News, Culture & Society

Would you buy (or sell) a home at auction? What you need to know 

Nearly two hundred people are gathered in a hotel ballroom in central London, waiting patiently for the action to begin.

But despite the buzz in the air this isn’t a fancy evening do, it is a room full of prospective bidders for the latest Savills property auction – and all the theatre that entails. 

The upmarket estate agent is also one of the country’s leading property auctioneers and judging by the number in attendance at the Marriott Hotel, on London’s posh Grosvenor Square, they have a number of sought after properties on their books.

There are 150 lots up for grabs, with the opportunity to buy everything from an empty pub in Basildon, to a four-bedroom wing of a Grade II listed Surrey mansion, and a vacant school in Bury St Edmunds. There is also a long list of more traditional houses and flats.

Chris Coleman-Smith, Savills auctioneer, takes the stage to auction properties across the UK

This is my first auction and I’m struck by how the room is populated by property searchers of all ages, many of whom are obviously there in a professional capacity as developers or investors of some type or other. 

Yet lots are clearly ordinary buyers, looking either for a buy-to-let or a home.

To add a bit of spice to the mix, BBC daytime TV favourite Homes under the Hammer is also here, filming for its next series.

There are no last-minute questions now… anyone unsure about what they’re doing should leave now 

Signalling that the auction was due to begin, head of Savills Auctions and our auctioneer for the day, Chris Coleman-Smith, and the rest of the firm’s team took to the stage.

Words of warning were handed out by Chris: ‘There are no last-minute questions now, you should all have done your due diligence. Anyone unsure about what they’re doing should leave now.’

Then there were also words of encouragement: ‘Now is the time to buy people.’ 

No doubt Chris was referring to the fact that property prices in London and the commuter belt, at least, have been driven down as buyers sit on the sidelines until Brexit is finally sorted.

Most of the lots in the auction were in London and the South East, with the first property under the hammer being a one-bedroom flat in the upmarket zone 2 district of Maida Vale. 

Bids started at £425,000, but the winning bidder eventually walked away with the property for £615,000. 

This was just the start of the drama. Over the next couple of hours I watched as lot after lot took its turn to go under the hammer. 

Some sold quickly with just a couple of bidders and the hammer coming down for the winner, but with others it was more of a game of cat and mouse. Bids could be slow to start, or the action could look like it had stopped, only for the auctioneer to tease a few more thousand out of those interested.

An empty pub in Basildon, Essex was bought at the Savills auction for £450,000

An empty pub in Basildon, Essex was bought at the Savills auction for £450,000

Bids tended to be in £5,000 increments, but for the less popular properties they would go down to £2,000. 

Properties would either be sold and the hammer would go down, with the buyers then approached to fill in paperwork and pay their 10 per cent deposit, or the reserve price would not be met and the property would go unsold. 

For some of those unsold lots, Chris made clear that he thought buyers were missing a trick. 

Some lots aren’t even sold in the room, however, with a number coming up as ‘sold prior’ meaning the buyer had snapped up the property before the auction, by negotiating through Savills having seen it in the catalogue. 

Properties that don’t meet their reserve can also often be bought after the auction, going down as ‘refer to auctioneer’ and ‘available’ in the results. 

Bidders tactics varied wildly: some would wave newspapers around and make it quite clear that they were bidding but others would be far more subtle. Occasionally, Chris would have to ask ‘are you bidding?’ 

A vacant school site, measuring approximately 4.4 acres, was sold prior to the Savills auction

A vacant school site, measuring approximately 4.4 acres, was sold prior to the Savills auction

And, sometimes those who weren’t would be encouraged – the team on the stage kept an eagle eye on the room and pointing out those interested to Chris.

It certainly had me worried about fidgeting, or adjusting my hair and being mistaken for a bidder.

Lots of those buying seemed to be investors, but there were also couples sat together who looked as if they may be buying homes and at least one first-time buyer. 

I left just before lunchtime, but the action was due to continue until about 3pm.  Would I buy a home at auction? I don’t think so, but I could see why for those on the hunt for a potential bargain or fixer-upper, the idea could appeal.

Bidding: Property auctions are usually very busy with hundreds of bidders coming and going

Bidding: Property auctions are usually very busy with hundreds of bidders coming and going

How to buy (or sell) at auction 

What is it that makes property auctions so popular and how can you go about either putting your home up for auction, or buying at one? We answer the important questions:

What do you have to do to put a home up for auction?

Interested parties should approach a property auctioneer.

They will advise you on guide prices for your property after inspecting it and it will then be photographed and made available for viewings.

The property will usually be advertised online and in a catalogue before the auction itself so those interested will have a chance to look at the details and arrange any viewings.  

Is it more risky to sell through auction?

According to Savills’ auctioneer, Chris Coleman-Smith, it depends on the property type. 

He said: ‘If the property is an owner occupier one, it can be difficult. With owner occupier stock, it is possible we might not have generated enough interest and we must make customers aware of those things.’

Commercial properties are more commonly sold at auction. 

