Property auctions used only to be for property that was impossible to value. Recent trends, however, have shown that the number of property auction sales has increased by 20% since last year. With property auctions becoming increasingly popular, is it still a sure fire way to bag a bargain?

Not for the faint hearted!

Property auctions are not for the faint-hearted! Most people who buy at auction are investors or developers who have access to cash immediately and also have sufficient confidence to know a bargain when they see one.

Traditionally, those who are prepared to buy at auction would almost certainly get a better price than if they had purchased on the open market. In some cases, the savings can be up to 40%; however, this is no longer guaranteed.

To really pick up a bargain at auction it is important to consider the many reasons why a property ends up in the auction house in the first place. Many properties make it to auction, simply because the agents do not know the property’s value. These can be a real bargain if you understand the market better than others, or if you have local knowledge that will allow you to make a reasonable judgement.

Why buy at an auction?

Many mortgage lenders and local authorities now also sell their property at auction to ensure a quick and trouble free sale. This is a really good way to make a significant profit as the property itself is unlikely to be anything special and you are simply offering the quick sale that the vendor requires.

As a general rule, properties at auction will require some degree of renovation and belong to those who do not want the hassle of investigating the market themselves.

Bargains are certainly there for the taking, although it is no longer the definite winner that it once was. Prudent auction buyers need to bear in mind that acquiring property in this way is a whole different ball game!

Timing and knowledge are key. Buying at auction is a roller coaster affair. Viewings are normally carried out in groups, which can be unnerving and make purchasers feel under pressure. A good auctioneer will be whipping up a sense of urgency, competition and desperation in potential purchasers. Falling for this ploy can be one of the ways to lose any profit that may be available.

Many novice auction buyers are advised to complete a practice run. Pick a property or two that are coming up at auction, in the next few weeks, view the property, decide on a price and visit the auction. Of course you don’t actually bid and you don’t arrange a mortgage or survey. Nevertheless, by doing this dry run you will be able to witness at first hand the process and tactics that are used during the auction life cycle, without the emotional attachment.

In reality, auctions are still one of the best places to acquire a bargain, particularly when it comes to renovation projects. Despite this, buying at auction is fraught with potential pitfalls and requires a certain personality to make a real success of the process.

Information Sourcing

As well as being a great place to pick up a bargain, a property auction can be a wonderful place to gather valuable information on the property market. Gary McCausland, presenter of TV show How To Become A Property Developer and property expert also believes that attending auctions is a great way to gauge the market in your area, he says: “Attending auctions will give you a first class education in real estate because the price at which a property sells is usually an accurate indication of market value."

Do your homework, stick to your budget and NEVER get carried away in the heat of the moment. If you can do all of this then the auction house is the perfect place to land a bargain!

Getting carried away in the auction house is one of the quickest ways of losing money on your investment. Philip Selway of The Buying Solution an agency dedicated to property-finding sees this happen all too often and offers this advice: “Make up your mind on the price you want to pay and then stick to it. Many people get carried away in the auction room and bid way beyond their financial capabilities.”

Despite this, Richard Auterac the Chairman of Royal Institute Chartered Surveyors’ Real Estate Auction Group recognises that buying at auction can offer some real benefits for property investors: "Properties on sale at auctions are usually available at a competitive price. Auctions also provide a platform for open and fair competition between bidders. Once the hammer comes down, neither the seller nor buyer can withdraw and the process is completed within a set time - with no danger of any link in the property chain breaking.”

Just three or four weeks before the sale, the auctioneer publishes a catalogue and a schedule of viewing times. In most cases you are unlikely to find out about the property before the catalogue is released, so from this point on, you have little time to hang around.

Viewing often takes place alongside a number of other people, as the auctioneer will not want his staff at the beck and call of casual visitors. Don’t be deterred by this. If you go to a number of auctions to ‘get the feel’ of them, you stand a good chance of seeing the same people time and again. Some of them, like you, are looking for something that just suits their pocket and needs. On the other hand, they probably will not have the same criteria as you. Also there will be the ‘professionals’ who will be unlikely to stretch themselves as far as you might because they have overheads and will need to turn the property into a sale or rental, quickly.

Bidding is undertaken in the auctioneer’s sale room, or by phone or even on the internet, so you don’t necessarily need to go to the auction room in person. You don’t even have to bid directly, because you can make the auctioneer your proxy by telling him the maximum amount that you are willing to pay and he will bid for you. You may even be able to make a successful offer before the auction. Your offer, nonetheless, will have to be higher than the guide price to stand any chance of success. But if the auctioneer and the estate agent agree there is a possibility that the bid price won’t be reached in auction, the offer may be passed to the vendor and agreed before the sale.

There is no substitute, however, for going to the auction in person, both as a ‘trial run’ and for real. In the auction room you can sense the mood and gauge other bidders. It’s an experience not to be missed, but keep to your limit, don’t be swept up by the enthusiasm of the day and bid above your budget. Just because someone else is bidding higher doesn’t mean the property has suddenly gone up in value.

Part 2 of this ‘Buying property at Auction’ guide will be coming up in a few days.

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