A bid too far

House auctions are swift and economical, but the pitfalls can be serious - as one buyer found

Mark Newman had his interest piqued when he saw an ad for a three-bedroom bungalow in St Austell, Cornwall. "I had just moved from the North and needed to buy a place quickly. When I saw the property was about to be sold at auction, the idea really appealed to me," he says. First, however, Mark, who is divorced with a young son, viewed the bungalow. It had a £30,000 reserve price and was only half-a-mile from the famous Eden Project conservation site. "The auctioneer told me it had a 'problem' in the back garden, but as it was 100ft long and I really liked the bungalow and its dormer roof, I didn't probe any further."

Mark Newman had his interest piqued when he saw an ad for a three-bedroom bungalow in St Austell, Cornwall. "I had just moved from the North and needed to buy a place quickly. When I saw the property was about to be sold at auction, the idea really appealed to me," he says. First, however, Mark, who is divorced with a young son, viewed the bungalow. It had a £30,000 reserve price and was only half-a-mile from the famous Eden Project conservation site. "The auctioneer told me it had a 'problem' in the back garden, but as it was 100ft long and I really liked the bungalow and its dormer roof, I didn't probe any further."

His determination won the day and a few days later, as the new owner of the house, he studied the property's deeds. It was only then that he found the "problem" was no less than an uncapped, disused coal-mine shaft under the garden and part of the living room. "It was particularly dangerous as my six-year-old son liked running around inside the house. Then I discovered a house only three doors away had recently collapsed and someone had died," he says.

It was a risk too far. Mark wanted out - and fast - so he put the bungalow up for auction again. This time it went for £59,000 - to a local buyer who, after having the property structurally surveyed, spent £16,000 on underpinning to prevent a potential catastrophe.

Gary Murphy, a partner at Allsop, the largest residential auction house, explains: "Although auctioneers should produce a full legal pack on properties, their searcher may not have picked up on the seriousness of the mining snag and Mark wasn't given the full picture."

Buying and selling at auction is both speedy and economical, but if you have any lingering doubts about a house or flat, get a pre-auction structural survey for around £250 so you know what you are bidding for.

"Anyone who goes to auction should adopt a disciplined approach," says Ray Boulger, senior technical adviser at Charcol the mortgage brokers. "It's vital not to get carried away with all the excitement and end up bidding too high as you may be up against a lot of dealers and property developers who are there because they know they can revamp a problem property far more cheaply than you can."

The successful bidder pays a 10 per cent deposit plus a £150 auctioneer's fee. Contracts are exchanged immediately and completion takes 28 days. Then the property's yours and you can move in. If you need a loan, it's wise to get a pre-sale lender's valuation for around £150, giving yourself a bidding guide and a short-cut to a mortgage offer. Then check the auctioneer's legal pack for deeds, local searches, access and lease details and pay a solicitor £100-£150 to check out planning permits.

If, however, you are selling, an auction can give you a refreshingly fast deal. "The real merit is that it gives you a fixed selling date, but it's important you get the price right so the sale goes through on the day," says Boulger. Sellers usually pay auctioneers 2.5 per cent of a property's sale price plus £350 for entry in the sale catalogue. "They can be a real boon for a property that hasn't moved for a long time, or an unusual one that dealers and potential buyers can study before the sale," says Boulger.

Visit www.allsop.co.uk for a free guide to everything from reserve prices to when and how you can visit a property before it goes on sale and www.propertyauctions.com for a list of auctions in your area.

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