Bid for a bargain: A beginner’s guide to buying property at auction
- Credit: Archant
Want to buy a property in London and move in a month later, no chance of being gazumped or getting caught up in a complicated chain? Sound like an impossible dream?
Well, if you buy at auction, that’s exactly what will happen. Sort your finances, set your budget, clear your calendar for the day of the auction, and the most difficult part of ending the day a property owner will be winning the bidding.
“Buyers like the immediacy,” says Andrew Binstock, auctioneer at Auction House London, who are holding their next auction in the Everyman Belsize Park on 26th February. “The seller can’t ring you up and say ‘I’m sorry, I’ve got a better offer now.’ Once you’ve signed the contract and got the finance in place it’s yours.”
The flipside of this, of course, is that you’ll need to have all your finances in place on the day as, once you’ve won a bid, you’ll be expected to sign the contract and stump up 10 per cent of the sold price there and then.
This is one reason that auctions tend to be most popular with investors buying properties in up and coming areas, either to develop and sell on, or to let out and that has an impact on the types of property that sell well.
“The most popular auction lots are typically unmodernised flats and houses, which offer potential to add value,” Binstock says. “For example, a repossession or a probate. It’s a totally desolate two bedroom house but with a bit of attention you could make it into a three bedroom house.”
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However, auctions are also increasingly popular with owner occupiers.
“We get a decent percentage of professionals but I’d say a good third of the room are amateur buyers – people buying their first investment property or owner occupiers,” says Binstock.
At a recent Savills auction on 17th February 2015, several hundred potential buyers thronged the hot function room in a Mayfair hotel to bid on lots ranging from a two-bedroom flat in West Hampstead with a guide price of £480,000 to a five-bedroom house in West Hampstead, which sold for £1.7million.
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As expected, a high proportion of buyers were investors, snapping up properties in Catford, Croydon and Ilford for around the £2-300,000 mark.
At the other end of the scale, and generally more hotly contested, were the places that hopeful owner-occupiers had set their hearts on, which tend to go the most over the asking price as people are willing to hit the top of their budgets to win a home.
Surprisingly though, apparent bargain properties in the Hampstead region raised little interest.
A one-bedroom flat on Frognal had a guide price of £500,000 and only one taker but was withdrawn after it didn’t reach it’s reserve. A similar fate befell a studio on Haverstock Hill, with a guide price of £300,000.
So what was going on? Are auctions not the place to pick up a top-end bargain?
Chris Coleman-Smith, head of Savills auctions says “Never forget that every vendor’s different. Some clients will give us dead low reserves and they can get 100 per cent more but there’s no set formulas. I’d say those properties that didn’t sell were just a bit top-heavy on price, simple as that.”
London doesn’t get much more prime than Marylebone, and there is a one-bedroom cottage in the area listed at the next Auction House London sale, with a guide price of £500,000.
Binstock says: “A property in a good area should always draw a lot of attention to it. A big reason it might not sell is if it had too short marketing time during which owner occupiers would struggle to get their fincances together.”