As the hammer went down, I confess that I was nervous. I'd bought it - a huge five-bedroom house in the handsome Suffolk market town of Bungay. Only a few months ago, this had been a hypothetical plan. Now it was reality. My first auction had ended in my first purchase.
I own one London flat outright with my partner and we wanted a place in the country. On the website of the Essential Information Group - a subscription service that collates all the auctions in the UK - we saw the house for £125,000 to £150,000. It was what they call "a project": a grade II-listed house with masses of work needed. But it seemed like a good price for an historic house. So we went to the auction in a Covent Garden hotel, bid and got it within the advertised bracket.
We're not the only amateurs getting in on the action. As with other parts of the property industry, auctions are becoming far more accessible thanks to the internet. Indeed, last year the new company Nethouse Auctions began offering automated bidding online. "It's the same as any other auction," says the spokesman for Nethouse Auctions, Richard Leonard. "And at the end, the consumer pays £250." Which is roughly what we paid to our auctioneers, Countrywide Property Auctions: £235.
Some differ on the attractiveness of bidding online. "No one wants to," says David Leary of the Essential Information Group. "Buyers in this sector want to feel more confident. The consumer market requires a lot more hand-holding."
For sure. Face-to-face auctions are more popular with ordinary buyers, but it is still a nerve-wracking process. There are certain benefits over estate-agent sales. It is quick, the vendor usually provides a legal pack, covering all the detail of the sale, including Land Registry, and costs from around £15 to £35. "The HIP [Home Information Pack] is a new thing to ordinary homebuyers, but the auction industry has been doing something similar for years in the form of a legal pack," says Leary.
Obviously, there's a lot of "buyer beware" with auctions. Before bidding, you should do a survey. Some don't, says Leary, but they are generally experienced. Surround yourselves with good people, says Leary. "Think about legal costs and get a good builder lined up."
One should ask why the property is going to auction. In the past, many properties were ex-local authority stock. "It could be a difficult property to value or mortgage," says Leary. "Some are in need of extensive works." Others might be above shops - "shops with uppers", as Leary puts it, often go on to the rental market. "I see more and more people investing in the commercial market," he says. "As a landlord, a tenancy agreement is renewable on six months, but with a commercial property you can get a five-year lease." Then there are an increasing number of repossessions. "It's not at the level of the late 1980s by any means, but recent interest-rate rises are putting a lot of homeowners under strain. So in one sense, it's a good time to be buying at auction."
The up-front costs and considerations constitute a risk to residential buyers. "This is why it's predominantly a market of developers," says Leary. "You could end up spending a lot of money up front with the risk of not buying the property." Leary guesses that about 20 per cent of those at our auction are ordinary consumers, although he also knows people who make money from the auction market by buying properties, doing them up, then selling them through estate agents. Also, auctions are of interest for those seeking building plots, although anyone interested in these should check the planning status with the local authority.
Historic house conservationist, Adrian Dobinson, bought his house in Somerset at auction and observed the kinds of people who attended. "There's a mix of builders, developers, and dewy-eyed London couples." That's us, then.
So, can you get bargains? It's "naive" to think that you will, says Leary. "It's like stocks and shares. You've got to understand the market." It's not for window shoppers, he says. "There are benefits and pitfalls. Some make money. Many don't." Some even buy at a higher rate than through an agent, because the whole process goes to their head. Check online the prices of similar houses on the same street (try www.landregisteronline.gov.uk and www.upmystreet.co.uk).
As the dust clears, I hope that "naive" does not describe us. But there's no time for such thoughts. We've got a project on our hands.
Going, going, gone
* BEFORE YOU GO
Auction catalogues come out three or four weeks before the sale. You'll need 15 to 20 working days to complete all the checks and surveys necessary before buying a property.
Buyers should do their own survey and all the research that they would do as part of a normal sale. Get a mortgage approved ahead of the auction. People usually borrow 75 to 80 per cent of the purchase price. If you win the lot, you pay a 10 per cent deposit on the day, and the rest within 28 days. Auction houses usually provide a sales pack including documents such as title deeds, leases, searches, and special conditions of sale.
* HOW TO BID
Go to a couple of auctions first to watch how it's done. On arrival, fill in the registration form, and take identification along with means of payment: some want a banker's draft, others might accept cheques. Seasoned auction-goers try not to appear too keen, and tend to hold back when the bidding starts. Set your top price and do not exceed it. If the bids are below the reserve price, the property will be withdrawn, but have a word with the auctioneer, as the seller might be ready to negotiate at this point. When a bid is accepted, you sign a Memorandum of Agreement, which is prepared and passed to your solicitor for completion within 28 days. The buildings insurance is the buyer's responsibility from that point.
* USEFUL WEBSITES
eigroup.co.uk (the Essential Information Group, a one-stop shop with a subscription charge; it costs £395 per annum or £125 per quarter)
nethouseauctions.com (a new internet auction site)
egi.co.uk (Estates Gazette Interactive)Reuse content