Bidding for Bricks and Mortar

THE property ladder is still out of reach forms of first-time buyers but an alternative way of getting on the housing market could be to buy through a property auction.

More than 300,000 properties are sold at auction a year, with buyers able to save up to 40% of the market value of a home. Properties usually come up at auction due to bankruptcy or repossession from the owner, so the seller is usually keen to sell.

However, they are also a great way of picking up unusual properties that conventional estate agents may struggle to shift, such as disused lighthouses and churches.

Gary Murphy holds up to seven auctions a year with auction specialist Allsop, generating over £250m in sales.
He says: 'Anyone can come along and get involved at an auction. We tend to get experienced investors looking for a buy-to-let opportunity or to do a property up to sell on, but we also get a lot of people attending for the first time looking for somewhere to live.'

The number of auctions has escalated over recent years as buyers become more comfortable with the process. Traditionally, they tended to focus on the London market, but auctions are springing up throughout the UK, particularly around major cities like Birmingham, Manchester, Newcastle and Liverpool. So how do you get started? In the first instance, contact local auction houses and ask to be put on their mailing lists. They will inform you of upcoming auctions and the properties that will be sold.

Bargains are usually found on lots that haven't been sold in previous auctions or properties with a short lease, typically less than 65 years. Once you have purchased the property, it is usually possible to extend the lease.
If you like the look of a property, arrange a viewing. Ask as many questions as you can about the home and local area and check with estate agents to see what similar properties fetched on the open market.

If you're still interested, then it is worth having a surveyor carry out a homebuyer's report. This is important as a large proportion of the properties for sale at auction need restoration or repairs so a surveyor will be able to spot any major faults. If you decide you want to make a bid at auction, speak to your lender to make sure you can secure a mortgage.

If you are successful with your bid, you will have to pay 10% of the property's value on the day of the auction and the remaining balance within 28 days, so it is important that your lender understands these conditions. In addition, you will need to take into account stamp duty, 1% of the property's value between £125,000 and £250,000, as well as any fees auctioneers may charge. It is advisable to attend a couple of auctions without any intention of making a bid to see how the process works. It is easy to become flustered, especially when you are talking about such large amounts, and lose the home you want.

Once you are ready to bid on a property, it is important not to get carried away, especially if you are bidding against a number of people. If several bidders are after the same property it is likely any cost saving benefit will be eroded by demand driving the price up. Set a strict budget and stick to it.