Housing under the hammer

Home-buying auctions offer choice, speed and certainty
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The Independent Online
FOR MANY people, property auctions evoke images of repossessed homes going under the hammer. In the recession years of the early 1990s many dreams ended this way.

So you might think that now, with the housing market buoyant once again, auctions would be playing a lesser role in the home-buying process. Not so, says Chris Berriman of Allsop and Co's residential auctions department. "The mystique of auctions is definitely fading," he says. "Buying a house or flat at an auction is an extremely simple process, and offers real advantages over other routes."

To back up his assertion, Mr Berriman reports that Allsop's March residential auction turned over pounds 20m of property, the largest single UK residential auction ever. Mr Berriman warns that, unlike during the recession years, you should not now expect giveaway prices at auctions: "Prices will be competitive, but don't expect any fantastic bargains."

But what you will get through buying at auction, rather than through an estate agent, are the three main advantages of choice, certainty and speed. Auctions can offer a good choice of unmodernised period properties in established residential locations, whereas properties in estate agents' windows will usually have already been "modernised", sometimes inappropriately.

Second, buying a home at the fall of the auctioneer's hammer offers a great deal of certainty: the contract is legally binding and there is no chance of being gazumped. Third, the process is quick: catalogues are sent out three to four weeks before the auction, contracts are exchanged at the fall of the hammer, and completion takes another three to four weeks, so the total home-buying process can take only six to eight weeks.

These factors, and the gradual demystification of the auction process, are attracting increasing numbers of ordinary people, including first- time buyers. Mr Berriman says: "We are now seeing more and more owner- occupier buyers bidding and successfully purchasing in the auction rooms."

One such purchaser was Denis Barton, a secondary school teacher, who bought his north London home last year at auction. He explains: "I wanted a small Victorian terraced house near the school where I work, and I looked at several in the area, but they had all been modernised to the owner's taste and I would have had to rip half of them apart to get them back to the original condition."

Mr Barton then saw an unmodernised house in the area up for auction, had it valued and got a mortgage offer, and bought it at auction 10 days later. He took the advice of a friend and employed the valuer to bid on his behalf, a decision he would recommend to anyone serious about buying a home at auction.

He explains: "Having invested time, money and emotional energy in the house, the actual auction was the scariest thing I've ever experienced. I knew how much I could bid up to, of course, but I didn't trust myself; if bidding goes pounds 1,000 over your limit, the temptation to make just one more bid could be overwhelming." Mr Barton's limit was pounds 71,000 (professionals recommend setting an odd number in case a rival has settled on a lower even one) and, in the event, he got his house for pounds 67,000. Having looked at other similar properties in the area, he knew he was getting a good deal.

Anyone thinking of pursuing the auction route to home ownership should start by going to a couple of auctions as an observer. Catalogues for forthcoming auctions in your area can be obtained by calling auctioneers (look in Yellow Pages, or on the property auctions UK web site, www. auctions.co.uk /property/).

Most catalogues contain a list of instructions about the auction-buying process, and Allsop & Co publishes a first-timer's guide to buying a house or flat at auction (call 0171-494 3686).

But the basic rules are simple. Each property will have a guide price published in the catalogue, and this is the price that the auctioneers expect to be reached. In addition, there will be a reserve price (unpublished), below which the vendors will be unwilling to sell. If a property fails to reach its reserve price it will not be sold, although it is worth registering your highest bid with the auctioneer in case the vendors change their minds later.

Instruct your solicitor to carry out the usual searches, have the property surveyed and valued in the normal way, and obtain a mortgage offer. Tell your mortgage lender that you are hoping to buy the property at auction, because you will need to write out a cheque for 10 per cent of the purchase price on the auction day. The balance will be payable within 28 days.

When you attend your first auction as an observer, you may be surprised at the number of properties in the catalogue that are either withdrawn from sale or sold prior to the auction.

Withdrawal can happen for several reasons, such as late discovery of problems with the title to the deeds, or of some kind of restrictive covenant on the property. Sale prior to auction is perfectly legal, so if you are interested in a property you should register your interest with the auctioneer as early as possible; it is obliged by law to pass your interest on to the vendor. Therefore, if someone else makes a pre- auction offer then you should also be approached.

Finally, there is no truth in the story about the man who accidentally bought a house at auction by twitching his eyebrow. You will have to wave your catalogue in the air to get noticed, but after that, a nod's as good as a wink, as they say.