It is midday on a hot July afternoon. Few people would choose to spend the next few hours cooped up with several hundred other bodies, but the large chamber at the New Connaught Rooms in London is filling up fast. In a market of property chains, parties pulling out mid-process and transactions that can proceed at a snail's pace, the no-nonsense approach of the property auction, its binding conditions, not to mention completion dates fixed in advance, can for many buyers and sellers be a breath of fresh air.
Today, agents and auctioneers Strettons are running one of six auctions they will hold this year. Property auctions used to be inextricably linked with the buyer-appeal-challenged section of the property market: bits of land without right of access or former old people's homes. Much of the debris of the collapse of the Eighties property market found its way into auctions - repossessed property that had been stripped to its bare bones after disillusioned owners ripped out bathrooms, kitchens and wiring.
That is all history now. But while we may enjoy watching the sale of a piece of Victorian china or a Georgian soup ladle on Flog It, many of us are still shy of buying the residential equivalent through auction, perhaps because of that contractually binding nature of the process.
The bidding itself, however, should be the final stage in a long process of careful evaluation (see box, right), beginning with perusal of the catalogue, which lists a guide price for each property - around 85 to 90 per cent of what the property is expected to fetch. "Any more than that and people are not tempted in," says Philip Waterfield, a director at Strettons. The reserve price - the figure below which the seller will not sell - is different, and secret.
Today's portfolio is a mixed bag - from terraced white stucco houses, shops with residential accommodation to ground rents, with the guide prices for properties ranging from £90,000 to £400,000. Auctions are also an ideal way of putting a price on the one-off that is difficult to value - windmills or properties that do not come up very often, such as a freehold shop in Covent Garden. The catalogues do not feature the over-flattering photographs typically found in property brochures. "We use professional photographer, but it is not in our interest to hide anything," says Philip Waterfield.
Eva Myszkier, 27, has attended today's auction. A banker at Canary Wharf, she is a first-time buyer - she has previously attended one auction to get the feel of the event - looking for an unrenovated place so she can put her own stamp on it and not pay for someone else's work. With a large number of properties in east London, her preferred location, in theory she is in a strong position since a developer - and there are plenty in the audience - will need to factor in a profit mark-up.
Apocryphal stories of people scratching their nose and ending up with a property are just that - "although we did once hold an agricultural property auction where a farmer with a twitch confused matters a bit," says Waterfield. "But it is actually more an issue of making sure your bid is heard over the coming and goings and ringtones. Eye contact is important."
Ben Tobin, today's chief auctioneer, has 20 years' experience and the purchases proceed smoothly, but Waterfield recalls the enthusiastic buyer who rapidly became less so after the gavel fell. "In the end one of the runners [who guide buyers to the contract desk] accompanied him to the car park where he was supposed to have left the cheque, when he promptly jumped into his BMW and sped off." More frequently, buyers have bank or building society drafts for less than the 10 per cent deposit required, indicating they exceeded their planned limit, but are happy top it up on the day.
The auction continues apace until four in the afternoon, by which time the bulk of the properties have been sold, realising some £10.5 million. Successful buyers pay the auctioneers an administration fee on exchange of contracts for each lot they purchase - at Strettons this is £175 including VAT. Eva Myszkier was unlucky, being thoroughly outbidded.
"The developers are out in force and could be willing to bid but take a smaller profit, or customers can be over-optimistic about what properties will sell for," says Mr Waterfield. Or perhaps as one famous economist put it, in a perfect market, which an auction seeks to emulate, there are no 50 dollar bills on the ground.
The website of the Royal Institution of Chartered Surveyors has a guide to both buying and selling a property at auction. Visit www.rics.org.uk
How to play the auction game
Before attending an auction with the intention of buying, view and inspect the property, and consult a chartered surveyor to carry out a report on the property.
Take professional advice from a solicitor to carried out usual searches and make enquiries, and check available leases.
Read the conditions of sale.
Have finance available both for the deposit and final purchase.
After the gavel falls, you are responsible for insuring the home there will usually be an insurance desk at the auction rooms.
If the property does not sell, register your interest with the auctioneer before leaving it may be possible to negotiate with the seller.
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