Over 30,000 properties are sold at auction in the UK every year, many at up to 40% below high street prices. In a market where high prices are keeping a lot of first time buyers off the property ladder, potential investors are catching on to the fact that despite auctions traditionally being the preserve of professional purchasers and property developers, but can be a cheaper and quicker way for anyone to buy a new home.
Reserve prices are competitively positioned to attract buyers to the auction, meaning that if there are no or only a few other bidders, it can be possible to secure a bargain. Additionally, cheaper properties, such as those that have been previously repossessed, undeveloped or owned by local authorities, are common lots.
It is not just the bidding that is fast-paced - the whole homebuying process is condensed into a much shorter time frame than more conventional methods, with the buyer and vendor considered to have exchanged contracts and be legally bound at the fall of the hammer. Deposits are payable at the end of the auction and completion dates are fixed in advance - normally within 21 to 28 days after the auction.
Be aware of pitfalls
However, some purchasers are wary of buying at auction, put off by scare stories of accidental bidding.
Damon Leigh, property investor and author of ‘Property Auction Secrets’, commented, “People are buying and selling property through auctions every day and making healthy profits, but you do need to be aware of the pitfalls. There are specific tried-and-tested strategies that work and novices can soon get into the swing of things with some guidance. Three of my top tips are:
- look for unsold lots, as both the vendor and auctioneer will be keen to sell and may accept a lower offer
- look for properties with short leases. If a lease has less than 65 years to run it will be relatively cheap. You can then extend the lease and increase the value
- London auctions generally attract London buyers, so properties in the extreme south-west or Scotland generally get less attention and therefore can go for lower prices
Expert advice
Damon Leigh will be leading a number of seminars, providing step-by-step guidance on auctioneering at The Property Investor Show North (18-20 June 2004 at Manchester G-MEX).
For further information on the Property Investor Show North contact 0208 877 3636 or visit www.propertyinvestor.co.uk
