply picked up a catalogue and went through it. I saw a property I liked in Fulham. It had been owned by two sisters who had recently died. The house needed extensive modernisation. The trustees of their estate, the National Westminster Bank, decided to sell it at auction.'

His first step was to get a structural engineer to survey the house. He commented: 'In my view a surveyor's report is of little use in this type of situation, because he cannot delve beyond the cracks in the wall. The structural engineer's report, which cost pounds 250, offered solutions rather than problems. It was worth every penny.'

When Mr Chesterman had studied the report, he visited a number of estate agents in the area and viewed similar properties as a comparison.

'I saw one particular house and cross-referenced all of its particulars and then worked out with the aid of a builder's quote how much it would cost to get the house into a similar state of repair. Once you have worked out the cost, you can add an extra 20 per cent on top.'

Carolyne Mawer and her boyfriend, Simon, also a surveyor, carried out a similar costing exercise when they visited an eight-room maisonette in London's Maida Vale. The property had a guide price of between pounds 60,000 and pounds 65,000. According to Carolyne, similar modernised properties in the area can sell for as much as pounds 200,000. She said: 'We costed the work which needed to be done, right down to the light sockets. We even planned the house-warming party.'

Richard Vause, a surveyor and associate with London surveyors Edgerley Simpson & Partners, said: 'We have noticed increased activity in the auction market, particularly on the commercial side. I would advise any potential purchaser to take professional advice before making a move. A full structural survey should always be carried out before attending the auction.'

John Guard, a partner and property specialist with Ansty Sargent and Probert, an Exeter law firm, commented: 'It is amazing how few people go to see their solicitor before buying at auction. Most auctions nowadays are structured so that all the title documents and searches are provided before the auction day. Buyers are deemed to purchase with full knowledge of all defects in the property.'

Mr Guard added: 'Not every house that is sold at auction is a repossessed property. Houses that are falling down are usually sold at auction simply because there is no other way of selling them. Just because a property has planning permission does not mean it has the drainage or rights of way essential for development.'

Once the paperwork is complete, the buyer is ready to attend the auction. It is usually possible to submit sealed bids before the auction date. Attending an auction can be a daunting experience. Mr Chesterman said: 'It was all very nerve-racking. The hotel was full of sharks, wheeling and dealing on mobile telephones.'

He said that on the auction day, lots were often withdrawn at the last minute and that the resulting disruption to the auction timetable made it easy for buyers to miss the bidding in their particular lot.

Mr Chesterman and Ms Mawer both advised potential purchasers to decide on the maximum price they were prepared to pay before attending the auction.

Mr Chesterman decided that pounds 113,000 was his ceiling. 'The bidding started at pounds 85,000 and within 30 seconds had reached pounds 100,000. At pounds 105,000, all the property developers dropped out. Eventually I bought it for pounds 111,000. We have spent a good pounds 30,000 on it since then. The house is probably worth between pounds 150,000 and pounds 160,000 now.'

Ms Mawer and Mr Mitchell were not so lucky. They decided their maximum was pounds 80,000. They were outbid by pounds 500. They subsequently tried to negotiate with the purchaser through his agents, but to no avail.

VIDEO GUIDE TO BIDDING

Auctioneers Stickley & Kent have recently issued a video entitled 'How to buy a property at auction' at a cost of pounds 9.95. Michael Gale, director of auctions, said: 'The video has evolved as a result of the overwhelming response from first- time buyer/owner occupiers to make this initiative and bow to public demand.

'We believe it is important that potential purchasers fully understand the process before attending an auction. We always encourage any would-be buyers to attend one of our auctions first before buying at auction.'

Hambro Countrywide Property Auctions has launched an auction seminar. At these meetings, potential bidders are taken through the auction process. A solicitor explains the legal issues, and a surveyor points out the types of valuations and reports that should be considered when buying a property.

Hambro Countrywide Property Auctions 0245 344133; Stickley & Kent 071-284 0181.

(Photograph omitted)

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