If a property isn’t sold, due to lack of interest or perhaps an excessively high guide or reserve price, the lot will usually go back up in the next auction, often with a revised starting price. 

Some properties for auction are very popular with many bids whilst some don't get sold at all

Some properties for auction are very popular with many bids whilst some don’t get sold at all

How is the guide price determined?

A reserve price will be the first thing that needs to be determined – this is the seller’s minimum acceptable price at auction and the figure below which the auctioneer cannot sell. 

The price will be suggested by an estate agent or auctioneer after surveys have been carried out but must be agreed upon by those selling the property. 

The reserve price, which may be up to 10 per cent higher than the guide price, is not disclosed and remains confidential between the seller and the auctioneer. Both the guide price and the reserve price can be subject to change up to and including the day of auction. 

The auctioneer will then suggest a guide price commensurate wit hthe reserve price. 

One setback to the auction process can be people who refuse to be realistic about price, according to Chris.

He said: ‘You have got to be a bit sensitive on price – you can’t ask people for rock bottom prices. However, people have to be realistic on the price – some people are prepared to be but some people are not.’  

A four bedroom house, in the wing of a Grade II listed Palladian mansion, in the Savills auction

A four bedroom house, in the wing of a Grade II listed Palladian mansion, in the Savills auction

What happens at the auction?

Prior to the auction, potential bidders are warned not to make a bid unless they have adequate funds in their account to pay the deposit as this could throw the whole sale off course. 

After the auction has kicked off, each lot will be shown on television screens around the room so people can see the property and the guide price. 

The auctioneer will ask someone to kick off the proceedings with the guide price and then bidding will commence – with the price usually increasing in values of £5,000. However, this changes when a property is less popular, when it will tend to go up in £2,000 slots instead.

Bidders will either be present in the room and can show their interest by putting their hand up or there will be phone bidders and proxy bidders – who mostly will have been given a maximum amount to bid by their buyer. 

How can you avoid overpaying on a property?

Make sure you have done your research before attending the auction and know the guide price. It is also good to ensure you have the maximum price you are willing to pay in mind before attending.  

Chris says: ‘Don’t get emotionally involved – you can be professional but you need to be dispassionate. There will always be another property. Try and keep to your limits – maybe go and get a bit higher than anticipated.’ 

‘I definitely think it is something I’ll do again’: First time bidder wins lot 

The two bedroom property that Lauren was able to buy in the Savills auction

The two bedroom property that Lauren was able to buy in the Savills auction

Lauren was a bidder at the Savills auction and managed to win the lot she was interested in.

She purchased a two-bedroom house in East Sussex, winning the auction with a final bid of £203,000, after a starting guide price of £150,000.

Lauren was happy with this amount as she was planning to stop bidding at £205,000. 

It was her first time at a property auction, although she had previously built three houses from scratch. 

She said: ‘I was watching Homes under the Hammer and decided going to an auction would be worthwhile. The reason I chose to go to auction was because price wise, it is hard to find properties like this through estate agents. 

‘I saw this house, saw it was within my price range and went for it.’

She intends to either rent out the property or sell it on after completing renovations which she hopes will take three to four months.

‘I won’t make a massive profit but hopefully I will get £20,000 to £30,000.’

So is this a process she would be willing to go through again? 

‘Yes, it’s definitely something I think I’ll do again.’ 

What happens after a property is sold?

At Savills, the buyer moves to an adjoining room to sign the contracts and pay a ten per cent deposit of the agreed amount.

Each owner will also have to show two forms of identification and fill out anti-money laundering forms.

Special premiums will be attached to certain properties for a variety of reasons so bidders are advised to be aware of this before making a bid.  

Why do people choose to use auctions?

One of the main reasons that people choose to sell – or buy – a home at auction is because of how much quicker it can be than through traditional estate agent channels.

As an example, once somebody has won a lot at an auction, they can complete the sale within just three to four weeks whereas an estate agent and conveyancing lawyer can take anything from two to six months.

Another key reason is that many properties going under the hammer will need renovations which means buyers can add value to the property and sellers can get rid of a property the average homebuyer would be unlikely to go for.

Fixer-uppers sold though traditional estate agents are rarely bargains but nevertheless get snapped up quickly.

Some people also don’t like paying agency fees and ‘project homes’ have become very popular, especially in the more expensive parts of the country since the house price boom of the last 25 years. 

Chris said: ‘Buying an auction means you get a clean canvas and can do what you want to do. There are lots of quirky properties at auctions which attracts particular buyers.’

Property auctions used to be reserved for just dealers and professional agents, as, although members of the public were welcome, most felt too intimidated to join the proceedings. However, the process is open to everyone. 

Chris believes property auctions are now an ‘open forum’. He said: ‘Property auctions used to be the domain of professional people but now everyone can go. Everyone gets treated the same – it is very cosmopolitan and there is no favouritism.’

Some final advice for people looking to buy at an auction for the first time?

Chris advises: ‘Do your homework on the property before you go. Everybody wants something cheap but be sensible. Look at the legal packs beforehand and make sure you’re comfortable with it. 

 

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Read more at DailyMail.co.uk


Comments are closed.