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By Jane Hall, The Journal, Newcastle
With house prices now out of
reach for many - despite signs the market is slowing in some areas - buyers are
having to look harder for bargains.
One alternative is to buy at auction,
says Jane Hall.
A glance through the daytime television schedules reveals that Britain is in
the grip of auction fever, with programmes such as Bargain Hunt, Cash In the
Attic and Flog It highlighting our love of a bargain.
This love affair
shows no signs of abating.
But for those hoping to emulate the likes of
David Dickinson and pick up a house "as cheap as chips", the auction room can be
a nerve-wracking place.
Yet a growing number of people are now looking to
the auction room as a means of getting their feet on the property
ladder.
Buying at auction now accounts for an estimated 5pc and rising of
all property transactions, according to the Royal Institute of Chartered
Surveyors (Rics).
Recent figures from online property database Focus show
the value of residential properties sold at auction during the first six months
of 2003 rose 12pc to 612m, helped by a 19.5pc increase in the average value of
residential lots to 113,599.
Buying at auction sounds like a dream,
especially as the traditional method takes an average of 12 weeks from the day
an offer is accepted until contracts are exchanged. During that time, buyers can
be gazumped or sellers may decide to stay put and chains break.
Almost
one agreed sale in three now never makes it to exchange of contracts.
A
big advantage for saleroom buyers is that once the auctioneer's hammer falls,
the property belongs to them and neither they nor the seller can pull out. The
buyer hands over a deposit and may move in within 28 days.
Around 25,000
properties now go to auction every year at more than 200 auction houses
nationwide.
Such sales - which are the norm in the United States and
Australia - really took off in the UK in the 1990s when lenders were having to
sell-off property they had repossessed, often at a loss, but couldn't sell on
the open market. They became a magnet for buyers who wanted to take advantage of
the lower prices and pick up a bargain.
Although there has been a
reduction in the number of auctions being held as the property market has picked
up and fewer homes are being repossessed, they are still going. And they still
attract bargain hunters.
The reason why auctions still produce mark-downs
is simple. Most properties being sold at auction are there for one reason. Their
owners - and this includes lenders with repossessions on their hands - need a
quick sale and are therefore often prepared to accept offers well below the
market value.
But despite the financial advantages of buying property at
auction, many people are wary of doing so. Not for the faint-hearted, an auction
room is an unfamiliar environment for most and is certainly not a conventional
way to buy a home.
As a result, it is seen by many to be a risky
business. This is not actually the case, says Andrew Entwhistle, associate
partner of surveyors and valuers George F White, which has offices in Alnwick
and Wolsingham and holds between 10 and 15 property auctions across the region
every year.
"There are two golden rules for buying at auction," Andrew
says. "The first is to do your homework and get an answer to every question you
have before the auction. This may cost you, but it will be cash well
spent.
"The second is to go to the auction with a fixed price in your
head and to stick to it. If you follow those rules, buying at auction need be no
more risky than going through an estate agent."
While George F White
usually deals in properties with what Andrew describes as the "wow factor," and
buyers who pay in cash, he says in general there can be bargains for the taking
at auctions.
"A lot depends on who is there on the day bidding, and how
the property has been marketed. If it hasn't been marketed well or the seller
wants to get rid of it quickly, then there is a possibility you will get a
bargain.
"In the current elevated housing market, auctions are preferred
by many. It is a transparent way to buy. You have the advantage of being able to
inspect all the deeds, searches and contracts beforehand."
Richard
Francis, head of auctions at estate agent Keith Pattinson, says: "Every month it
staggers me that, while some properties go for more than anticipated, many go
for much less.
"We are attracting first time buyers and those looking to
trade-up as well as investors, and have properties across all price ranges, from
1,000 to 750,000."
Andrew Entwhistle throws cold water on the idea that
an auctioneer may mistake a twitch or a cough for a bid. "A property auction is
not like a lamb sale where a sneeze will buy you a whole flock. At a property
auction you generally have to wave your arms around very strongly. However, my
advice would be if you're not wanting to bid, keep your arms folded."
A
more common problem is bidding for the wrong lot. Make sure you know exactly
which lot you want and which lot the auctioneer is taking bids on.
You
should also check that the property is still up for auction and hasn't been sold
privately.
So while buying at auction can be nerve-wracking, it need be
no more risky than buying through an estate agent.
The only difference is
that the selling price will be determined by the amount of competition bidders
are prepared to offer.
Most people who buy at auction are cash buyers who
already have finance available. But some inexperienced buyers do venture into
the auction market. If you decide to do so, then you must be certain that your
finance is in place before making an offer.
The auction catalogues are
released usually two to four weeks before the sale and give a guide to prices,
so you will know roughly how much you will need. But remember that the final
price may be higher, particularly if there are several bidders for the
property.
The most important point to remember about this pre-auction
planning is that all of the paperwork, surveys, searches, and financing must be
carried out before the auction itself.
But one of the major advantages is
that the purchase goes through very quickly, therefore you bypass problems like
chains or a long wait while the vendor finds a suitable property to move to.
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