The UK consumers lust for a bargain is clear from the heaving masses at car boot sales, not to mention the millions of regular buyers and sellers on eBay.com.
But when it comes to the property market, how easy is it for the average homebuyer or even first-time buyer to buy up a bargain at auction?
In 2005, roughly 31,000 residential and commercial properties were bought at auctions held across the UK. This amounts to over £4.3 billion worth of property and the numbers of buyers looking for a home at these auctions is on the increase each year.
However, for those looking to buy a home, few auction properties are in the sort of ready-to-buy, well-decorated state many consumers expect to see when they go house-hunting.
I would always avoid the use of the word bargain, says Gary Murphy, auctioneer and partner with residential and commercial property auctioneering firm Allsop.
Buying a bargain implies a clean purchase. I would still like to encourage all buyers to go to property auctions, but these properties can be unmodernised, require plenty of work and often have one or two legal problems like short leaseholds and other quirky things like that, says Murphy.
RICS spokesman Paul Bagust says: You never know, but if all auctions offered were bargains, no sellers would sell, simply because they wouldnt make any money. But it all happens so fast it depends whos in the room bidding against you.
Who buys at auction?
The fact is, buying at auction is still a very small market because many properties sold this way still only appeal to a small number of buyers.
Commercial properties like offices, shops and land for redevelopment make up the majority of lots at these auctions. You can even buy a chunk of woodland, an old disused railway signal box or just the right to ground rent paid by tenants in a property. Some properties are auctioned off complete with sitting tenants, which Murphy calls oven-ready buy-to-lets.
Property auctions are also the preserve of those in the know. There are only 50 to 60 specialist property auctioneers in the UK, although estate agents are increasingly holding two- to three-lot residential property auctions.
However, government bodies like local councils, Network Rail and the army also regularly auction off properties, so its worth surfing their websites for more details.
Consequently, property developers or professional buy-to-let landlords tend to be the most frequent visitors to these types of auctions.
These buyers have the ready cash and tried-and-tested relationships with building contractors to be able to give these sometimes down-at-heel properties a makeover and then sell them on quickly.
These types of buyers are also only looking to make a profit, which means someone looking to buy a place to live may be able to outbid them, but obviously for a slightly inflated price.
First-time buyers.
But increasingly, people from all walks of life are coming to auctions, including small numbers of first-time buyers.
Although, Paul Stockwell, associate at Savills Private Finance, says Savills deals with very few first-time buyers because many twig early on that they may be getting in over their heads.
We get many tentative enquiries, but first-time buyers are scared off when they realise they could be setting their sights too high. If they tried to buy, many would be buying at the top of their budget and the price can very easily run away from the guide price in the auction room, says Stockwell.
Also, very few first-time buyers have the ready funds needed to get these properties up to acceptable standards, which can be daunting for some, says Stockwell.
Getting the financing.
Unless youre a property professional, you will probably need to arrange a mortgage before auction day. And when catalogues come out just two weeks before auction day, youll need to be fast. You need to get a decision in principle for your mortgage so you know how much you can borrow to stop you overbidding, and you also need to get a survey done.
Finding a specialist mortgage adviser with the contacts to help you with both can be a good move. Savills PF, for example, deals directly with underwriters at specialist mortgage lenders like BM Solutions and Mortgage Express to make sure the loan comes through in time, and can also arrange your survey.
Tim Sturley, spokesman for specialist lender Mortgage Express, says because so few lenders are able to move quickly enough, many buyers obtain short-term loans called bridging loans, again, usually arranged through mortgage advisers. Lenders like Bristol & West and Blemain Finance offer bridging loans, although borrowers pay high fees and interest charges for the service so tend to refinance or sell on the property to pay off the loan as soon as possible.
Sturley adds: The two fundamental differences between a standard purchase and buying at auction is you cant wriggle out of a sale if you have doubts after the hammer has fallen. You must also have your finance arrangements in place before you walk into the auction room.
Finally, he advises: Do make sure you know what a property is worth before you bid. Ive seen people get carried away in the heat of the moment.
