It can pay to get hammered
© Sunday Times http://www.timesonline.co.uk
If gushing estate agents and languid lawyers make you want to scream, buying a property at auction could be the quick decisive option you’ve dreamed of.
It’s the gloves-off-and-gritty end of the housing market, Sotherbys-smooth but devoid of glitz, and more sweatily exciting than a back-street betting shop on Derby day.
“The adrenaline was really pumping,” says entrepreneur builder Brian Cook, who paid £281,000 at FPD Savills for a terraced house in Ealing and anticipates it being worth over £400,000 by the time he’s added bedrooms and a bathroom. “It got to 250 and the bids stuttered, so that’s when I joined in. At 265 there were only two of us bidding and the auctioneer was playing us off against each other, pushing us both, telling the other guy he wanted him to have it. I thought thanks very much, charming, just you wait!”
“Because our loyalty must be to clients, my job is to squeeze the last few bids out of the room,” explains auctioneer Gary Murphy, of Allsops, England’s largest property auction house. “My department deals mainly with vacant and tenanted residential property, single houses, flats and blocks of flats, requiring anything from a lick of paint to complete renovation. You could pay less than in a private deal because you’re not paying for other people’s improvements.” Don’t imagine you’ll bag a mansion in Mayfair for peanuts: auctions are anything but clandestine affairs, and property companies, estate agents and corporate bodies who have responsibilities to shareholders, use auctions as a public way of demonstrating their efforts to achieve maximum return. “Over the last four years, demand for run-down places has outstripped supply, so while you won’t necessarily get a smashing bargain you could find a good un-modernised house that you can do up to your own taste,” says auctioneer John Weatherall of Andrews & Robertson.
On the plus side you could take possession within days, the hammer’s fall endorses the final gazump, and you might catch a bargain. But a deal is legally enforceable, with dire financial penalties for default, there’s no date flexibility and it’s strictly 10% cash down with the remainder payable within 28 days. Key rules are that prior to the day you’ve got to have the cash or a formal mortgage offer for that specific property, your solicitor must have highlighted any potential glitches, and it’s advisable to pay for a survey (full structural about £800, homebuyer’s £450), though many people rely on the lender’s valuation report. The guide price, frequently below that actually realised, is based on an adjusted assessment of market values.
As with any whirlwind romance, make sure your beloved has no dangerous secrets before you get hitched. “If you buy for cash you may not realise something coming to auction is un-mortgage-worthy,” says Mike Logan-Wood, of Countrywide Property Auctions. “Building societies can become awkward when lending on anything in a block of flats of over four storeys, but much depends upon quality and location. There could be a dispute with a neighbour over rights of way. If you’re buying for investment always choose an area you know well, as local travel and employment facilities are decisive factors in the letting stakes.”
Solicitor David Still, of Edridges and Drummonds, says, “The auctioneers should have copies of the deeds, pre-contract searches and replies to standard enquiries for buyers’ solicitors to inspect before bidding. If people don’t get help and land themselves with an un-mortgageable, un-saleable title they have no one but themselves to blame. There are more potential traps with leaseholds then freeholds.” Christopher Coleman-Smith, auctioneer with FPD Savills, agrees. “For leasehold purchases, always check up on service charges, find out who the freeholder is, and if there’s a management company,” he says. “Try to ascertain if any substantial works are planned in the near future. You might buy a basement flat, not realising that you could have to fork out thousands towards a new roof.”
David Sandeman runs the Essential Information Group, an information dissemination service that taps into the details of more than 650 auctions per year, run by the over 100 UK auction houses, giving constantly updated details on his subscriber-based website. “We maximise people’s choices and give them the widest window of time to assess anything from the date it enters the lists, so they don’t have to scan individual auctioneers’ catalogues,” he explains.
“You can also find quirky unusual things, such as disused toilets, bits of land or funny-looking towers,” says Coleman-Smith . “The greatest advantage is that the property changes hands on the day, which is ideal for buyer and seller. No flannelling around for months on end, with a buyer dropping out on a whim. People like the openness. There’s no favouritism, no racism, no elitism.”
Cook thoroughly enjoyed rubbing competitive shoulders with property professionals and clued-up homeowners. “Decide exactly what you’re looking for, suss out the general locality, then, when you’ve found a suitable prospect, fix your top limit and stick to it,” he advises. “Finding our bargain was entirely due to my wife Wilma’s astute advice against buying another, less suitable, place. Always discuss things with your partner.”